Another budget speech has come and gone! As the dust settles, experts will analyze the fine print, pro-government voices will praise it Finance Minister for his ‘visionary’ budget, and with the same zeal critics will denounce the ‘unimaginable anti-poor’ budget! It’s pretty much every FM.
However, looking at it objectively, especially in the context of upcoming elections in key states, one must commend Nirmala Sitharaman for resisting the temptation to woo vote banks. Equally, they have dared to leave direct taxes virtually untouched, despite numerous demands for raising the exemption limit and increasing the deduction under various sections of the Income Tax Act. Of course, there were some legitimate demands for relief, especially from the very troubled salaried class, especially in these times of the COVID-19 pandemic. However, FM has chosen to look beyond the here and now, and paint a bold vision for India@100!
While budget paints a wide and varied canvas, there are two areas I want to focus on in particular. PM Gati Shakti Master Plan covering Roads, Railways, Airports, Ports, Mass Transport, Waterways and Logistics Infra is indeed a laudable step, providing wide benefits in various sectors like Cement, Steel, Commercial Vehicles and the like. Earthmoving and construction equipment, not to mention its huge job generating potential. India has already made significant gains from the Golden Quadrilateral, and as our roads become world class, these gains will only increase. Therefore, the idea of a master plan to focus on the entire spectrum of movement of goods and people has not come a day too early. A sharp 35.4% increase in public capital expenditure to ₹7.50 lakh crore in 2022-23 is an equally welcome step, though actual spending appears to be slowing in the current fiscal. It is one thing to allocate, and quite another thing to spend!
Considering the government’s additional committed expenditure allocation, in a pandemic year, there were concerns that the government would see a shortfall in its fiscal deficit target. Happily, there appears to be only a slight slippage at 6.9% against the budget target of 6.8% of GDP in 2021-22, which is projected to come down to 6.4% next year.
The major concern for the government in the coming financial year will be international crude oil prices and the intensity and trajectory of the ongoing pandemic. If, as Cassandras predicts, prices reach $120 a barrel, there will be serious implications from both the balance of payments and inflation perspective, and could very well be disruptive to the ambitious plans outlined by the FM. Similarly, if the pandemic – God forbid – continues to have its debilitating consequences on lives and livelihoods, the engines of growth are likely to accelerate. Hopefully, these dire situations will not come.
I wrote in this column a few years back that the most difficult and ungrateful job in our country is that of FM. It still is, and the credit for it goes to him.
TT Srinivasaraghavan, former MD, Sundaram Finance Ltd.