Noted economics professor sums up Sitharaman's budget: 'Bold attempts to achieve growth'

Tabled before the parliament on February 1 by Finance Minister Nirmala Sitharaman, the Union budget 2023 saw several major announcements, including income tax cuts, and substantially increased health and defense allocations among others. Dr Prabal K Sen, noted economist and Founder-Chairperson of Entrepreneurship Development Centre (EDC) at XLRI Jamshedpur, sums up the Union Budget 2023 for ETV Bharat.

Hyderabad:The Union Budget 2023, presented by Finance Minister Nirmala Sitharaman on Tuesday, saw major announcements such as the tax slab re-arrangement, and a whopping Rs 88,956 crore healthcare budget - amounting to 2.1 percent of the country's total Gross Domestic Product and 2.71 percent hike from the health allocation from the previous fiscal year.

Highlighting upon various aspects of the budget, professor of Economics and Founder-Chairperson of Entrepreneurship Development Centre (EDC) at XLRI Jamshedpur, Dr Prabal K. Sen, weighs in on the pros and cons of the budget. ETV Bharat is publishing his views on the Budget verbatim.

The budget for the year 2023-24 presented by Union Finance Minister Nirmala Sitharaman on February 1, 2023, like her previous few presentations, aims at achieving economic growth consistent with macroeconomic stability, inclusive development and fiscal consolidation. While it is well recognized that these goals are not necessarily mutually reinforcing, and sometimes contradictory to each other, the Minister nevertheless appears to have made bold efforts to achieve the same. Yet another significant feature of this year’s budget is its emphasis on taking India on the path of what has been described Green Growth.

As the development of infrastructure - both rural and urban - is recognized a prerequisite for sustained growth, the Finance Minister has made a number of announcements to smoothen the process of removing the bottlenecks on the infrastructure front and allocated ambitious outlays for this purpose. Capital investment outlay is being increased steeply for the third year in a row by 33 per cent to Rs 10 lakh crore, which would work out to 3.3 per cent of GDP. This will be almost three times the outlay in 2019-20. The direct capital investment by the Centre is complemented by the provision made for creation of capital assets through Grants-in-Aid to States. The ‘Effective Capital Expenditure’ of the Centre is budgeted at Rs 13.7 lakh crore, which would be 4.5 per cent of GDP.

Apart from government expenditure, the newly established Infrastructure Finance Secretariat will assist all stakeholders for more private investment in infrastructure, including railways, roads, urban infrastructure and power, which are now predominantly dependent on public resources. The need for enhancing the capacity of public functionaries in identifying, conceptualizing, structuring and managing Public-Private Partnership (PPPs) has been long felt. It is in this context that the Government’s intention to revamp the National Capacity Building Programme is considered a timely and useful step in the right direction.

With regard to infrastructure development, yet another notable announcement made in this year’s budget is the establishment of an Urban Infrastructure Development Fund (UIDF) on the lines of the Rural Infrastructure Development Fund (RIDF) created in early 1990s. UIDF will be established through use of priority sector lending shortfall of banks. This will be managed by the National Housing Bank, (NHB), and will be used by public agencies to create urban infrastructure in Tier 2 and Tier 3 cities. States will be encouraged to leverage resources from the grants of the 15th Finance Commission, as well as existing schemes, to adopt appropriate user charges while accessing the UIDF. It is expected to make available Rs 10,000 crore per annum for development of urban infrastructure in Tier 2 and Tier 3 cities.

The Harmonized Master List of Infrastructure will be reviewed by an expert committee for recommending the classification and financing framework suitable for the current period. A capital outlay of Rs 2.40 lakh crore has been provided for the Railways. This highest ever outlay is about 9 times the outlay made in 2013-14, Also one hundred critical transport infrastructure projects, for securing effective connectivity for ports, coal, steel, fertilizer, and food grains sectors have been identified. They are expected be taken up on a priority basis with investment of Rs 75,000 crore, including Rs 15,000 crore from private sources.

Fifty additional airports, heliports, water aerodromes and advance landing grounds will be revived for improving regional air connectivity. All such measures relating to infrastructure investments are likely to have a significant multiplier effect securing a jump in GDP growth.
As to macroeconomic stability, which consists primarily of inflation control, the Budget has hardly anything in it. Inflation in India for the last few years is seen to have caused by both domestic as well as international factors. Food prices within the country and vulnerability of crude oil prices emanating from outside have been the principal triggers of the continuing inflation in India. While the Government has admittedly little to do so far as crude oil prices are concerned, the Budget has not spelt out any tangible measures which can leash the food prices.

As far as inclusive development is concerned, the Budget has made a number of announcements which are expected to have a significant impact on the disadvantaged sections of the society. Some of the measures announced in this regard are as under

(i) agriculture credit target will be increased Rs 20 lakh crore with focus on animal husbandry, dairy and fisheries.

(ii) a new sub-scheme of PM Matsya Sampada Yojana with targeted investment of Rs 6,000 crore to further enable activities of fishermen, fish vendors, and micro & small enterprises, improve value chain efficiencies, and expand the market.

(iii) PACS are to be made multi-purpose societies, so that non-agricultural sectors can also be covered by such cooperative societies.

As to fiscal consolidation, the Finance Minister can apparently be complimented that she seeks to contain fiscal deficit at a much lower level, namely, 5.9 per cent of GDP against the revised estimate of 6.4 per cent registered in the previous financial year. The devil however is in details. Such an ambitious goal is based on the projection of an estimated receipt of Rs 51,000 crore by way of disinvestment, which given the present state of affairs, seems to be quite ambitious. Also this target is predicated on good tax collections on the lines of the financial year 2022-23. Tax collections achieved in 2022-23 after the Covid-induced freeze for two successive years, may not repeat in the year under reference. Also ambitious expenditures proposed on infrastructure investment and inclusive development fronts, when duly factored in, makes it difficult to contain the fiscal deficit at the level envisaged in the budget for the financial year 2023-24. Against this backdrop, only a huge dose of luck will enable the Government to end up with a fiscal deficit number of 5.9 per cent of GDP.

As indicated above, this year’s budget will be known for its distinct emphasis also on attaining green growth and significant digitization of the Indian economy. These are goals which will take India not only on a resilient but also sustainable path of development. Many programmes for green fuel, green energy, green farming, green mobility, green buildings, and green equipment, as also policies for efficient use of energy across various economic sectors are proposed to be taken up according to the budget. The most remarkable of the measures announced is implementation of the recently-launched National Green Hydrogen Mission, with an outlay of Rs 19,700 crore, which will facilitate transition of the economy to low carbon intensity, reduce dependence on fossil fuel imports, and make the country assume technology and market leadership in this sunrise sector. The government’s target is to reach an annual production of 5 MMT of green hydrogen by 2030. These green growth efforts would help in reducing carbon intensity of the economy and provide for large-scale green job opportunities.