August 10, 2026

The Union Budget: More Equitable Distribution Of Resources Was Possible

By Linus Garg
First publised on 2023-02-06 07:31:17

About the Author

Linus tackles things head-on. He takes sides in his analysis and it fits excellently with our editorial policy. No 'maybe's' and 'allegedly' for him, only things in black and white.

View all posts by this Author

A lot of debate is taking place on the need to strike a balance between giving a push to the economy through increased government spending on capital expenditure and the need to provide relief to the poor by maintaining or hiking allocation in social sector schemes. The Union budget this year has increased spending on capital expenditure by a huge margin but at the same time reduced allocation on schemes such as MNREGS or maintained the allocation in PM-Kisan. It is facing huge criticism for this.

Writing in the Indian Express, senior Congress leader Sonia Gandhi has accused the government of being insensitive to the needs of the poor and the marginalized in slashing the allocation for the schemes that benefited the poor. She has said that "this silent attack comes at a time when our economic situation continues to be distressing".

But the government thinks otherwise. It feels that the economy has now recovered from the dual disruptions of Covid and the Ukraine war and is poised to grow well. Hence, it feels that if it spends heavily on infrastructure projects, assets will be created for the future and the economy will get a big push. The core sector will benefit (through increased orders for steel, cement and other raw materials and services and there will be a huge demand for construction workers) and the resultant upswing will generate demand for products and services of related downstream units. This domino effect will bring in private sector investment and result in job creation. There is sound reasoning in this. There is no doubt that the government has done well to aim to reduce fiscal deficit and has not resorted to the announcing more revdis in the pre-election year, but it could have put more stress on existing schemes, especially because some of them started during Covid have been wound up.

With the global economic and political situation remaining uncertain, there was a need to increase the funding of social schemes, even if marginally, mainly to offset the effects of inflation. Although economic indicators point to a good recovery, the ground report does not match and salaries have been cut, jobs have been lost and new jobs are not being created at the speed at which youngsters are entering the job market. A large number of people are facing hardships. At this time, the government could have increased spending on capital expenditure by 25% (instead of 33%) and used the spare funds to increase or maintain allocations in social schemes. That would have been fair and equitable.