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New India’s Economic Transformation And The Interim Union Budget 2023–24 – IMPRI Impact And Policy Research Institute

New India’s Economic Transformation and the Interim Union Budget 2023–24

Press Release

Asra Malik

The IMPRI Center for the Study of Finance and Economics (CSFE), IMPRI Impact and Policy Research Institute, New Delhi, hosted an interactive panel discussion on the topic “New India’s Economic Transformation and the Interim Union Budget 2023–24″ on February 4, 2023, under the IMPRI 3rd Annual Series of Thematic Deliberations and Analysis of Union Budget 2023–24, as part of IMPRI #WebPolicyTalk.

The convenor and moderator of the talk was Professor Mukul Asher, professor in the Lee Kuan Yew School of Public Policy at NUS, who started off the session by presenting how the interim budget takes constructive steps towards building a “Vixit Bharat”—a  prosperous India empowering both people and nature—by announcing initiatives for household welfare, clean energy goals, and employment generation across regions.

Though prudent fiscal management is evident despite higher capital spending, realizing the 6.5% real GDP growth projected by the IMF will require focusing on disruptive technologies like AI, ensuring a skilled workforce as fertility declines, and cultivating a national character that prioritizes development. While the budget sets the stage for inclusive growth, sustained economic success will depend on continued fiscal prudence coupled with developing appropriate human capital and mindsets to power India’s rise as a leading global economy in the face of technological and demographic headwinds.

Taken over by Dr. Radhika Pandey, the budget projects a reduction in deficit indicators, with the fiscal deficit declining to 5.1% next year from 5.9% budgeted this year, along with a fall in revenue deficit to 2.0% by 2025. The government is emphasizing effective capital spending growth of 17% through increased allocations across roads, railways, and defense while capping overall expenditure growth at 6%. This is enabled by the rationalization of revenue expenditure and subsidy projections across major categories.

While tax revenues are projected to grow by 13% next year, non-tax revenues remain more uncertain. Risks stem from slower GDP growth and election-year spending pressure; however, the budget indicates a commitment to medium-term fiscal consolidation. The fiscal prudence measures, along with higher revenues, will be crucial to achieving the government’s fiscal deficit target of 4.5% of GDP by 2026 and putting debt trajectories on a more sustainable path as bonds get included in global indices.

Dr. Pandey defined the interim budget as a fiscal consolidation, which is also pro-poor, but the outlook of fiscal policies and reforms can only be expected once the white paper is out. The key challenges highlighted were the state of private investment and the anemic pace of consumption for India as an overall economy, among other global challenges.

The policy talk was furthered by Professor Amarender Reddy, who covered the agricultural sector in the budget and discussed the pattern of distribution of farm supplies and machinery and how there’s been a significant shift towards DBT schemes in recent years, which has cut down on the role of block-level agricultural officers. He added on by highlighting the presence of technological advances and their impact on traditional agriculture, along with the advent of the private sector to capitalize on commercialized crops.

However, recently, the government has stressed the importance of the framer’s organization in different forms of companies and cooperatives, and more often than not, the government has been throwing SHGs under the spotlight, which has led to massive growth in their economic performance and exposure.

The professor laid the background of an analysis on the growing need of Indian farmers to have an understanding of technology as it stops them from equipping with better machinery, which slowed down crop diversification, which is also to be consolidated with the knowledge of intensive crops, high-value crops, and commercial crops to play the game with a fair chance.

The inclusion of climate-smart technology—bio and sustainable energy—has also found its place in the interim budget, as highlighted by Professor Reddy, with the added stress of the outcome of the involvement of such technology, as this is only at an experimental or primary level of which even the Indian Council of Agriculture Research has a little knowledge. Market Intervention Scheme, promotion of oil seeds, and fisheries, even though the distribution of seeds didn’t find its place in the interim budget.

Historically, the agricultural sector hasn’t found any aid from the private sector, but the government has advocated funds to push up startups, enhance the viability and monetary returns on farmers’ livelihoods from farming, and reduce reliance on non-agricultural modes of gain. Local innovations and a balanced investment from and between the private and public sectors are required.

Dr. Prabir De took the stage by quoting the Finance Minister’s statement “Sabka vikass, sabka vishwaas aur.. sabka prayas” and covering it in a literal sense by linking it to the interim budget’s directives.

As mentioned, the interim budget presented a vision of India as a developed nation by 2047, and it continued to bag inclusive development through various schemes like increased allocations for ASHA workers. There is also a reliance on FDI and production linkages with Southeast Asia and Eastern Asia for economic gains aligned with discussions at the G20 summit. The external ministry expects India to play a greater global role, though budget allocations regarding this have been lowered in the interim budget. Significant investments were announced across sectors like ports, aviation infrastructure, roads, and highways to enable connectivity and mobility.

The budget aims to correct anomalies in customs duties like those for mobile phone manufacturing. The overall intent is to maintain the momentum after elections and enable long-term growth through infrastructure building, global partnerships, and social welfare schemes for vulnerable sections. If the vision of the interim budget sustains post-elections, India is on the right trajectory to become a leading developed nation by 2047.

Mr. Subhomoy Bhattachaterjee pinned the thought of letting a given topic sit—the interim budget in this case—before diving into the nitty-gritty. Giving some time and space is important, as it more than often gets charred with the dominant narrative of the first day’s commentaries, which might also lead to rivalizing the given subject.

The constitution of India doesn’t say anything about reading the budget, but its relevance as a political document as the party lays its priorities. The word interim budget doesn’t appear in the constitution; it is just an additional provision that the government brings forth to record its political stance or purpose and lay out a series of economic measures that the government wants to address.

This year’s interim budget highlighted the fiscal deficit (the Achilles’ heel) as the government’s foremost goal, as India is entering the global bond market and international investment in the Indian economy, and how much stability the government can show in terms of financial management to take down the fiscal deficit from 5.1% to 4.5%. The importance is to be given to the various sectors and aspects of the Indian economy and how the debates on GDP, the allocation of resources, disinvestment, etc. are taken up by this economic and political document, its limitations, and the kind of message it wants to put forth to the people, which is global investment.

Professor Mukul Asher concluded the discussion by asking his peers to elucidate their final thoughts, the challenges, and points of resolution to be looked at after discussing the interim budget, which was ended by stating that equal consideration is to be paid to state and municipal budgets and praising the transparency of the Finance Minister and the predictions by the IMF.

IMPRI’s 4th Annual Series of Thematic Deliberations and Analysis of Interim Union Budget 2024-25

Watch the event at IMPRI #Web Policy Talk

Acknowledgement: Asra Malik is a research intern at IMPRI.

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