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 “The Amrit Kaal and Union Budget 2023-24” on 2 February 2023, under the IMPRI 3rd Annual Series of Thematic Deliberations and Analysis of Union Budget 2023-24, as part of IMPRI #WebPolicyTalk.
The discussion was chaired and moderated by Prof Nilanjan Banik, currently a professor at Mahindra University, Hyderabad and a Visiting Consultant at IMPRI. To begin with, Prof Banik gave a holistic view of the budget. This year’s budget has seen an increase in capital expenditure towards building roads, highways, buildings, railways and the like.
From an economist’s perspective, such spending leads to better connectivity and generates more income as more people get employment. He spoke about the importance of reducing inequality through the budget as well. India has a substantial domestic market that constitutes the bottom 40-50% of the population that we must tap into to increase consumer demand. He also initiated the discussion by talking about the non-utilisation of funds allocated through the budget in the previous year, which is also an essential factor to keep in mind.
This discussion was taken forward by Mr TK Arun, a Senior Journalist and Columnist based in Delhi. He started the discussion by discussing Demonetisation in 2016 and its impact on the growth rate. Due to the demonetisation of high-value currency notes, the growth in the following year dropped to 6.2%, further dropped to 5.8%, and the decline continued to 3.8%. With this backdrop, the pandemic happened. So we have a lot to recover from. He then spoke about the MGNREGA scheme. The demand for MGNREGA is on the rise due to rural distress. Thus, keeping this in mind, the budget for FY 2023-24 was set. This time, Rs 13.7 lakh Cr have been allocated to capital expenditure.
He pointed out that not all capital expenditure leads to increased production capacity. For example, repaying loans counts as capital expenditure, but it isn’t capacity building in any way. He spoke about the role of demand as well. Between 2008 and 2014, rural demand increased rapidly, not because of rural prosperity but due to a construction boom that raised their wages. Talking about the fiscal deficit, Mr Arun said that we have been able to increase expenditure by increasing the fiscal deficit. He also mentioned that the worry for a fiscal deficit of 5.9% of GDP is not a matter of concern as there is no problem of excess demand in the system; rather, insufficient demand persists.
This was followed by opening remarks by Dr. Rajesh Shukla, currently serving as Managing Director and CEO of People Research on India’s Consumer Economy (PRICE). He spoke about two main pillars, as mentioned by our finance minister- (i) inclusive development and (ii) reaching the last line. He says that India’s middle class is of utmost importance and quotes Aristotle when he says that ‘the best political community is formed by the middle class and those states are likely to be well administered in which the middle class is large’. He says this holds much relevance in a country like India.
The middle class is responsible for creating the much-needed discourse in a country. But this class is often measured differently by different organisations. He calls the middle class the cementing agent that makes society more inclusive. Currently, 400 million people come under the middle class, which will soon be 700 million. If political and economic reform has the desired effect, we can use this massive middle class.
The next panellist, Dr. S P Sharma, the Chief Economist at the PHD Chamber of Commerce and industry, New Delhi, gave us an insight into the industry expectations and suggestions. These include- an adequate PLI fund, enhancement to consumption, more robust ease of business, rationalisation of taxes for middle income, reforms for MSME and more focus on Primary Health Centres (PHCS). According to him, most of his aspirations were met. In this budget, the government has pushed consumption and increased capital expenditure. The main focus of the budget has been: (i) the economic environment for women, (ii) artisans or Vishwakarma, (iii) tourism and (iv) the green economy.
He laid down the “Saptarishi” as mentioned in the budget speech, i.e., Inclusive Development: Sabka Sath Sabka Vikas, Reaching the Last Mile, Infrastructure & Investment, Unleashing the Potential, Green Growth, Youth Power, and finally and very importantly, boost to the Financial Sector.
Regarding where the budget is lacking this time, Dr Sharma said that relief to the middle class in taxation had yet to be provided. In addition, India’s agriculture market is a small proportion of the global market, despite being an agricultural economy. To sum up, he said that increasing consumer demand is vital. A shift from agriculture to manufacturing can only happen if there is a demand for manufactured goods. Thus, investment in agriculture is also crucial.
After a Q&A session, the program was concluded with closing remarks by Prof Nilanjan Banik, who thanked and praised the IMPRI Impact and Policy Research Institute team for hosting a successful panel discussion and ensuring the smooth functioning of the event.