Prof. Raj Kishore Panda in Bhubaneswar, February 7, 2022: Recently the Union Budget for 2022-23 was  presented in the Lok Sabha by the finance minister. On the measures announced in the budget there are divided opinions among the people in the country. While some feel let down because of lack of tax breaks in the budget, others feel that the budget by laying emphasis on government expenditure and particularly capital spending has emphasized on the creation of assets for achieving higher, sustainable and inclusive economic growth.

It is argued that rise in public investment in infrastructure will crowding-in private investment which will help in kick-starting the virtuous growth cycle in the country. Since the budget is prepared at a critical stage of the Indian economy having large-scale unemployment, lower consumption spending, high inflation and above all Covid uncertainty continuing, how far will the budget exercise be able to deal with these challenges facing the economy.

Coming to the budget highlights, we find that it targets at achieving 11.1 percent nominal GDP growth rate for 2022-23. To achieve this growth rate the budget proposes for enhancing government spending without altering tax provisions benefiting consumption. More particularly the government has enhanced capital expenditure significantly with focus on developing infrastructure – multi-modal connectivity. As we observe in the budget estimates the total expenditure proposed to be Rs39.45 lakh crore out of which revenue expenditure comes to Rs.31.95 lakh crore and capital expenditure Rs.7.50 lakh crore.

Compared to the revised estimate of 2021-22 the revenue expenditure has increased by 0.9 percent while capital expenditure has gone up by 24.5 percent. The total receipt other than borrowing accruing to the government during the fiscal year is estimated to be Rs 22.84 lakh crore, thus deficit of Rs 16.61 lakh crore which is proposed to be met through borrowing.

As regards allocations made to different ministries, of the 13 ministries, Ministry of Communications, has got the highest allocation in terms of percentage increase over its previous year’s allocation (93%) followed by Road Transport (52%)and Jal Shakti (25% respectively.) The budget assumes 4% inflation during 2022-23.

From the aforesaid broad budgetary statistics two inferences may be drawn. One, the government has chosen capital spending which generally generates multiplier effect with a lag rather than revenue expenditure inducing direct demand in the economy by influencing consumption. Given that India is a consumption driven economy and at present consumption spending is at a very low level it would have been wiser on the part of the finance minister to increase revenue expenditure appreciably in the budget to boost growth.

Secondly, the Indian economy though showing signs of recovery yet suffers from high rate of unemployment, and lower consumption demand. This is akin to the Great Depression of 1930s. This necessitates focusing on reviving demand through raising employment. By emphasizing capital spending in the budget the government has chosen asset creation over direct income enhancement which may not effective in reviving the economy.

In the budget the Government has laid stress on improving logistics; boost digitization etc to enhance ease of doing business. However, over the past two years of the pandemic there has been severe dent on the human capital development. The disruption in formal education caused by the pandemic has mostly affected the vulnerable sections of society.

When internet connectivity is largely absent in most of the villages, digitization of education is questionable for the children residing in rural areas. So also the proposal for use of drones in agriculture for sprinkling pesticides etc, does not sound realistic. In India with more than 85 percent farm householdds being small and marginal holders the use of such technology does not seem to be cost-effective.

In conclusion, it may be said that while the budget seems to be a great departure from earlier ones in shifting emphasis from enhancing income to creating assets in the long-run growth perspective of the Indian economy, it has certainly overlooked the current economic scenario prevailing in the country and its extent of sacrifice the present generation can undertake for the future need. More so effective implementation of the budget proposals is another area that needs to be pondered over.

As it is observed a large chunk of budgetary allocations in different departments very often are spent in haste towards end of the fiscal year questioning their effective utilization. Let us see the budget outcome at the end of the year.