The risk of praising the government in a column like this is the immediate labelling of being a ‘bhakt’ or ‘sycophant.’ Sure, one should criticize shortcomings of a government or its policies. However, should praise not be given when it is due? For the recently announced budget for FY2023-24 was the best budget of all the nine annual budgets presented by the current government so far. Whether it is fiscal responsibility, infrastructure push, cutting expensive subsidies and giving some relief to middle-income taxpayers, the budget got it right in almost every department. Here are five areas where the government deserves genuine praise:
- Fiscal Prudence – The current budget was even more remarkable as this was the last budget the government would present before getting into the full-blown 2024 Lok Sabha election mode. It is exactly these pre-election year budgets that in the past have been used to issue sops, subsidies and freebies to get votes. It was so normal to have a sop-friendly pre-election budget that budget analysts even expected it. TV experts would make post-budget statements ‘Fiscal responsibility was not kept, but one can understand, given it is an election year.’
However, the current budget, coming out of a Corona-battered, economy, leading into national elections was one of the most fiscally prudent budgets in recent times. Fiscal deficit, a measure of what the government spends more than it earns (hence a low number is better), was targeted at 5.9% of GDP, compared to 6.7% of GDP just two years ago. These numbers are only of interest to economists, even though they ultimately impact all Indians. If the government spends too much, it can lead to inflation and an overall weak economy. However, in the short term, the temptation to spend more can be huge. A freebie party is always welcome for many voters. However, the government didn’t do it and even aims to bring the deficit to 4.5% by FY25-26.
- Spending massively on Infrastructure – Make no mistake, the government spends a lot of money. A lot of this goes recurring expenses such as salaries, interest payments called revenue expenditures. These simply help the government run on a daily basis. However, the government also invests for the long term in the form of capital expenditures. These are places where spending leads to future returns. Infrastructure (roads, rail, bridges, ports, airports) is a big part of that. The government’s capital expenditures will rise this year from Rs 7.2lakh crores to Rs 10 lakh crores, a rise of 37% in one year (and nearly doubling from three years ago.) Railways ministry expenditure alone for instance, will from Rs 1.6 lakh crore to 2.4 lakh crore, a rise of 48% in one year. These aren’t token increases, but radical shifts in the emphasis being put on infrastructure buildout for the nation. All this infrastructure creation will immediately produce jobs, but more importantly show long-term in terms of higher productivity and economic growth in times to come, not to mention in the added comfort to citizens due to better infrastructure.
- Cutting subsidies substantially – when was the last time you heard a government cutting subsidies in a big manner, and that too right before an election year. And yet, that is exactly what happened. Food, fertilizer, petroleum and other subsidies are set to drop (yes, not rise) from Rs 5.6 lakh crores to Rs 4.0 lakh crores, a drop of 28% in one year. Which government has done this in a pre-election year? Fiscal responsibility is at the heart of the budget exercise and this is yet another example of that.
- Disinvestments – For years Disinvestment targets were set only to be never met. In the past year too, the disinvestment reached 77% of the target, or at 50,000cr compared to the expected 65,000 crore. However, it was still a substantial amount. Not to mention the government managed to sell the permanent cash burning albatross Air India in the middle of a pandemic. That alone deserves praise.
- Tax cuts for the middle income earners – this one is where the government finds a lot of supporters. Income tax levels had not changed for the past few years, and given inflation alone a correction was overdue. Income tax at more reasonable levels will not only give relief, but also increase compliance. Similarly, reducing the effective marginal tax rate for super-high income earners (Rs 5cr plus annually) will also make us more competitive globally, especially in terms of keeping small number the high-income earners.
There were other aspects of the budget too, including various government schemes, smaller welfare measures, some policy changes that will all help India get more streamlined as a globally competitive economy. There were the usual duties, taxes and other tweaks, making certain products cheaper or more expensive. However, there were no major surprises, either good or bad, which is exactly how the budget of a big, stable economy should be. As Indian economy becomes larger, and we aspire to be even bigger, we need a budget that is fiscally responsible, invests in future growth and offers stability. The current budget did that, and more importantly, in a pre-election year, and post a major pandemic. For this, it deserves praise and was the best budget presented by this government so far.