Restrained Budget in Election Year
The FM has presented a document that reflects fiscal restraint and takes forward the welfare and development schemes of the government, while avoiding populism. We need to understand that populist schemes are not auspicious for the country’s development in the long run. — Dr. Ashwani Mahajan
Although, an interim budget was presented in the Parliament on February 1, 2024, with only a few months left for the upcoming general elections, general expectation was there about some populist announcements could be made in this budget. Some people believed that there could be some relief in income tax, but denying all such possibilities, while presenting the interim budget, the Finance Minister has not only shown fiscal restraint and prudence, but has also taken full advantage of the budget speech to present an account of the policies and achievements of the Modi government in the last 10 years.
Fiscal Deficit Reduced Further
In the last budget, the fiscal deficit was to estimated to be 5.9 percent of gross domestic product (GDP). Some analysts believed that since nominal GDP would be low this year, the fiscal deficit could be higher than estimated. But revised estimate of fiscal deficit shows the same to be only 5.8 percent of GDP. This indicates that the government has tried to keep the deficit low by exercising fiscal prudence. The reason for this is that the government is getting sufficient revenue. Due to the intensified economic activities in the country, there has been an unprecedented increase in collections from Goods and Services Tax (GST), Personal Income Tax, Corporate Income Tax etc. The government had estimated that the revenue growth would be 10.7 percent, but this growth rate has been nearly 15 percent. Due to booming revenue, despite increase in expenditure, fiscal deficit has remained low. For the next financial year, the government estimates that this deficit will be only 5.1 percent. The opposition alleged that the government has been increasing the debt burden, but in the interim budget, the gross and net borrowings have been kept at Rs 14.1 lakh crore and Rs 11.74 lakh crore only. This means that next year the government will borrow less than the current year. In view of the fact that government keeps borrowing more and more, year after year, it is unprecedented that it is going to be less next year. It’s notable that since 2020-21, when central government’s Debt-GDP ratio climbed to 61 percent due to Covid19 related crisis, this ratio has been constantly declining and is likely to reach 56 percent in 2024-25. It is noteworthy, that reduction in fiscal deficit also reduces the risk of inflation. Its effect may be that rating agencies are likely to improve India’s rating; and therefore, investors will be attracted more to India. In general, from the point of view of fiscal management and management of the economy, no one, not even the opposition, can say that this is a populist budget, which has been brought with a view to electoral gains.
There is no doubt that despite the country and the world facing the worst pandemic in these years, despite the collapse of the global value chain due to war and conflicts, this government has run the economy most efficiently. We have been able to take our economy out of the five most fragile economies of the world in 2014, to the fifth largest economy of the world, striving to be third largest economy in next three years.
The credit also goes to this government for bringing the economy, out of the negative GDP growth of 2020-21 and bringing it to the world’s fastest growing large economy of the world. India’s progress is seen in all dimensions of the economy- technology, industry, agriculture and service sector. Capital expenditure has consistently been increasing in the last 4 years and in 2024-25 also it will continue and this time a provision has been made to spend Rs 11.11 lakh crore, up 11.1 percent compared to current year.
Public welfare schemes like Pradhan Mantri Awas Yojana (Urban and Rural), Tap water for every house, Ujjwala Yojana of providing free LPG connection to poor women, Electricity for all, toilets, and many other schemes were implemented. This has been taken forward in this interim budget also. Construction of 2 crore additional rural houses; The program to make 2 crore more women Lakhpati Didi, work has been done to take forward the programs already running. In addition program has also been launched to provide free electricity to one crore people through roof top solar.
Budget proposes 11.1 percent increase In capital expenditure, through which roads, rail and other types of infrastructure will be built. It has to be understood that road, rail, water, air transport infrastructure etc; all reduce our logistics costs and improve competitiveness, helping exports to grow and imports to fall.
Free Electricity to One Crore Houses Through Roof Top Solar
Through the interim budget, the government has also tried to give a new direction to states, giving free electricity. Many state governments are running various schemes to provide free electricity to the people. This irresponsible act is making states to fall into debt trap. So, it has been proposed that free electricity be given to those who install solar panels on their roof tops. In this way they will generate electricity and also get free electricity. With such efforts, the production of clean energy in the country will also be encouraged; and people will also start getting free electricity.
Though, the question of government subsidy on installation of rooftop solar is not clear in the budget, if the government also gives support for this, benefits will be available in the form of free electricity for 25-30 years. Such subsidy will actually prove to be an investment for the future.
This is also a lesson for those state governments, which are spending indiscriminately for the provision of free electricity. Now with this roof top solar program, unlike current scheme, up to 300 units of free electricity can be provided on a sustainable basis without continuously burdening the government exchequer.
In conclusion, it can be said that while demonstrating the spirit of the interim budget, the Finance Minister has presented a document that reflects fiscal restraint and takes forward the welfare and development schemes of the government, while avoiding populism. We need to understand that populist schemes are not auspicious for the country’s development in the long run.