November 21, 2024

Union Budget 2023: Economy Wins As Politics Takes The Back Seat

By Our Editorial Team
First publised on 2023-02-02 05:46:54

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With this being the last full budget of the NDA government and with elections scheduled to be held in April/May 2024, there was always the chance that electoral considerations would get precedence over economic prudence in this year's budget. But Finance Minister Nirmala Sitharaman must be commended for not playing to the gallery and presenting a growth-oriented budget. The budget has gone for fiscal consolidation, a strong push for more capital expenditure and tax reforms rather than announcing financially-bleeding grandiose schemes which seldom achieve their stated objectives.

The government will bring down fiscal deficit to 5.9% of the GDP in 2023-24 from 6.4% in 2022-23. The Finance Minister has also wisely slashed subsidies and the outgo on this will be Rs 1.47 lakh crore lesser in 2023-24 than the revised estimates for this fiscal. Other prudent measures include not raising the outgo on PM-Kisan and lowering it for MNREGA. The government will bring down the revenue deficit too - from 4.1% of the GDP to just 2.9%. These fiscal consolidation measures will stand the nation in good stead in a year when the global economic and political situation remains uncertain.

On the other hand, the tax reforms will make it attractive for those who have not switched to the new tax assessment regime. Additionally, it will put money in the hands of the salaried middle class through lower taxes. That in turn will boost demand which is crucial as exports are falling due to recessionary trends in global economies and an upswing in domestic demand is essential. Politically this will help the BJP (as the elections are due next year) without disturbing the exchequer much as the total outgo on this count will be just Rs 35000cr. The cut in the surcharge and hence the lowering of the highest effective tax rate from 42.7% to 39% is also welcome.

Capital expenditure has been raised by 33% and the push for infrastructure projects will induce private sector investment, both in the core sector (as demand for steel, cement and other building materials will rise) and in downstream industries. This will also help in job creation. The allocation for railways, highways, power and aviation sectors, among others, will boost infrastructure and build assets for the development of the nation.

Prime Minister Modi has repeatedly criticized the so-called revdi (handout) culture. This budget has walked the talk by refusing to resort to revdis. Instead, it has focussed on building infrastructure, fiscal consolidation and tax reforms. This shows that the government is more concerned about development and growth rather than short-term electoral gains. If it resists the temptation of undertaking any misadventure (like giving revdis to woo voters) before the elections (which throws the budget maths haywire), it will show that it is a responsible government and the objectives of this pragmatic budget will be achieved to a great extent.