- We have witnessed how the union government aims to influence the lower strata of society with dole-outs, incentives, and attractive schemes to not only consolidate the vote banks based on complex caste equations but also try to score brownie points against the opposition. Refreshingly, the budget stays away from attempting to overtly influence the voters through unsustainable spending. Thus, this budget exuded political confidence in two important ways. As mentioned, it’s the penultimate budget before the preparations for the Parliamentary elections kickstarts in the first quarter of the next year. There was heavy anticipation from the general public about electoral dole outs as nine state assemblies go to polls this year.
PC: freepik
- It’s pertinent to note how Prime Minister Narendra Modi had spoken against the revari (freebie) culture not so long ago. Keeping in line with his exhortation and defying conventional wisdom, the FM has lowered the effective income tax rate for the rich by almost 4 percentage points to 39%. More importantly, lower taxes for the middle class, which BJP hasn’t overtly courted since 2014, show the party recognizes that this group will grow bigger and play an increasingly important role in politics. Notably, the PM apparently understands the extremely complex undercurrents of the political and economic pulse. By backing his cabinet colleague fully, the PM has displayed adroit and pragmatism truly representing the consummate statesman that he is.
- Needless to mention, the different strands of the budget will hold together only if there’s underlying fiscal credibility. The budget scores here even if its estimate of just 10.5% nominal GDP growth is too low. If the baseline GDP growth estimate is 6.5%, it’s hard to see how inflation this year will average just 4%. However, as the gross tax revenue growth is expected to be Rs 33.60 lakh crore in 2023-24, 10.4% higher than the revised estimate, a higher nominal GDP growth will also boost revenue receipts. This is assuming no further external shocks like the pandemic-induced economic slowdown and the ongoing Russia-Ukraine conflict-like situation emerges. In such a scenario, the fiscal deficit estimate of 5.9% of GDP in 2023-24 should be met.
PC: freepik
- Admittedly, the gradual glide path of deficit reduction is what was required and the budget offers a roadmap to achieve the same. A minor letdown is the continued tinkering with import duties, although less this time. A general increase in import duties over four years is inconsistent with the emphasis on manufacturing. Also, budgetary concessions for specific products for a limited time typically lead to lobbying. A general downward revision in the tariff to make manufacturing globally competitive is what Make in India needs. In conclusion, there’s little doubt this is the budget India needed at this juncture. As is there won’t, all the major opposition parties have termed the budget bereft of fresh ideas and lacking in direction. But people aren’t complaining.
