Budget@24: FM balances growth, fiscal prudence, and coming elections
Virendra Pandit
New Delhi: A huge increase in capital expenditure for infrastructure development to spur employment opportunities, fiscal prudence to reassure investors’ sentiment and attract investments, and income tax relief to the middle classes ahead of the crucial elections to the nine Vidhan Sabha elections this year, and the Lok Sabha elections in 2024, are the key takeaways from Finance Minister Nirmala Sitharaman’s General Budget for the financial year 2023-24 she presented in Parliament on Wednesday.
In brief, the FM has stuck to the broader, two-pronged growth strategy of the Narendra Modi Government she had unveiled in 2019-20. One is to incentivize the private sector in the economy to invest in productive capacity, thereby creating jobs and pushing growth. And, secondly, to minimize the government’s role in the economy. It meant increasing the capital expenditure, on the one hand, and raising more revenues via disinvestment, on the other. This was done to ensure the government maintains fiscal prudence and doesn’t splurge money on populist schemes.
In the FY24 Budget, Sitharaman more than doubled capital expenditure in infrastructure development, from Rs. 4.39 lakh crore allocated in 2020-21 to Rs. 10 lakh crore in the coming financial year. Simply put, capital expenditure is the money spent on building productive assets such as highways, roads, bridges, and ports. This has a greater, multiplying return to the economy—for, every Rs 100 spent leads to Rs a 250 gain. That is, the government’s investment of Rs. 10 lakh crore would translate into revenues of Rs. 25 lakh crore.
The next key takeaway is fiscal prudence, which provides stability to the country’s economy. Sitharaman assured that the fiscal deficit (the government’s market borrowing) will fall to 5.9 percent of the GDP, as promised in the glide path. This will have a salutary impact on the broader economy as it suggests that money will be available for private entrepreneurs to borrow.
The third most important announcement is what attracts the salaried middle classes the most, especially in a year that will see elections to nine State Assemblies, to be quickly followed by the Lok Sabha elections in mid-2024.
Salaried people were expecting some relief on the income tax front. Now, those earning up to Rs. 7 lakhs per annum need not pay income tax.
