An element of surprise in Finance Minister Nirmala Sitharaman’s fourth budget relates to the absence of freebies and sops that could impact elections in five states scheduled next month. We in Tamil Nadu are only too familiar with the political parties vying with one another in promising the moon ahead of elections.
THE BUDGET IS bold in the massive stepping up of investments in infrastructure through the Gati Shakti. It has opted for growth in spite of the inflation pressures and a hefty fiscal deficit of 6.9 per cent, more than double the 3 per cent desired and targeted for long.
Sitharaman has the advantage of a sharp rebound and recovery of the economy and high economic growth estimated at 9.2 per cent for the current year. Revenue receipts estimated at Rs 20.79 lakh crore were substantially higher than the Rs 17.88 lakh crore in the budget estimates. GST collections for January at a record Rs 1.41 lakh crore was also a booster dose for the optimism and confidence for a sustained high growth in the coming years.
The agriculture and industry sectors have been performing well. These favourable factors have helped the Finance Minister concentrate on four priorities – the PM Gati Shakti, inclusive development, productivity enhancement and investment, sunrise opportunities, energy transmission and financing investments. The stepped up investments on infrastructure, viz., roads, railways, airports, ports, mass transport, waterways and logistics will be complemented by energy transmission, IT communication, bulk water and sewerage and social infrastructure.
The massive capital expenditure estimated at Rs 7.50 lakh crore forms a step up of over Rs 6.03 lakh crore of the revised estimates for such expenditure in 2021-22. The visible progress made in recent years on the construction of national highways and road network, railways, ports and airports could be expected to be further improved. There are expectations of increased support to the private sector in this endeavour.
For long, interlinking of rivers has been talked about. These projects will be of great value in providing irrigation benefits to lakhs of farmers and drinking water supply to millions. Of special interest to the south relates to the linking of Godavari-Krishna-Pennar-Cauvery rivers. The Finance Minister indicated preparation of DPRs on these.
POSTS-RAILWAY COMBO…
For years, there have been references to the 1.5 lakh post offices spread across the country as invaluable assets waiting to be drawn to their potential. The budget proposes to bring these post offices under the core banking system providing access to accounts through net banking, mobile banking, ATMs… and also for online transfers. The integration of the postal and railway services indicated is a good plan for developing the sprawling post office network along with the railways as a precious logistics backbone.
Digital India has been one of the major endeavours of the Modi government. Especially during the Covid pandemic years of 2020 and 2021 with the lockdowns and compulsions to work from home, digitisation has recorded massive growth. Look at the spectacular spread of digital commerce with assured promise of delivery of thousands of products by Amazon, Flipkart, JioMart, PharmEasy, Netmeds, 1mg…
More interesting is the assurance of consumer protection comparable to those in developed countries, eg. return of goods and refund of cost without question.
The Finance Minister proposed refinements and expansion of digital banking, digital payments…
BUDGET THROUGH THE YEARS…IN PRESENTING HER fourth budget Finance Minister Nirmala Sitharaman has further helped diminish the halo over the budget. For decades earlier, the annual presentations on the statement of finances had a lot of importance and interest; tax changes had enormous impact on the fortunes of businessmen and traders. Hence a lot of secrecy was shrouded over budget preparations. Former Finance Secretary, K P Geethakrishnan used to recount stories on the quarantine of key men, days before the presentation of the budget and to the ritual of preparing halwa in the basement of North Block.
The election of the BJP with comfortable majority in the Lok Sabha in 2014 led to decisive leadership with a free hand to implement the policies and precepts of the BJP. Prime Minister Narendra Modi has been able to bring a sharp focus on social and economic transformation across the country. There has been a sharpening of the focus on issues of concern to all parties–eradication of poverty, reduction of inequalities, improvements in standards of living… Social amelioration plans like power for all, Swachh Bharat, housing for all, piped water supply for all households, health and focused welfare of women and children, health insurance cover (Ayushman Bharat), road and telecom connectivity… have been impacting wider sections of the population. We have travelled a long way from fiscal policies announced in detail in annual budgets. Fiscal measures involving considerable costs are announced through out the year. We witnessed through the pandemic years of 2020 and 2021, a large number of proposals involving humongous outlays announced outside the budget days. The budget for 2022-23 appears to be an important watershed in its straight, matter-of-fact focus on development and a transparent statement on the state of the finances. Media, especially the visual medium of television, is perhaps the one segment that continues to revel in vesting the budget with powerful halo. Dr Prannoy Roy with the experience of his long stint with the finance ministry, used the budget as a great opportunity for marketing NDTV. His chelas who are active in rival TV companies follow this model with equal gusto. These are supported by liberal sponsorships and participation of industry associations. The entire exercise has also been helped by the digital medium with instant coverage and comments from countless social networks. |
V P Singh as Finance Minister in the mid 1980s, introduced a long term fiscal policy that imparted a certain stability in fiscal administration. One had the spectacle of a procession of finance ministers from 1986 to 1991 with average tenure of just about a year or less. The P V Narasimha Rao-Manmohan Singh duo, with the liberalisation policy and a stable tenure of five years, liberalised economic policies. Globalisation and expansion of world trade also helped in reduction in import duties. From 1999 the continuance of such policies and a more professional approach was further helped by the inclusion of a large number of political parties forming part of the Central government.EASE OF EXITING BUSINESS…
The budget continues with the reforms in tax administration expanding a measure of trust with the tax payers. The Finance Minister referred to over 25,000 compliances that were reduced and 1486 Union laws repealed. She has also addressed the difficulty of a corporate exiting a business. The Centre for Processing Accelerated Corporate Exit will facilitate and speed up the voluntary winding up of a company. The Finance Minister indicated a reduction of the currently required two years to less than six months. This is specially welcome for the ease of entering and exiting a business.
The Finance Minister has taken a bold risk opting for growth. There are plausible risks in this: a new virus surfacing with devastating impact on public health; of raging inflation triggered by steep and continuous increase in crude prices and of industrial raw materials.
These should also be related to a steep drop in allocation for fertilizer and petroleum subsidies. The budget for 2021-22 initially estimated a fertilizer subsidy of Rs 79,530 crore; but steep increase in the price of imported urea which shot up from around $ 300 earlier to $ 900/tonne resulted in revising the estimates to Rs 140,122 crore. The budget for 2022-23 estimates the fertilizer subsidy to be lower at Rs 105,222 crore. The petroleum subsidy for the current year was estimated Rs 14,073 crore but the revised estimate shows this at Rs 6517 crore. For the coming year the provision is still lower at Rs 5813 crore.
A word of praise is due to the Modi government linking the prices of petrol and diesel to the global prices of crude oil. The UPA government persisted with mindless subsidies on petrol and diesel that resulted in humongous outgo on subsidies and debts to supplier countries and the oil marketing companies, running into thousands of crores of rupees. The Modi government opted not to reduce the prices of petrol and diesel even when crude prices crashed to less than $ 30 per barrel, about a fourth of the peak prices. This prudent policy helped the country clear the debts and also improved the finances of the oil marketing companies.
DISINVESTMENT, ASSET MONETISATION MISSING…
For over two decades the annual budgets used to indicate plans on disinvestment. Arun Shourie as Minister in the Vajpayee government took bold to sell off a few public sector undertakings. The dust has not still settled with the opposition parties, especially the Communists baying for his blood. In his long tenure as finance minister, P Chidambaram had the ingenuous practice of selling off shares of the government in a PSU to another healthy financial institution like LIC or a prosperous PSU like ONGC under the pretext of disinvestment.
The Modi government has been making bold to announce outright sale and monetisation of public assets. It set up a target of Rs 1.75 lakh crore for the current year but is expected to end up realising just Rs 65,000 crore. Thankfully, the Finance Minister did not spend her energies over this ritual. But one can expect the government to quietly proceed ahead with such monetisation.
During the first term of the Modi government, Sitharaman donned the role as the Defence Minister for a few months. She came to grips with the problems of the ministry in quick time and set ambitious plans for massive step ups in defence production, particularly defence exports. There is thus a welcome reference to her announcing an impressive plan of Atmanirbharta in defence production. She has indicated 68 per cent of the capital procurement budget earmarked for domestic industry in 2022-23, up from 58 per cent in the current year.
The big breakthrough of export order from Philippines for the Brahmos missile system is an excellent break for continuous and big step up in defence exports.
Concepts like green bonds and allowing world class foreign universities and institutions to set up operations in the GIFT City to offer courses in finance and management, free from domestic regulations should be extended to other states. Indian students spend large resources on pursuing higher education in UK, USA… Universities and higher institutes of learning setting up their businesses in India will obviate the need for this as also attract students from other developing countries.
As could be expected, chief ministers of states ruled by opposition parties as also leaders of Congress and Communist parties are critical of the budget proposals. TN Chief Minister M K Stalin opposed the conditionalities in allotment of Rs 1 lakh crore for the states under Gati Shakti as also for the one-nation-one-registration plan.
IE has been suggesting industry associations, experts and other leading political parties to work on model budgets ahead of the presentation of the budget by the ruling party. The brilliant lawyer, N A Palkhivala used to draw thousands to listen to his commentaries on the budget for several years. Working for the Tatas, Palkhivala had enormous access to data and was eminently suited to prepare such a model budget. Likewise, political parties and industry associations like the CII and FICCI can prepare such budgets. These could guide the Union Finance Minister to incorporate the suggestions found feasible. But then it is easy to find defects in a constructed house than help building it free from faults!
