Will the 10-lakh crore of capital expenditure make the Indian economy robust enough to create hundreds of thousands of jobs?
Will it generate tax revenue enough to fuel its expenditures and fill the gap between the income and expenditure of the government?
Or is the Budget 2023-24 an election-year exercise to appease all with little hope of fulfilment of any of the promises made?
Even the most ardent admirers of Modinomics will have to ponder over these pertinent questions if they analyse the last full- budget presented before the General Elections, next year.
The Finance Minister Nirmala Sitharaman appears to have passed the political test of coming out with a budget that targets its constituencies-the OBC, Dalits, tribals, other subaltern sections and the younger generation though symbolically, rather than in substance.
She announced that 38,000 teachers will be appointed for 748 tribal schools under the Prime Minister Particularly Vulnerable Tribal Groups Development Mission and allocated Rs 15,000 crore for it, she tried to lure the people living in the tribal areas, whom the BJP loves to call ‘vanvasi.’
As many nine states are going to polls this year, and many of them have a sizable number of scheduled tribe populations. Meghalaya, Mizoram and Tripura are the states with majority of tribal population.
Similarly, Nirmala Sitharaman allocated Rs 79,000 core, a whopping hike of 66% for the Prime Minister Awas Yojna, a house construction scheme for the rural poor.
She has also promised to transfer a huge amount of Rs 2.2 lakh crore to 114 million farmers.
The finance minister announced an outlay of Rs 10 lakh crore for the capital expenditure or the capex, as it is popularly called. She signalled to the construction sector and everyone else related to it that they might make a killing. She also might have thought that it would boost steel, cement and other related fields and create hundreds of thousands of jobs.
Similarly, Sitharaman wanted to woo the younger generation searching for jobs by announcing certain sops for the MSMEs, startups, green energy and labs for future technologies.
Prime Minister and his colleague Sitharaman have complained many times that not more than two percent of the vast population of more than 130 crore pay direct taxes. While preparing the budget of the year, the Finance Minister chose to appease the middle class taxpayers by symbolism rather than in substance.
She announced that people with an annual income upto Rs 3 lakh will not have to pay, earlier this limit was Rs. 2.5 lakh. So, she gave a relief of Rs 50,000 only. Considering the RBI-estimated inflation rate of 5.2%, this will be much less, starkly insignificant.
But the finance minister has other plans for the taxpayers as well. Considering the fact that there are not many takers of the New Tax Regime, introduced three years back, she made an interesting announcement-those with an annual income of less than Rs. 7 lakh will not be taxed. The minimum tax rate of 5% will be levied on annual income of Rs 7 lakh to 9 lakh. She also announced certain deductions and reductions to incentivise people of other income brackets to shift to the new tax regime.
The New Tax Regime has no deduction or concession.
The budget has some inherent flaws indicating that either the Finance Minister is a too optimistic person, completely disconnected from the economic realities of the country or she has tried to fool the country deliberately.
The budget has projected a nominal growth rate of 10.5%, assuming that the inflation rate will not be more than 4%. But the RBI has projected an inflation rate of 5.2% for the first half of the financial year. Even if the inflation rate for the second half of the financial year is 4% as projected, the average inflation rate will be 4.6%. It will upset the budget estimates.
Clearly, the budget has over-estimated the growth prospect.
Sitharaman has tried her best to strike a balance between good politics and good economics. But it seldom happens.
By cutting subsidies, freebies and also pumping money into capital expenditure, she has tried to prepare a budget that angers no one and also generates some inputs for real and long-time growth.
But the finance minister has not made arrangements to generate enough revenue to fuel the expenditure. She has tried to appease the middle-class in symbolism with no substance. She has ruthlessly cut the allocations for MGNREGS and other employment generation schemes, with no alternative ways for job-creation. Sitharaman has cut subsidies leaving the most vulnerable segments of the society in lurch.
A good politics is a bad economics and vice-versa. An attempt to juggle up both is bound to fail.
Meanwhile, the finance minister has slashed the allocation for the Ministry of Minority Affairs by about 38%.
She made an outlay of Rs 3097.60 crore, much less than last year’s allocation of 5020.50 crore.
Out of the total outlay, Sitharaman has made an allocation of Rs. 1,689 crore for education empowerment while Rs. 64.4 crore has been allocated for Skill Development and Livelihoods.
Welcoming the budget, Minority Affairs Minister Smriti Irani tweeted that the prime minister and the finance minister has ‘truly epitomised inclusive development’
Narendra Modi cabinet has no Muslim minister. It is also for the first time that the largest ruling party has no Muslim member in the parliament.