Print Friendly, PDF & Email

EDITORIAL ANALYSIS : An eye on the future

 

Source: Indian Express

 

  • Prelims: Indian Economy(GDP, GVA, fiscal policy, budget, economic survey, budget, GST etc)
  • Mains GS Paper III: Fiscal policy, Monetary policy, GDP, Issues related to planning etc.

ARTICLE HIGHLIGHTS

  • The budget for 2023-24 is an innovative amalgamation.
    • It comes when there are impending state elections and the general election in 2024.

 

INSIGHTS ON THE ISSUE

Context

Budget:

  • The government’s blueprint on:
    • expenditure
    • taxes it plans to levy
    • other transactions which affect the economy and lives of citizens.
  • Article 112 of the Indian Constitution: Union Budget of a year is referred to as the Annual Financial Statement (AFS).
  • The Budget Division of the Department of Economic Affairs in the Finance Ministry is the nodal body responsible for preparing the Budget.
  • Components of the Budget:
    • expenditure
    • receipts
    • deficit indicators.
  • Depending on the manner in which they are defined, there can be many classifications and indicators of expenditure, receipts and deficits.

 

Why is the budget 2023-24 responsive?

  • The priorities articulated in the vision for Amrit Kaal:
    • opportunities for citizens with a focus on the youth
    • growth and job creation
    • strong and stable macroeconomic environment
  • Saptarishi(seven priorities)
    • infrastructure and development
    • green growth
    • financial sector
    • inclusive development
    • reaching the last mile, to mention a few.

 

Why is the budget 2023-24 responsible?

  • It achieves the stipulated fiscal deficit of 6.4(six point four)percent of GDP
  • It seeks a half percentage point correction — primarily from an unwinding of subsidies (food and fertilizer of 6(zero point six)pp of GDP; likely reflecting both withdrawal of Covid-related relief and global commodity tailwinds)
  • Continued decline in the ratio of revenue to capital spending.
  • A modest nominal GDP and tax buoyancy

 

Aims in budget:

  • The budget aims for restraint on borrowings of CPSEs (2(one point two)percent of GDP).
    • Excluding state PSEs for which we do not have reliable estimates
  • Allowing for some buffer in states’ estimates

 

Positives from  fiscal and debt consolidation for the sovereign:

  • It enhances resources available for countercyclical fiscal policies in the event of negative shocks such as Covid
  • It envisages social spending in critical areas such as health and education where India’s public spending remains markedly low.

 

Does the budget  address issues in the health and education sectors?

  • With a hike of 2.7(two point seven)percent relative to what was originally budgeted in FY23.
    • Health expenditure is now assumed at Rs 88,956 crore.
  • The 157 new nursing colleges will improve human resource capability and primary health centers.
  • Education: The enhanced allocation in school and higher education of Rs 68,804 and Rs 44,094 crore respectively, represents an increase of 8 percent in both.
  • Improved outcomes through the National Digital Library, and revamp of teacher training, in line with the overall vision for a digital economy.

 

What does the budget do for India’s commitment for an orderly transition to a Green Economy?

The announcements included:

  • Rs 35,000 crore allocation for energy transition and net-zero carbon emission targets
  • An annual production target of 5 MMT by 2030 for Green Hydrogen Mission
  • Green Credit Programme under the Environment (Protection) Act to incentivise sustainable actions.

 

Agriculture and railways:

  • Both sectors crucial for employment and for the low- and middle-income population
  • A massive increase in targeted credit for high-growth, high-value agriculture
  • Increase in the capital outlay for railways, highest in a decade.

 

What steps need to be taken?

  • Continued reforms on tax policies and administration would be needed to close the potential revenue gap.
  • Unfinished agenda of GST reforms by way of slab rationalization and moving towards a revenue neutral rate needs upward recalibration of 3 to 4 percentage points.
  • Preference should be to revisit allocations in the areas of health, education, and green economy.

 

Way Forward

  • The rationalization of direct taxes in reducing one slab is an effort in the right direction.
    • Over a period, the slabs need further rationalization as also the elimination of wide-ranging exemptions.
  • The encouragement to states through:
    • Rs 3(one point three)lakh crore for capex as a 50-year loan
    • tantamount to a grant
    • Extra headroom for borrowing
      • It should enable state governments to utilize these resources to improve growth and development outcomes, including in critical areas like health and education.
    • Issues of innovative financing, risk mitigation for crowding in private investments and securing participation of multilateral institutions would need continuing engagement.
    • This budget has the stamp of this wisdom: It has been said, “We must not promise what we ought not, lest we be called on to perform what we cannot.”

 

QUESTION FOR PRACTICE

Q. Explain intergenerational and intragenerational issues of equity from the perspective of inclusive growth and sustainable growth.(UPSC 2020) (200 WORDS, 10 MARKS)