NirmalaNomics Meets ModiPolitics
Does the Union Budget FY24 signal the arrival of the politician Sitharaman ? Or is it the economist Sitharaman ? Seems the positive blend of both, a happier note that enriches the powerhouse of talent in the Union Cabinet. Especially at the time, when nine Indian states will go to polls, as well as India will vote next year (probably around this time) to elect its next Union Government. The outlook electorally should not a worry for the ruling party, but for skirmishes of animosity across few -isms. The structural pillars for socio-economic growth have been put up, devoid of political colour.
Even if that were the case, this Union Budget announcements cannot be faulted as a populist Budget, for it is not throwing subsidies or sops. It is a Budget that structurally addresses all segments of the population, and equally has cheer for the employed and the entrepreneur. It is a post-pandemic budget that accepts its fiscal limitations, and nudges the private sector to rise up to the opportunities. But will Corporate India rise upto this opportunity to be a key contributor in the journey of becoming a developed nation by 2047 ?
Amrit Kaal debut budget
No Budget can please everyone. There would be sceptics and critics abound on this, due to worries if these announcements would translate into ground realities. A healthy democracy needs such debate and open discussions, and only solution is to transparently measure the projects milestones and make with granular disclosures.
The Budget is continuing the growth story, amid worries about the impact of the global slowdown on the Indian economy. The essential pillars of this budget include : Inclusive Development, reaching the last mile, Infrastructure and Investment, Unleashing Potential, Green Growth, Youth Power and Financial Sector. The budget has been built on foundations of being tech-driven, knowledge-based and with strong public finances.
The government will target a budget deficit of 5.9% of GDP for FY24, in comparison to the current year’s 6.4%. The targeted Fiscal deficit is below 4.5% by FY26. While fiscal deficit would decrease year ahead, as it tries to create jobs while maintaining financial discipline. This is a clear indication to nudge for capex from private investments, and to speed up fresh employment generation and entrepreneurial opportunities. It has shown balance between the need of enhanced capital expenditure and fiscal discipline to push for sustained economic growth.
This budget targets gross borrowing of Rs 15.43 lakh crore. This would necessitate domestic debt markets’ largesse, as GoI and its entities are the biggest borrowers from it. With India being seen as a economically better positioned economy in the global turmoil, can we look at the idea of low cost India Growth Bonds to sell to investors across the world ?
The other key aspects covered in this budget were schemes that provide newer opportunities for citizens, especially the MSME entrepreneurs and the youth. This budget has also signalled the big move to focus on data governance, something that could boost better public governance across the sectors.
Misses
This Budget does not spell a clear roadmap for disinvestment process, considering that previous attempts have not been successful. While post-covid economy and global economic turmoil might be the reason, this Budget could have atleast spelt the way forward. The government expects to raise ₹51,000 crore from stake sales in various state-run companies. Proceeds from divestment and monetisation will be put into a 'National Investment Fund', to be used for financing expenditure on infrastructure, education and health. This is a big miss considering that this government has time and again that it does not want to be in business of many businesses. Another aspect that the budget did not mention was how the government would resolve the conflict of regulatory or governance arbitrage around public sector entities and their private peers. If only it gets done, the valuations for those entities would see higher numbers.
Is there a political reason in the budget being silent about the status of government’s announcements in previous budgets - on divesting stakes in two other PSU banks , apart from IDBI bank, and to sell a general insurance firm ? In an election year, is that worry about how the employees unions could create a hiccup ?
There is also an ominous absence of climate responsive budgeting. The challenges of climate actions and financing it was also mentioned in the Economic Survey. With India presiding over the G20 this year, one would have thought it fit to include this in the Union Budget.
On the taxation side, it is one more year of missed opportunity to simplify the structure and rate slabs. But for the political aspect of middle class’ content, at the savings with the newly announced lower-end slab revision, it is a lukewarm effort.
Sets the pace
Achieving the budget plan depends on not just the domestic condition, consumer sentiments and political winds but also the global economic situation. Hope there is wiggle room in this budget, if the year ahead brings some pressures.
NirmalaNomics Budget meets ModiPolitics sets the tone. With this budget, she has deftly showcase her ability - in balancing both the political compulsion of an economic resurgence and economic need of timely policy actions. It has set the pace for addressing polls, people power, priority sector, and being a growth pillar. The baton now passes to the Executive, to deliver these policy into realistic outcomes. This Budget has set the pace with the - India matters - theme!
Dr. Srinath Sridharan - Author, Policy Researcher & Corporate Advisor
Twitter : @ssmumbai
