Friday, July 1st, 2022 16:10:32

India @ 100 Budget in ‘Amrit Kaal’

By ASHWANI MAHAJAN
Updated: February 13, 2022 4:05 pm

In general, during the budget times, there are high expectations for reliefs in taxes to please the people, especially the middle class. There is a lobbying of the corporate sector too, about reducing their taxes. Foreign investors feel that some tax relief will obviously come out of the government’s purse. But nothing like that happened in Finance Minister Nirmala Sitharaman’s fourth budget 2022-23. Belying all such expectations, Finance Minister made use of the budget for presenting the roadmap of country’s development for the next 25 years as the nation in celebrating 75th year of independence.

Capital expenditures

If we see budgets of the last two-three decades, the government had been washing its hands off from capital expenditure. It seemed that perhaps the entire responsibility of capital investment had fallen on the private sector. It was thought that private, especially foreign investment can make up for every shortcoming, be it technology development, employment, investment or export. But despite all the efforts, desired private capital investment has not been taking place for the last almost one decade.

There has been a change in the thinking of the government in the last few years and it started investing capital in many sectors including infrastructure. For the last two years, the need was also felt to increase both public and private investment to revive the economy hit by Corona. However, due to Corona, the revenue was also badly hit. It was not possible to raise funds for investment, as the government was required to make expenditure for relief package for poor, vaccination and stimulus package for economy hit by Corona. But thanks to the 9.2 growth in the current fiscal year, there has been a significant increase in GST receipts as well as direct taxes. Taking full advantage of this fiscal space, capital expenditure was increased in the current financial year and in the coming year also a provision of Rs.7. 50 lakh crores has been made, which is 35 percent more than the current year. This is probably the highest ever expenditure in the last 30 years.

In this situation, while avoiding populist policies, the Finance Minister has opted to provide sufficient allocation for ‘PM Gati Shakti’ Project, which aims at coordinated development of various types of infrastructure so that the country’s work efficiency can be increased while reducing logistic cost for businesses. Provision has been made for various types of infrastructure including digital infrastructure, infrastructure for education, arrangement for drinking water and housing for the poor. All this has been done keeping in view the future needs. It can be said that this budget is not a populist one, but a futuristic one.

 

Protection of domestic industry

In the era of globalization, protection had become a dirty word. Due to the obsession with globalization, tariffs were constantly reduced, causing unprecedented increase in imports, especially from China. The manufacturing sector of the country was almost destroyed. Our API industry was destroyed due to the gimmicks adopted by China, the electronic industry died in its infancy and the chemical industry was also badly hit. How the small scale industries suffered, is known to all. As per the WTO, while we had the right to impose an average tariff of 40 percent, policy makers, obsessed with globalisation chose to levy an average tariff of only 9 to 10 percent. Even before Corona, the former Finance Minister of the Modi government, Arun Jaitley, in his budget presented in February 2018, had announced hike in tariff from 10 percent to 20 percent, protecting India’s electronics and telecom industry. After that this journey of protection continued unabated. During the Corona period, the government outlined the goal of self-reliant India, modifying its own ‘Make in India’ policy announced earlier. Production Linked Incentives (PLI) scheme were launched for which 14 sectors were identified which had been affected the most due to imports. Last month, a $ 10 billion support was also announced for manufacture of semiconductors in the country. All this happened for the protection of the industries of the country.

Continuing this policy in the present budget also, the government has announced hike in tariff product/ sector wise. Many earlier concessions in tariff were reversed to encourage domestic production. A special allocation of Rs 19,500 crore has also been made in the budget to promote the production of solar energy equipment in the country.

 

Agriculture development

Since the years of Green Revolution, chemical farming had been promoted in the country, due to which though, agricultural production did increase in the country, but at the same time, the expenditure on farming also increased along with; and unwanted chemicals including pesticides entered our food plate. For some time, the emphasis of the government has been towards chemical-free farming. Provision has been made for promotion of natural farming, zero budget farming and organic farming in this budget, taking forward the goal of chemical-free farming. We have been going through excessive production of food grains and shortage of oilseeds, due to which the country’s dependence on imported edible oils has also been very high. Provision has also been made in the budget to rectify the same by encouraging the production of oilseeds in the country. Although the farmers’ agitation is over, however, to improve the condition of the farmers, provision was needed to ensure remunerative price for their produce, which has got place in the budget.

 

Supporting states

The need has been felt to provide help to the treasury of the state governments which were suffering from Corona. A provision of Rs 10 thousand crore was made in the last year’s budget, which was increased to Rs 15 thousand crore in the revised estimates and for the next year a provision of Rs 1 lakh crore has been made in the budget. Which the state will be able to use for some special expenses.

Though the budget 2022-23 has provided for taxing the income from the virtual digital assets at the rate of 30 percent and taxing the gift of virtual digital asset at the hands of recipients, however, looking at the dangers of national security, the menace of money laundering and other related dangers emanating from the transactions in cryptos, ban on private crypto currencies seems to be the only solution. However, the announcement of the issue of Central Bank Digital Currency (CBDC) is a welcome move, which can go a long way in developing block chain technology, fintech industry and much more.

Despite the five state elections to be held in the next few weeks, we confined in this budget, all efforts to accelerate economic growth and remove policy anomalies, while avoiding populist policies.

 

 

By ASHWANI MAHAJAN

(The writer is Professor, Department of Economics, P.G.D.A.V. College, (University of Delhi)

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