The 8-9 per cent growth presumption is far from reality. The FM could not count on savings for boosting consumption as people are not spending
A high-expectation ambitious Union Budget has many contradictions. It pines too high but may not create 60 lakh jobs and boost consumption.
It is a time of crisis. Farmers and youth are showing their displeasure. The micro and MSME sectors are in distress. People in the public sector are worried about job losses due to possible privatisation. The economy hit by the pandemic has to come back to health and business must be on track to boost jobs and growth. Finance Minister Nirmala Sitharaman appropriately bites the bullet of increased public expenditure but curiously cuts down on welfare and slashes key subsidy by 27 percent. The 8-9 percent growth presumption is far from reality. Total expenses are calculated at 11.1 percent nominal growth. It is on assumption that retail or CPI inflation would be at 2.6 percent instead of actual 5.6 percent. Inflation is global. It means the total expenditure is inappropriately calculated. Two years back there was seven percent contraction; means actual growth is far less.
Her arithmetic is conflicting. The government being short on revenue earning is dependent on debt. It proposes to borrow Rs 14.95 lakh crore and of this Rs 11.6 lakh crore will be raised from the shaky market. If the government picks up all the money, the credit will be more expensive. As RBI rate rise is likely the cost of borrowings will increase. For creating jobs public sector is needed but it is being edged out. The market is choppy. The disinvestment target is being reduced as there are fewer buyers. It has come down to Rs 65,000 crore for fiscal 2023, from Rs 78,000 crore in 2022 and Rs 1.75 lc in 2020-21. But transferring even profit-earning 171 public assets, as per Manmohanomics, to the private sector seems fashionable. The Air India deal cost a fortune.
During 2021-22, the Centre infused equity of Rs 62,057 crore to clear AI dues before disinvestment. Now another Rs 9259 crore has been allocated to AI Assets Holding Ltd (AIAHL), a new PSU, to handle AI’s unsettled debt and non-core assets. So, Government spends over Rs 71316 crore (and plus Rs 51970 crore losses!) to “sell” the mammoth AI.The UPA minister, who drove profit-making AI and Indian Airlines to losses during 2005-07, escapes unscathed.
The first PSU steel plant NINL, with Rs 6600 crore liabilities, is sold for Rs 12,100 crore to Tatas on budget day. The buyer profits from a one-million-tonnes-a-year plant in Odisha, 2500 acres of land and a mine with 102 million tonnes of prime iron ore. The LIC and four banks are on the same sale block. Such ‘privatisation’ is too costly.
It has tax revenue of Rs 27.58 lakh crore and wants to have capital expenses of Rs 7.5 lakh crore, 35.4 percent more from the present Rs 5.5 lakh crore but this year it spent 48 percent less. This cannot create more jobs. It reduces allocation on rural development, health and other programmes. The Rs 50,000 crore for MSMEs is bank credit. The FM could not count on huge savings for boosting consumption as people are not spending. Pre-budget data reveals Rs 7 lakh crore household savings and Jan Dhan deposits swelling to Rs 39,000 crore. But the households with Rs 18000 crore debts are not spending.
The kisan expects more. The farm sector alone has sustained growth of around 4 percent but 86 crore lost their land. Possibly 52 percent of them crore were in the informal self-employed economy till demonetization, according to an SBI study. Except about 15-20 percent, including a chunk of farmers who lost their lands, are now labourers. Should we not revive that low-cost people-initiated informalisation? It is cheaper than unicorns and employs more. The nation needs to rethink. Even MGNREGA allocations have been reduced to Rs 73000 crore from Rs 98000 crore of 2021-22. The rural development, health and labourers need more support. So does lowering of income tax rates to match corporate tax. People need more cash for consumption boost else manufacturing industry would be suffering.
The nation needs more people-oriented approach than mere 25000 km roads, airports and digital connectivity that help the corporate builders, toll collectors and fee extractors. Irrationally high tolls and cesses ideally be scrapped to keep prices in check. Taxes are not “hiked” but devious cess robs more and hike prices.
The budget cannot have contradictory projections and has to be more imaginative to overcome the difficult days and help the country sustainably grow.
(The writer is a senior journalist. The views expressed are personal.)
