The hype about Rs.7.5 trillion rupees for capital expenditure in the Budget 2022/2023 announced by the Finance Minister is misplaced.
Total expenditure budgeted for is 39.45 trillion rupees, after borrowing Rs 16.61 trillion (fiscal deficit). If 7.5 trillion rupees are diverted for capex, how much will be left for incurring other developmental expenditure? Only a paltry sum of Rs 3.36 trillion.
The following budgeted numbers reflect this.
In Trillion Rupees
- Interest payment: 9.40
- Capex: 7.50
- Establishment Exp: 6.92
- Defence: 3.85
- Subsidies: 3.18
- Grant to States: 3.17
- Pension: 2.07
- Remaining Dev Exp: 3.36
Is this (3.36 trillion rupees) adequate for incurring developmental expenditure for as vast a country like India ? Look also at the ever increasing bloated establishment expenditure of the centre – this is now budgeted at Rs.6.92 trillion ! That much about overcoming “too much government and too little governance.”
This diversion of funds for capex, out of limited resources, has been done by slashing food subsidy, slashing petroleum subsidy, slashing other welfare expenditure like MGNREGA. Allocation towards healthcare has been a huge casualty. Rural development has hardly received the attention it deserves. Whether or not our entire population receives booster shot of vaccine free of cost is a huge question mark now. Centre’s logic seems: why bother about the present? Let’s plan a grand future!
The argument that long term growth is preferable to generating immediate demand is misconceived. Ideally both should complement each other. Capex to achieve overall growth will take time; it will depend on the quality of execution of projects. On the other hand, by putting money into the hands of the needy, who are desperate to spend, will generate immediate demand.
In the aftermath of severe pandemic that saw lakhs getting impoverished, the option to generate immediate demand is a compelling necessity.
The budgeted figures quoted above also show that the centre has failed to service its debts efficiently. Interest payment of Rs 9,40,000 crores constitutes the largest component of expenditure. This reflects an increase of 16% over last year’s budgeted figure of Rs 8,09,000 crores. Today, the debt-to-GDP ratio in India is at an alarmingly high level of 58.9% with debt of 152 trillion rupees and GDP of 258 trillion rupees.
Left with limited resources and having to meet vicissitudes of critical economic situations with hefty borrowings also reflect the Centre’s utter failure to optimise collection of revenue.
In matter of taxation, the Centre has been treating the corporate sector with kid gloves. The unfortunate reluctance to adequately garner corporate tax revenue is writ large. Corporate tax budgeted for is a paltry Rs.7.2 trillion compared to Rs.7.0 trillion of income tax for individuals.
GST collection of Rs.1.40 trillion in January 2022 is laudable but enough damage has already been caused to the economy due to its faulty implementation spanning years. Asset monetisation programme of Centre has not succeeded. Non-tax revenue budgeted for is unimpressive. Overall, the Centre seems to prefer to borrow rather than taxing the corporates adequately.
The impoverished, the disgruntled and the despairing segment of our population without job need immediate care and economic empathy. In the long run, as Keynes said, we are all dead. We need to quell the short-term fire! Centre should not ignore the immediate present and must spend money directly on those languishing todayy. Millions of Indians have slipped below the middle class in the last ten years. Even urban unemployment is a matter of deep concern. This budget with all the hype about Rs 7.5 trillion capex has simply ignored the poor. This is insensitive and is fraught with dangerous consequences. Policy makers: smell the coffee and read the writing on the wall before it is too late.
Bishwajit Bhattacharyya is Senior Advocate Supreme Court of India & Former Additional Solicitor General of India,
