By Dr. Gyan Pathak
Union Government has begun budget exercise for the year 2023-24 in the right earnest with narrowed options and very high stakes for the ruling establishment led by PM Narendra Modi since it would be the last full budget before the 2024 Lok Sabha election.
The Union Ministry of Finance has kick started the series of exercise with a meeting held on November 21, chaired by the Union Minister of Finance Nirmala Sitharaman, and attended by other union ministers for state for finance Pankaj Chaudhary and Bhagwat Kishanrao Karad along with various secretaries and economic advisors. They heard the industry leaders and experts of various sectors which included leaders in climate change and infrastructure and tried to find out the challenges ahead and the demand of these sectors.
The very fist meeting showed that the Union government is primarily concerned more about the three sectors – Industry, Infrastructure, and climate change, than any other sector of the economy, though the Union Ministry of Finance has said that this first meeting would be followed by meetings with various other stakeholders in other sectors like agriculture, health, education, sanitation, and water.
No doubt, Industry, infrastructure, and climate change would be priority sectors for the government but they would try to balance it with social sector investments like agriculture, health, education, sanitation and water in this pre-election last full budget to attract voters. The task before the Union Minister of Finance Nirmala Sitharaman will thus be more challenging. She is meeting the captains and representatives of agriculture and agro-processing industry, in addition to the representatives of the capital market and financial sectors on November 22, service sector and trade bodies on November 24, state finance ministers on November 25 and economists and trade union representatives on November 28. Union Ministry of Finance is to organize more consultation, perhaps would break all earlier records, only to find out what would likely to work in the economy and in the forthcoming state elections in 2023 and Lok Sabha election in 2024.
Only last week Sitharaman had met Jin Liqun, the President of Asian Infrastructure Bank (AIIB), of which India is the largest client. She had urged AIIB to mobilise more private finance and scale up investment in India’s key priority areas like energy efficiency, renewable energy, and more advanced climate technologies that have been deployed so far in the country.
However, the challenges before Nirmala Sitharaman this time (her fifth) seems to be insurmountable since the Union Budget 2023-24 will have to address critical issues of high inflation, boosting demand, job creation and putting the economy on sustained growth path of over 8 per cent at a time when the domestic as well as global economy set to be tumultuous. She would have to make a tightrope walk between economic growth and provide social sector benefits to the people as voters in this pre-election budget.
CII has been batting for income tax cuts to boost disposable income in view of the high inflation rate in the country that has remained around 7 per cent well above the RBI’s tolerable limit of 4-6 per cent range, and also the impending recession in advanced economies that is likely to adversely affect domestic growth momentum particularly due to decline in exports. However, increasing income tax level and reducing the rates would not be an easy task this year. CII has said that tax cut would boost disposable income with people which would increase the domestic demand which is likely to be hit due to a range of issues including the higher rate of borrowing cost.
India’s economic growth for the year 23 is likely to be 5.9 per cent according to Goldman Sach forecast, and hence, revenues on this rate of growth would be significantly reduced. It would bring additional difficulties in budget making for the year 2023-24.
Budget would have to make provisions for alleviation of the rural distress which would need additional spending. Urban areas are not also doing well. Joblessness has become a major problem which is making people more vulnerable to all sorts of distress. People need social security coverage in absence of means of livelihood. Increasing social sector spending has become a matter of paramount importance, both economically and politically.
India Inc has suggested the Union government to focus on capital investment, jobs creation, and climate change. PHD Chamber of Commerce has suggested five pronged strategy – enhance consumption, increase capacity utilization in the factories, create employment, enhance quality of social infrastructure and strengthening economic growth.
However, for all these the country would not only need much more public and private investment than will be available. However, to enhance private investment, which has not been coming forwards for years, the India Inc has emphasized on ease of doing business to establishment level, rationalization of cost, rationalization of taxation, enhancement in infrastructure, to push up incomes of the people including in agriculture.
Industry bodies have pitched for widening the tax base, boosting private investments, consumption and employment generation. They have emphasized that global uncertainty is likely to impact the incipient revival in private capex and hence, public capex would be critical to support demand and growth. However, the needs of fiscal consolidation and reducing the budget deficit would restrain the government to significantly increase the public investment. (IPA Service)