The Budget day came and went, and as is usual, I thought I’ll table a few points which might have escaped accolades and emphasis from pundits over the last week!
A Union Budget is now-a-days not meant to be limited only to estimates of “Receipts and Expenditures for that Year”... as originally in our Constitution, it’s much more now, it’s evolved as an annual appraisal of Economic Vision and Explanations thereon of the Government in the Parliament.
I propose to take a look at the following four corner stones of this exercise:
i) The backdrop this year
ii) The priorities this year on the Path to The India @ 2047, A “Developed Economy”
iii) The proposals: The allocations and the sources
iv) The financial prudence at macros ..and..What’s missing..?
I ) The Backdrop: This was, after about a decade, the first Budget, back to coalition-days of yore along with their compulsions, additionally, the 24 Election Guarantees (The Sankalp Patra) looking for fulfilments ASAP!. Add to that, possible impacts of tensions in the Middle-East on commodities and logistics, uncertainties in continuity of policies across the West, approaching elections and new administrations. View also, the possibility of a fed rates reduction.
Back home however, our fundamentals were encouraging; the GDP growth, a healthy upwards of 8% for the year; An improving PMI of around 58-60 both in manufacturing and in services; although significant rise in consumption not yet to be seen. An uneasy 5%+ fiscal deficit, albeit with a reducing trend; A modest growth in exports of just 7% in such a good year otherwise, but a negative growth in FDIs remain concerns as well, in my view.
I saw an excellent paper from Niti Aayog and it says India@2047 has to have a per capita GDP of 8 times of what it is today, with Industry taking a 34% share in GDP (up from around 28% today)...no mean task at all!
The question is, in what ways does the budget run at this speed today?
ii ) The nine priorities for the year: All nine excellently expressed. I missed however, mentions of Atmanirbhar Bharat, except for oil-seeds, (even on the face of recent “nation-first” slogans heard from our Western-peers-to-be!) I also missed health and government schools and colleges, where I think a developed nation has not only to be good, they have to be internationally exemplar. Incidentally, of the four “Themes of the Budget, viz: employment, skilling, MSMEs and the middle class, whereas I found meaningful connects with the priorities, I missed linkages of the MSMEs (excepting for doubling of loan upper-limits for Tarun-Mudra) and I missed the middle class. I think we need to prioritise more of mentoring and hand holding rather than more loans for MSMEs. For the middle class, I think a small step could be rationalising the slabs in the new-regime income tax rates for 12 to 25 lakh incomes at 20% in place of 15 lakh-and-above proposed at 30% tax, when we tax a 400-crore company at just 25%!
iii) The Proposals: The allocations, the funding and the sources: I found mostly all allocations well aligned with stated priorities, as well as to the Sankalp-Patra ‘guarantees’, I am not sure of a few, e.g. in Ayushman Bharat, we couldn’t spend more than 78% of budgets last year, yet the same budgets have been proposed. Whereas we spent a whopping 43% excess in MNREGS we budgeted an allocation at the actual-spent-last-year level. What happens to inflation adjustment and to rural public works? Fertiliser subsidies are allocated 87% of what the actuals were last year. The Garib-Kalyan Anna Yojana gets a budget of 2.05 trillion (4% less than actuals of last year). I think the internship scheme needs much more than just one month’s one time gross, there has to be curriculum and coaching pedagogy approved at some board for internship or so, for a meaningful engagement.
Just like upgrading railway stations, I think a yojana for upgrading hinterland post offices, BDO’s offices, primary health centres and government primary schools could be great, could do a lot of optics to enhance pride and users’ perceptions.
The infrastructure spend at a whopping 11 trillion is great. But I’m uneasy on railway spends. E.g., gross capital expenditure budgeted 4.39 trillion is actually 1% less than last year’s budget. I think railway safety is the area requiring upgradation and monitoring, particularly with semi-high-speed trains’ regime we are now in! I did not see significant increases in allocations for rolling stocks, track-renewals and signalling and telecom (Guarantee No. 15, item 3 of Sankalp-Patra).
Arising from special allocations for Bihar, I wonder who’s the spender? The Centre or the State? If it’s the State who’s going to build the Bridge, am I sure there are prima-facie capabilities to handle the Rs 46,400 crore for the bridge and the super thermal power-house on plans? Andhra’s allocation of the Rs 15,000 crore to implement the 10-year-old task of the Andhra Reorganisation Law, I’m almost sure would have inspired CeeLo Green for his hit “..better-late-than-never” (had he not sung it already 4 years back!). The middle-class?.. I missed sadly the mediclaim for elders 70+ (Guarantee No5, item No. 1).
And before I conclude; iv) The financial prudence at macros: Positive in my view! In spite of a GDP growth of 8.2% in FY 2024, the borrowings were actually lower by a good 5%. There is a reduction of 0.2% in fiscal deficits. Second: Tax to GDP ratios (Central) slowly but consistently improving, so is improving, the direct-to-indirect tax ratios, which Adam Smith would be happy about. But there is in my view, room for improvements, particularly in view of our inequality indices. I missed something on global minimum taxation (pillar 2) around 15% for corporates talked in the G20, event-based presumptive taxation on lavish event expenditures for example, and of course an industrial engineering study on future jobs, say a job-census!
Technology and the world will change – so will have to change our notions and our aspirations!
(Binayak Datta is a finance professional)