Budget 2023-24: Pro-rich, anti-poor
By Dr. Santosh Kumar Mohapatra*
On February 1, the budget presented by Finance Minister Nirmala Sitharaman for 2023-24 fiscal has evoked a mixed reaction. However, a budget cannot be evaluated just based on its size. With the passage of each year, the size of the budget increases. It also increases in nominal terms simply due to inflation.
Hence, a budget should be evaluated as the percentage of nominal GDP or in real value taking inflation into account. The nominal GDP for 2023-24 has been projected at Rs 301.75 lakh crore assuming 10.5 percent growth over the estimated nominal GDP of Rs 273.08 lakh crore as per the first advance estimates of 2022-23.
The budget is contractionary in the sense that the budgeted total expenditure is projected to be Rs 45 lakh crore which is only 7.39 percent higher than the revised estimate of the previous fiscal (i.e, Rs 41.9 lakh crore). This rise is not only lesser than the projected nominal GDP growth of 10.5 percent but also amounts to a slashing of expenditure in real terms (i.e taking inflation into account).
Further, the budgetary outlay of India as a percentage of GDP is shrinking and much lower than many countries. What is worrying is that it has come down from 20 percent in 2020-21 to 15.93 percent in 2021-22 and 15.34 percent in 22-23. It is estimated to decline further to 14.91 percent in 2023-24 which is very abysmal compared to other countries such as 42.36 percent in the US, 59.05 percent in France, 42.52 percent in Japan, 44.87 percent in UK, 49.86 percent in Sweden, and 54.1 percent in Eurozone. This establishes that the budget is not only contractionary but does not match other countries in terms of expenditure as a percentage of GDP.
The Prime Minister categorically called the budget a foundation stone for the “Amrit Kaal” which will fulfil the dreams of an aspirational society including poor people, middle-class people, and farmers. But the government has cut estimated spending on food, fertiliser and fuel subsidies for 2023-24 which are indispensable for the upliftment of farmers, labourers and poor people.
Expenditure on food, fertilisers and petroleum is estimated at Rs 3.74 lakh crore for 2023-24, 28 per cent lower than the revised estimates for the ongoing financial year. Food subsidy is cut by Rs 90,000 crores, fertilizer subsidy by Rs 50,000 crores and petroleum subsidy by Rs 6,900 crores.
It was agriculture which helped to sustain GDP growth during the pandemic. Till today, the average per capita income of farmers is lower than that of the national average, though the government is talking about doubling farmers’ income. What is disquieting is that the government has reduced the budgetary allocation for the Ministry of Agriculture & Farmers Welfare.
The share of agriculture in the overall budget has also declined abruptly in the budget 2023-24. While the sector got 3.36 per cent of the total allocation last year, this time it was just 2.7 per cent of the total budget. The schemes for ensuring MSP-based procurement is on verge of extinction. There is reduction of PM Kisan Fund allocation from Rs. 68,000 crores to Rs. 60,000 crores.
There is a trivial rise in health and education. Despite the colossal damage caused by the pandemic Rs. 9255 crores of the last year’s allocation for health remained unspent. Likewise, Rs. 4297 crores remained unspent in the education budget.
The MGNREGA scheme was critical to the rural economy’s recovery during the pandemic, protecting the vulnerable households again complete income loss. The central government has allocated only Rs 60,000 crore for this scheme for 2023-24. This is much lower than the revised estimate for 2022-23 which stands at Rs 89,400 crore.
In the budget speech, the Finance Minister said that the government’s efforts since 2014 have ensured all citizens a better quality of living and a life of dignity. The per capita income has more than doubled to Rs 1.97 lakh. But, India was reported to have a per capita income of $2170 in 2021 to be dubbed ignominiously as a lower-middle-income country. India ranked 142nd by GDP (nominal) and 128th by GDP (PPP). It means in terms of per capita GDP, India is placed behind 141 countries even Bangladesh and in terms of GDP (PPP), it is ranked below 127 countries.
The Finance Minister said during the Covid-19 pandemic, we ensured that no one goes to bed hungry, with a scheme to supply free food grains to over 80 crore persons for 28 months. And again, extending the same for the year 2023 in a better situation. But government contradicts its own claim of development as 80 crore Indians are unable to get two square meals in a day without government support.
The budget is a special occasion to address economic ills plaguing the nation. Now Indians are missing quality of a life. India is home to the largest number of hungry and poor people in the world. Around 22.8 crores in India are still multi-dimensionally poor, 22.43 crore are undernourished in 2019-2021. The price rise of essential commodities and hyper inflation have decimated the poor people. The unemployment rate in India rose to 8.30 per cent in December 2022, the highest in 16 months, according to data from CMIE.
The educated youth unemployment rate is one of the highest in world. But job creation in both central governments has declined. The Oxfam report highlighted the large disparity in wealth distribution in India, saying that more than 40 percent of the wealth created in the country from 2012 to 2021 had gone to just 1 percent of the population while only 3 percent had trickled down to the bottom 50 percent. But the budget has failed abysmally to address those problems especially unemployment and taxing rich to reduce inequality and generate resources.
By contrast, the highest surcharge levied under personal income tax has been reduced significantly from 37 percent to 25 percent in the new tax regime. As a result, the maximum tax rate on highest income slab with income above Rs 5 crore, which is currently 42.74 percent that includes all surcharges, will come down to 39 percent. In past, she has reduced the corporate tax rate too by big margin. India has no inheritance and wealth taxes while many countries have.
Actually, in a progressive tax system, there should be more collection from direct taxes and less from indirect taxes. The direct tax rate should be increased in tandem with the rise in income. The Finance Minister has taken recourse to indirect taxes by burdening poor and middle-class people more while allowing the rich and corporate behemoths to pay lesser taxes.
The Finance Minister said that she has raised income tax exemption limits and changed the slab to the benefit of the middle classes. Actually, this is very low if inflation is taken into consideration. Hence, the budget is contractionary, regressive, pro-rich and anti-poor. It fails to address the grim problems of poverty, hunger, inequality, and unemployment, plaguing Indians.
The author is an Odisha-based eminent columnist, economist and social thinker. Email: [email protected]
DISCLAIMER: The views expressed in the article are solely those of the author and do not in any way represent the views of Sambad English.
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