SATURDAY, APRIL 27, 2024
BINAYAK DATTA
The mark sheet for last year is out and the “what next” followed. And no need to repeat, you heard in the corridors of expensive looking, well varnished business chambers, nearly everybody found out great virtues in the Budget proposed, never bothering to reflect back on earlier promises vs achievements nor on any benchmarks which they would care to have, those who could not find a nice compliment, profusely praised the brevity of the speech!
I just want to take a look at this duo-document of prognosis for the last year and the budgets for the next from just four corners: a) How did we financially fare last year (prognostics) 2022-23; b) What are our priorities for the next year’s Budget? (We were promised a 5-trillion-dollar-economy by 2025) c) What has actually been proposed now towards achievement of the number and finally, d) What I missed and would love to see as we proceed!
My Take:
a) I think the Union Government did quite a good job last year financially, given the fact that the economy was recovering from the Covid losses, the 20-trillion Covid stimulus, and the Ukraine crisis. The Fiscal Deficit as in guidance was still 6.4% of GDP (much higher than the 2013-14 actuals though) but I can live with this, given the downslide of the rupee (or was it the upswing of the dollar?) But where I do have a concern is Capital Expenditure. Actual Capital Expenditure was down by Rs 20,000 crore from the last year’s budget and yet the Fiscal Deficit was more by trillion rupees. I missed actions on reigning in Revenue Deficits particularly establishment expenditure which as per the highlights account for 26% of the 45-trillion-budget. Appropriate deployment of IT and AI and outsourcing in government-rendered services should have yielded significant savings. Second, the capping of deficits of States at 3+0.5% is decidedly a good action. Third, I’m not clear at all, as to why subsidies are invariably under-budgeted. Fresh gross borrowings and liabilities would be around 18 trillion where the Debt: GDP ratio is already 84.5% (PIB). Another 18 are proposed next year. Having said that, if we achieve our five trillion-by-2025, I would still go with it!
b&c) What were our priorities vs the proposals: I’m pleasantly surprised that in spite of a fall in Capital Expenditure, the GFCF (Gross Fixed Capital Formation) recorded a slender increase of 1.9% (RBI). But our priorities remain Capital Expenditure in infrastructure, in mobility, in healthcare and in education. Agriculture and rural development, R&D and technology, services (tourism), environment and climate change and finally reduction of inequality.
Whereas the Budgeted Capital Expenditure which increases by 33% is laudable, the plans in infrastructure under last years’ “Gatishakti” are focussed and clear, I think a lot more needs to done with healthcare and education where we are just 2.4% and 2.9% of GDP respectively (as in the Budget-Papers) where benchmarks in BRICS countries are four and six respectively. Allocations in Railways 2.4 trillion is excellent, we need to speed up the direct freight corridors, so we can be more competitive on our logistic costs. In agriculture, we need more clarity on capacity build-up for green ammonia, particularly in MSME sectors, for green plant nutrients and plant protective, although generous allocations have been mentioned. I am in support of these steps rather than a legislated guaranteed MSP schemes. I didn’t quite understand why the NREGS scheme is being cut by nearly 33%. Yes, there were issues of monitoring and accountability no doubts, nevertheless if implemented for asset-creation particularly in fields like roads and rural infrastructure it could remain an ideal vehicle for economic security of the rural poor.
Although R&D in AI applications have been provided for – an excellent initiative, I missed R&D priorities in hardware and chips, chemicals, fertilisers and pharma. We need world class facilities. China, the erstwhile factory of the world, slowly giving way to Vietnam, Indonesia, Thailand (in components) and Bangladesh (in garments), I think we need to sit up! I’m happy with mentions of concessions on batteries for EVs, green ammonia in fertilisers and green hydrogen in heavy mobilities; I think I missed more on solar and wind energies, commitments in the COP27.
I think we need much more on tourism. I recollect some years back a few tourist destinations amongst States were selected (Goa had one) I honestly do not know what the results were. World class, tourism is a real answer to India’s hinterland development and employment issues and inequality. It should not be run amateurishly with rickshaws and motorbikes. It’s a prospect waiting to be exploited. Just 50 destinations are not enough at all.
I missed also sustained steps to strengthen the rupee, could entail hardships, so be it!
Whilst allocations for green and climate change have been made, somebody should be able to pack a part of all that exclusively for the Himalayas and the Western Ghat ecology preservation. We cannot afford more Joshimaths. I missed seeing specific allocations for the entire Himalayas and the Western Ghats as start of a long-term
programme.
d) Inequality: I think the reduction of the surcharge for larger tax payers above Rs 5 crore could have been avoided – this step would aggravate matters of inequality, if at all. Also, appointment of a hundred more Joint-Commissioners is awesome. I think the better answer is to one-time settle 1st appeals where government-owned undertakings are appellants. Use AI for segregating substantive legal issues from procedural ones.
And before I conclude: “I do not want India to be an economic superpower. I want India to be a happy country.” JRD Tata had once said, and that I think summarises what ultimately counts!
(Binayak Datta is a finance professional)
