Sitharaman’s push for big growth cycle on back of capital investments and infra will work.
It’s an unconventional budget of sorts. Many may not feel so. Never mind, but it’s the Indian civilizational philosophy of ‘Yoga kshema’—people’s welfare—ordained in Dharmic principles of economic governance that finance minister Nirmala Sitharaman leaned heavily on to present her fourth budget.
Easiest is to dismiss with a smirk that there’s nothing in the budget for hoi polloi. Finance Minister Sitharaman’s budget proposals were definitely not a routine affair that offeredfew rupees here or there through tax concessions, exemptions or raising the bar on standard deductions.
Even Kautilya’s arthshastra had emphasised on establishing sustained and workable economic order especially during and aftermaths of a pandemic. This’s precisely what Nirmala Sitharaman attempted through her Rs 39.45 lakh crore budget for 2022-23 unveiled on February 1. It’s not easy to pull the economy out of woods after having been battered for over two years during the Covid 19 induced pandemic. Sitharaman seems to have donned the cap of a thinking Finance Minister to lay the roadmap for inducing sustained growth in medium term.
Spurring industrial expansionto carve out millions of newjobs and work opportunities in the medium term may not be altogether a bad idea. Expanding the productivity linked incentive scheme beyond 14 sectors alone may bring in six million new jobs as estimated by Sitharaman.
For the common man and average BJP voter with ‘what’s in it for me’ attitude, this high growth packagemay not mean much. Even from optics point of view, ‘growth, growth and more growth’ kind of budget may be difficult to sell.
But then, right messaging is what the Narendra Modi government has to do for garnering support tobudget proposals that haveoutlinedplan to set aside over Rs 7.5 lakh crore for capital expenditure marking 35 per cent increase against revised estimates in 2021-22.
As Prime Minister Modi pointed out a day later, this huge capital expenditure was four times more than Rs 1.87 lakh crore incurred in 2013-14 prior to his government took reins. Over and above, states have been allowed to borrow Rs one lakh crore as interest free loans with 50-years tenure.
Front-ending public investments also mean that private and foreign investors would follow suit to revive the investment cycle.
It’s not just the messaging part. Reality is that Modi government has put a large chunk of budget resources on railways, ports, airports, roads and other infrastructure projects to give an aggressive push to economic growth and thereby create more jobs.
Even if 50 per cent of government’s projects materialize, the criticism that nothing was beingdone to tackle unemployment and job losses will fall flat. It’s a conscious gamble that Modi-Sitharaman duo have taken.
Most economies globally continued to report contraction last two years. Interestingly enough, Indian economy’s resilience has led to 9.27 per cent growth this fiscal. For the growth momentum to sustain, finance minister seems to have chosen public investment and infrastructure development push as twin engines.
Well, naysayers were quick to cite heightened inflationary pressure working counter-cyclical to high economic growth trajectory Modi government consciously opted for.
Crude prices heading for $ 100 per barrel ($ 90 per barrel reported two days before budget) could put immense pressure on India’s inflation that’s already hovering at double digits in wholesale markets and 5.4 per cent at consumption level.
There’s no denying that for every finance minister, biggest nightmare was to achieve a fine balance between prices, inflation and interest rates on one side and getting desired growth uptick to spread prosperity, meet peoples’ aspirations and carve out work opportunities.
As Sitharaman went about methodically to induce sustainable growth, she facedbrickbats for having giving fiscal prudence a go by as fiscal deficit was targeted at 6.4 per cent in 2022-23 and continued to be high at 6.9 per cent this fiscal.
Huge surge in goods and services tax collections has not helped in pruning deficit figures though finance minister Sitharaman insists that Modi government has not lost out on fiscal consolidation plan outlined in the last budget.
Consistently, GST mop up crossed 1.2 lakh crore each month beginning April 2021. And, in January 2021, GST collections touched an all-time high of Rs 1.40 lakh crore since its inception in July 2017.
So singular was her focus was to achieve high growth levels, Sitharaman did not hesitate to expand borrowings to Rs 14.95 lakh crore for 2022-23.
Through the budget exercise, Nirmala Sitharaman put to rest the raging debate on crypto currencies. She has clearly stated at the post-budget press conference that private crypto currencies will be banned completely.
This is in sync with this government’s belief that only RBI has the right to introduce currency whether its notes, coins or digital instruments.
Prime Minister Modi offered further clarity on digital rupee to be launched, regulated and monitored by RBI. At a virtual conference with BJP workers post-budget, Modi even outlined that digital currency and physical rupee would be easily convertible.
While taxing digital assets (read crypto currencies) at 30 per cent on long-term capital gains and one per cent transaction fees, Finance Minister Sitharaman clearly stated that private digital currencies will not be legal tender in India.
Nirmala Sitharaman’s decision to tax digital assets like cryptos has lent credibility to the digital transactions. But, will they be accepted as collateral in banks is a question on which there’s continued ambiguity. Tax officials do tell that Income Tax department had been collecting tax on digital transactions via the capital gains window.
While there’s no official estimate of Indians exposure to crypto currencies, several independent consultancies have put the figure at a whopping Rs 6 lakh crore. Now that private crypto-currencies will not be recognized, future of such investments, block chain technology mints and exchanges is a big question.
Expansion in the productivity linked incentives scheme beyond the initial 16 sectors and renewed support to ‘Make in India’ campaign would only increase foreign companies’ engagement in India. As per budget documents, 60 lakh jobs will be created over five years by these enterprises.
Self-reliance campaign pushed across defence sector with over 68 per cent resources set aside for Indian companies on preferential basis is again a big positive. Several other initiatives for start-ups, medium, small and micro-enterprises apart from digitizing rural as well as agriculture economy would have cumulative impact that would add up neatly.
This is a budget in continuity for growth and usher in welfare, prosperity and upward socio-economic mobility of 1.4 billion people. Kudos, Finance Minister Nirmala Sitharaman!
(The author is director & chief executive at New Delhi based non-partisan think tank, Centre for Integrated and Holistic Studies)