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Union Budget to continue process of fiscal consolidation while empowering consumers to boost domestic economy

Higher Capex targets likely to raise growth, create fresh jobs

SNS | New Delhi |

In her last full-fledged Budget before the General Elections next year, Finance Minister Nirmala Sitharaman is expected to balance objectives of fiscal consolidation and empowerment of consumers to spur spending for a vibrant domestic economy.
The Government is likely to continue pursuing its strategies for higher growth rate while strengthening areas with potential for fresh jobs in the Union Budget-2023-24, which is to be presented in the Lok Sabha on Wednesday.
The Budget Session of Parliament begins tomorrow morning with a joint sitting of the two Houses of Parliament addressed by President Droupadi Murmu, followed by presentation of the Economic Survey 2022-2023 by the Finance Minister.
The Narendra Modi Government has over the years given more weightage to empowering citizens than distributing “goodies” for short term benefits. It is therefore reasonable to expect that the coming Budget may continue making higher allocations for capital expenditure (Capex) to strengthen foundations of the economy, rather than adopting populist measures for electoral advantage.
This does not mean that there may not be any relief for the common man suffering from retail inflation and frequent increases in petrol and diesel prices. The Budget is expected to tweak the income tax regime for the salaried class so as to create a feel good factor about the Government’s annual financial statement.
Since the success of any Budget for many years has been evaluated in terms of its capacity to create new jobs, the coming Budget is also awaited to see how it provides for areas that need fresh manpower. The Government has been expanding expenditure on infrastructure projects.
In the coming Budget too, the Government will continue to play the role of the big spender and sectors like Railways, Roads and IT will remain favoured. India has set its economic profile high, having achieved its status as one of the fastest growing economies of the world.
Buoyant direct and indirect tax collections will enable the Government to invest more, even as the private sector continues to shy away from increasing investment. The Goods and Services Tax (GST) collections continue to account for more than 50 per cent of government revenues.
The Government is likely to continue interest-free long term loans to State Governments for capital expenditure and the outlay in 2023-24 will depend on the off-take during the current financial year 2022-23.
The Production Linked Investment (PLI) incentive, launched to support domestic manufacturing, has been popular and there is demand to extend it to more sectors. The start-ups have been encouraged through faster clearances and fiscal concessions. The Budget will have to take a considered view on the sector, considering creation of high-value jobs and innovation triggered by it in the economy.
Pressures to reduce the fiscal deficit from this year’s expected 6.4 per cent to below 6 per cent around 5.8 per cent will force the Government to look at the large food and fertilizer subsidies. This may not be an easy task considering the Government’s commitment to give “precedence” to the deprived in its policy framework. Covid-19 and Ukraine will continue to present challenges to the economic policy of large nations like India.
In any Parliamentary debate on the Budget, a common theme of Opposition speeches has been allocations for health and education sectors. The significance of allocations for the health sector has been highlighted by Covid-19 and support for Ayushman Bharat health cover and industry initiatives in infrastructure are likely in the Budget. The education sector has been demanding attention because of the setbacks during the pandemic.
India has opened its doors for foreign direct investment (FDI) sector. While reviewing its outcome, there is pressure to demand simultaneously for opening their doors to manpower migration by countries which seek to invest their capital in India.
In the domestic economy, the tourism sector has shown resilience to revive after the Covid setback and is now seeking concessions for its capacity to create jobs and earn foreign exchange.