- Prelims: Indian Economy(GDP, GVA, fiscal policy, budget, economic survey, budget, Employment etc )
- Mains GS Paper III: Fiscal policy, Monetary policy, GDP, Issues related to planning etc.
ARTICLE HIGHLIGHTS
- Finance Minister in the Budget speech 2020: India accounted for 6(twenty point six)% of the worldwide population of 15 to 29 year olds.
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.
The key proposals in 2023-24 Union budget are the following:
- There will be a considerable increase in capital expenditures, for the building of physical infrastructure, mainly in transport, energy and defense.
- The figures under this head are expected to be higher by ₹3.2 trillion in 2023-24 compared to the corresponding level in 2022-23 (revised estimates).
- The growth of the tax revenues is going to be modest
- Fiscal deficit: The government is committed to reducing the fiscal deficit — the shortfall in government’s receipts relative to its expenditures — to 9(five point nine)% of GDP.
- The Union government’s expenditure will fall in :
- food subsidy by ₹0.9(zero point nine)trillion
- fertilizer subsidy by ₹0.5(zero point five)trillion
- Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) by ₹0.3(zero point three)trillion.
- The marginal increases in the allocations on health, education, agriculture and the Anganwadi scheme.
Response to the global financial crisis in 2007-08:
- China responded by increasing domestic investment, a large part of which coming from its public sector.
- India, the government restrained its expenditures, worrying about the rising fiscal deficits.
- Impact:As public expenditures nosedived, private investors lost confidence as well.
- Investment as a proportion of GDP was on a steady downward slide, falling to 8(thirty three point eight)% in 2013-14 and 27.3(twenty seven point three)% in 2020-21.
Subsidies and social sector spending:
- A cut on their outlays will not hurt economic growth.
- A reduction in social expenditures worsens the existing social inequalities.
- It can dampen the prospects for long-term growth.
- Only 9.8(nine point eight)% (in 2020-21) of India’s workers are in regular jobs that provide some form of social security.
Advantages of Public expenditures on the social sectors:
- It constitutes an investment for the future — more so for a country with a predominantly young population.
- The income a destitute mother receives for work through MGNREGA may ensure that her children do not have to go to school with empty stomachs.
Disadvantage of undercut in expenditure:
- Underinvestment in education and health will undercut India’s chances in a global economy that is increasingly dominated by knowledge.
- In 2022, only 9 million candidates who wrote the National Eligibility cum Entrance Test (NEET) in India for admission to undergraduate medical courses managed to secure a seat for MBBS in a government college.
Unwarranted fears about fiscal deficit:
- Only a small portion of India’s public debt is owed to external agencies (amounting to 4.2% of GDP in 2022), which does not pose a threat
- India’s government debt is held largely by domestic financial institutions, including public sector banks, insurance companies and provident funds.
Way Forward
- A jump in capital spending by the government, as proposed in the Budget, is a much-needed step to reinvigorate the Indian economy.
- If the proposed investments by the government come through, and they indeed crowd in private investments as the Finance Minister has predicted, that can set the stage for a revival of the Indian economy.
- Measures such as MGNREGA and free provision of food have been a clutch at straw for millions of poor Indians, hit as they have been by the COVID-19 pandemic and joblessness.
- Government expenditure on health and education can provide a boost to both the supply and the demand fronts in a knowledge-driven economy.
- More new jobs as teachers and doctors, especially for women, and a greater supply of younger professionals and skilled workers.
- Inflated fears about the fiscal deficit and government debt will only be counterproductive in a country possessing vast reserves of untapped human and other resources as India does.
- Providing loans for education: Children belonging to asset-poor and socially disadvantaged households will get a chance to pick up the qualifications required to enter the new economy.
- India will need a vast army of scientists, engineers and nurses to fulfill its global ambitions.
- A boost in government expenditures to provide food security, health and education, millions of India’s youngsters could indeed aspire to grow into bright stars that illuminate the world.
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)
