If India were the lone spot of hope in a gloom-filled global economy, Budget 2023-24 provided it with a historic opportunity to take a big risk and unleash its shackled forces — private entrepreneurship and investment, a middle class with greater spending power, reduction of the government’s role in the economy and more — if seen from a converse perspective. Instead, continuing with a premium on safety, balance and status quo, finance minister Nirmala Sitharaman, in one of her most effective Budget speeches, opted to play safe. She thus cost India a big opportunity but her Budget will keep the economy in sound health.
The big thrust is public investments in infrastructure. The biggest highlight and focus was on public capital expenditure as the fountainhead of progress and initiator of a cycle of positive economic forces — creating jobs, enhancing the economic multiplier and augmenting the velocity of money, thus bringing about a rise in demand. This would, in turn, propel a secondary cycle of growth.
The government spend was predominantly increased in the Railways, ports, roads, and others to Rs 10 lakh crores. An investment of over Rs 2.4 lakh crores in the Railways would help modernise the rails and is commendable. The jobs created here will be centred on manual work and will serve the underprivileged in a year of several state elections. They would also benefit from the continued food security spend.
Capex was also the thrust of Central support to states, focussing on pushing the secondary federal units of India to script greater infra stories and benefiting from the Centre’s 50-year interest-free loans for capital, with a few reform-oriented conditions. There was a capex outlay increase of 33 per cent for the financial year 2024.
The next big tickets are green economy and skill development and education, with a focus on technology, knowledge economy and innovation. The allocation of nursing colleges, for example, can really help lots of youth find jobs and the healthcare industry find skilled additions to their workforce.
The reduction of customs duties, though less substantial than expected by the reforms lobby, was a welcome signal to the world, and India’s own domestic industry. While “Atma Nirbhar Bharat” will be a goal, each industry must get competitive and be ready for global competition. With lower tariffs, the world will welcome greater access to the Indian market — but the move was a bit symbolic.
The reforms in the direct taxes, while pushing the salaried class to pick the second option in tax calculations, forgoing all exemptions and deductions under Section 80C of the Income Tax Act, will leave a little more cash in the hands of the employee, but again fall significantly short in terms of unleashing the middle classes as growth leaders through the spending route. The government clearly expected the middle classes to support the BJP more for socio-political and ideological reasons rather than as the beneficiaries of its economics.
Green is the colour of the Budget, with a big thrust to green housing, green vehicles, green industries but the conventional housing industry won’t cheer it for long. The Budget also chose to conservatively stay within limits on spending, and borrowings, and keep fiscal deficit in leash, instead of going a bit easier on it to achieve higher growth, and more rapid jobs creation.
The Budget’s vision of the State as the most powerful force directing India’s economic future and guiding its destiny, with its people playing a more passive role, as a stepping stone into the Amrit Kaal is slightly disappointing, and years from today, we may rue the lost opportunity.
Ms Sitharaman has delivered a good, sound Budget, low on risk, moderate on growth, and high on State power. She has won the day.
