Budget 2022-23 and Indian economy: An analysis

Satyajit Kumar Sharmah Thakur

(The writer can be reached at sksharmahthakur@gmail.com)

The economic condition of our country was a matter of very serious concern even for a few years before the global outbreak of COVID-19 that has not spared India as well. So, naturally, on the heels of that poor status of the national economy, the effect of COVID-19 on the country's economy was very serious even though of late, a turnaround has been noticed. Much jubilation has been noticed in our country also at such an economic recovery. Projection of GDP for the financial year 2022-2023 above 9.2 per cent by so many international institutions is to everybody's easy notice even though in the last few days both print as well electronic media are abounding with the news of deceleration of that figure i.e. from 9.2 per cent.

If we look at the position of the country's economy, two factors are very much in operation to the detriment of the economy. While one is growing unemployment, the other is further deterioration of the economic condition of a mega-size of the country's population. True, no country has been spared by that COVID-19 onslaught, even though the natures of the problems to the economies are at variance from each other. After all, no country has been spared by that COVID-19 onslaught.

The figures of growth of GVA and GDP may not imply the welfare of people at large unless the economy takes the people at large with it in its progress. Both exports and domestic consumption impact GDP. However, if exports increase and imports decrease mainly due to the deceleration of domestic consumption and overall domestic consumption goes down. Does that increase in GDP augur well of the economy? To me, it does not.

A few days ago I went through a treatise of the CEO of Yes Bank. I fully agree with him when he emphasized making more money available to the people of the country to enhance domestic consumption as well as thrift. The international market is both competitive as well as dicey. The national market should get a great emphasis on the overwhelming participation of the people. Regarding that, our economy is still facing a great setback. The trend of the creation of jobs is far below the trend of growth of unemployment. It is no denying the fact that the growth of employment opportunities cannot be at par with the growing trend of the people who seek employment. Resultantly, the growth of unemployment remains unabated. I do not think that due emphasis has been given to that by the government.

Much publicity about the buoyancy of revenue tax collection in the period April 2021 to November 2021 while compared with the figures of the corresponding period of the immediately previous year, to me, should be limited to our all sincere and serious endeavour to make that progress more satisfactory in consideration of the fact that the period of April 2021 to November 2021 witnessed better environment for the economy compared to the corresponding period in the previous year.

The Union Budget 2022-23 is keeping the mammoth task of accepting the challenges faced by the economy. The decision of increasing payment to Rs 2.37 lakh crore towards the procurement of wheat and paddy under the MSP operation is no doubt appreciable, especially given the demands of the farmers who carried on their agitation against the Centre's farm laws demanding their repeal and one of their demands was the retention of the MSP. I do not find much ground for jubilation over that move of the government on the MSP because agriculture and allied activities which vouch for the largest bulk of the population in the country will have to be content with a very meagre increase of two per cent in the budget allocation for 2022-23 since that sector's share in the overall budget allocations fell to 3.84 per cent from 4.26 per cent in 2021-22. Even though that increase in MSP is likely to increase inflation very marginally, undoubtedly a reasonable increase in the MSP was imperative. That the Indian Railways will develop new products and efficient logistics services for small farmers and small and medium farmers is also a welcome step, but only after it's becoming operational and how effectively the benefits are availed will determine the extent of effectiveness. But whatever may be the net result, expectedly appreciable benefits should emanate. Availability of high tech and digital services, if properly implemented, will help the farmers, more visibly the big ones. Changes in the quality of crops, help that the farmers will get from research and development in the area of agricultural research etc., aiming at enhancing the quality of crops and agricultural productivity, can be told only when remarkable positive changes come to the fore.

Thus the picture of the benefits for the farmers is good enough, but at the same time, we must also consider the real benefits that may accrue to the fragmented landholdings. In almost all of my articles on the MSMEs in India, I invariably mentioned their problems on the marketing front. Let us also consider the cost on account of the presence of the intermediaries in the channels of distribution. If one goes to an outlet of Reliance Jio, one will find almost every food item nowadays produced by that industrial giant. The extent of economic inclusive of online sales, that is available to the big industrial giants, cannot be afforded by most of those in the MSME sector. Therefore, while I appreciate the move of the government for increasing the corpus under the Emergency Credit Line Guarantee Scheme for the MSMEs by Rs. 50,000 crores to Rs. 5 lakh crore; to me, its effective utilization should occupy very serious consideration. Otherwise, the increase in the headache for the lending financial institutions will be unabated with an ultimate increase in the woes of the people in the middle class and the poor class.

While, it seems that the government is very optimistic about the financial outcome of the 30 per cent tax on gains made from the transfer of virtual digital assets, at the same time the declaration of the Finance Minister made after the presentation of the budget that the Centre is yet to decide their legal status, is bearing great seriousness for examining every nook and corner. I fully believe that jumping to any conclusion regarding virtual digital assets without a meticulous consideration of every nook and corner, may not augur well for the economy.

Consequent to the budget 2022-2023 presentation, we have noticed great euphoria in both the NSE and the BSE. Naturally, with the proposal of a 35 per cent jump in capital expenditure to Rs.7.5 lakh crore, dwelling at the same time on the proposals like higher spending on infrastructure including highways, affordable housing and great emphasis on further digitalization, etc. must have a reason for both the markets to be buoyant. Frankly speaking, the result of the government's skill development programmes is not very heartening in the case of the PSUs. Hence, privatization is the easiest solution. Given such a situation, the extent of job creation may fall far short of the government's expectations. The government's expectation of setting up new manufacturing companies will be bearing fruit provided they thrive, but the overall positions of the sick and the extinguished MSMEs speak otherwise. Therefore, it is time not to count on the number of such newly set up companies but on how they function and if they are also likely to become a reason for the growth of the NPAs.

The budget has not given any relief in respect of the personal income tax rates. That the government has failed to make more cash available to the taxpayers is a great setback for the purchasing power of the taxpayers. The rise in prices is a phenomenon that all of us must be in preparedness for facing any time in the future. It will not be proper to consider only the number of personal taxpayers getting disheartened, but the real impact should be studied through the numbers of persons financially dependent on a personal taxpayer. To tackle the overall increase in financial burden on the people, the initiatives of the government to make a healthy inflow of money into the hands of the people in the middle class and the poor class seem to be quite inadequate in the budget.

Eventually, for the people in the middle class and the poor class whose well-being must matter the most, the budget has not been able to bring in any optimism. At the same time, regressive indirect taxes being equally applicable to all the sections of the people, the pinch the people of the middle class and the poor class feel, is also more compared to the people of the rich class.

India may achieve the growth of 9.2 per cent as expected by the Finance Minister, but that it will be successful in taking people at large with it so far benefits are concerned, is quite doubtful for me.