Significant push to growth, jobs

The fact that the Lok Sabha elections are coming up next year is apparent from the Budget proposals for 2023-24. An effort has been made to provide succour to all sections of society — from tribals to farmers to the salaried middle class — even while pushing forward the drive towards aggressive investment in infrastructure.

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The government was not expected to present a populist Budget, given that it will have a chance to do so next year. But it has begun the process this year by trying to mollify those left out of the relief measures announced over the past two years to soften the impact of the Covid pandemic.

At the same time, Finance Minister Nirmala Sitharaman has managed to maintain the fiscal discipline by containing the fiscal deficit within the target of 6.4 per cent of the GDP for the current fiscal. The target for the next year has also been kept at 5.9 per cent in line with the earlier-declared plan of reducing the deficit gradually. While this was expected, given the known revenue buoyancy, there have been concerns over the huge outlays that have to be met to support social welfare schemes. The revamped free foodgrain programme, for instance, will cost an estimated Rs 2 lakh crore annually.

One of the big highlights of the proposal include the 33 per cent increase in capital expenditure (capex) on infrastructure, a continuation of the push in this direction over the past two years, it has come as no surprise. The other much-awaited tax concession is the increase in rebate on personal income tax slabs for the middle class that could finally blunt the criticism that little has been done for this segment.

What is significant, however, is the complete absence of any mention of public sector disinvestment or strategic sales. This again is clearly linked to the forthcoming elections as the aim would be to avoid any controversy on this score. In contrast to previous years, no target has been set for disinvestment receipts. The entire process was also kept on a low-key in recent months and it appears the earlier plans to keep a pipeline of companies ready for divestment are now on the backburner.

As for the increase in capex, the Budget envisages a sharp acceleration by 33 per cent to Rs 10 lakh crore, bringing it to 3.3 per cent of the GDP as against 2.7 per cent in 2022-23 and 1.7 per cent between 2015 and 2019. This will have the twin impact of pushing economic growth as well as facilitate creation of more jobs, an area where this has been a considerable concern in recent years.

The Economic Survey has pointed to an improvement in the unemployment rate to 7.2 in the second quarter of 2022 as compared to 9.8 per cent in the previous year. But the latest data for December shows a rise to 8 per cent and an even higher 10 per cent for urban unemployment, according to the Centre for Monitoring Indian Economy.

The anxiety to push both growth as well as creation of jobs has also been the driver for the expansion of the PM Awas Yojana that is being enhanced by 66 per cent. The outlay for the scheme, which aims to provide affordable housing to those at the bottom of the pyramid, has been raised from Rs 48,000 crore to Rs 79,000 crore.

The middle class has also been given long-awaited concessions in personal income tax, but Sitharaman has cannily extended these only in the reformed new tax regime. The old regime allowed exemptions, while the new one was without any of these. The bulk of taxpayers, however, continued to bank on the old system. So, the offer of raising the ceiling for non-payment of tax from Rs 5 lakh to Rs 7 lakh only applies to those opting for the new regime. Similarly, the new tax slabs that provide for zero tax up to

Rs 3 lakh will only be available for those who migrate to the new system.

As for the policy initiatives towards small and medium enterprises, the credit guarantee scheme has been expanded by an infusion of Rs 9,000 crore in the corpus, envisaging an additional collateral-free credit of Rs 2 lakh crore. In addition, the interest rate has been cut by 1 per cent. Micro enterprises with turnover up to Rs 2 crore will be able to avail a higher rate of presumptive taxation. While this is all to the good, the fact is that the government is yet to provide support to the MSMEs in the unorganised sector that are still feeling the pain of the pandemic.

Yet, the Budget proposals remain in the please-all mode with key constituencies, especially those in the marginalised sectors like tribals and women being given some form of support. Artisans and craftspeople, for instance, have been given a special assistance package. Similarly, a new scheme has been outlined for particularly vulnerable tribal groups with an outlay of Rs 15,000 crore. A special savings scheme is also being launched for women as well.

The cooperative sector has equally been given pride of place with a scheme to set up much-needed storage capacities in rural areas through primary agricultural cooperative societies. This comes along with a rise in agricultural credit to Rs 20 lakh crore.

Green is also a key word in the Budget with the national hydrogen mission being mentioned along with an outlay of Rs 35,000 crore for energy transition, net-zero objectives and energy security.

The Budget proposals for the next fiscal are thus largely a continuation of the trend set in 2022-23, seeking to push investments in infrastructure to propel higher growth. Though India may be the fastest-growing major economy, the Economic Survey’s forecast of 6.5 per cent for 2023-24 indicates a slowing down from 7 per cent in the current fiscal. The policy measures are thus a bid to accelerate growth and simultaneously keep an eye on the elections by providing support to a wide swathe of sectors.