The Budget is always about announcements. But the proof of the pudding is allocations. In this regard, it is noteworthy that the expenditure is rising only 7 per cent compared to that of last year, and is not keeping pace with the nominal GDP growth of 10.5 per cent. The growth rate of the economy will rise only if expenditure is higher than the GDP growth rate while containing inflation.
Further, the stimulus to the economy comes from the primary deficit, which is declining. While the capital expenditure is rising sharply, it is going only to capital-intensive areas and one cannot expect much employment generation. A good strategy would have been to increase expenditure on the rural development front.
But, unfortunately, rural development has not been given any boost and, in fact, the expenditure on this front has actually been curtailed compared to previous year from about ₹2.43-lakh crore to ₹2.38-lakh crore. In real terms, the economic growth would actually drop. Even food subsidy has been cut, and this could lead to hardship for the poor who need to buy 8.8 kg from the market. Given the rate of inflation, the poor will suffer going forward.
The allocations need to be transformed into actual expenditure for development to take place. A scenario of higher growth and lower prices seems unlikely.
While sectors like agriculture, infrastructure, tourism and MSMEs find a place in the Budget, the overall macroeconomic situation should be favourable to foment growth. When the larger economy is not doing well, boost to individual sectors may not fully deliver the desired outcomes.
Given the number of people who are paying income tax, the direct tax sops announced in the Budget are not going to help the larger middle class in the country. What the middle class now needs is measures to curtail inflation and boost job creations. Overall, it is a Budget aimed at elections, even though the public may not realise it immediately.
The writer is retired Prof, JNU. As told to Naga Sridhar