By Dr. Santosh Kumar Mohapatra*
Finance Minister Nirmala Sitharaman presented her sixth straight Budget, which is a pre-election Budget and an interim Budget, technically is a vote on account, sought Parliament’s nod for a grant in advance to meet the expenditure for the first four months of the new fiscal year ahead of the Lok Sabha polls. After the new government comes into power, they will present the full Budget.
The budget has evoked mixed reactions. Prime Minister Narendra Modi described the budget as a guarantee for a developed path while oppositions termed it as disappointing, self-congratulatory. Of course, an interim budget has no significance as it can be completely changed when a full budget is placed.
Why An Interim Budget?
The term interim Budget refers to the Budget of a government that is going through a transition period. The Budget following the British tradition is called a vote on account so no spectacular announcements are made that time. You may have to wait till after the new government comes in.
A full budget gives the government of the day spending rights until the end of the financial year (which ends on 31st March). As per Article 112 of the Indian Constitution, a statement of the estimated receipts and expenditure of the Government of India for a specific financial year— referred to as “annual financial statement” or budget— is laid before both Houses of Parliament. The Centre seeks both Houses’ approval to withdraw the necessary funds from the Consolidated Fund of India; this statement has to be passed by both Houses.
However, in an election year, or when there is a caretaker government, the incumbent Government cannot present a full Budget as there may be a change in the government after the polls, there is the need for an interim Budget.
As there is no constitutional provision for an interim Budget, the Centre can choose to seek the Lok Sabha (Lower House)’s approval for the funds required for the transition period, say (April – July) till the new government presents a full Budget— via the vote on account provision . The vote on account is usually also valid only for two months and can be extended up to four months.
Parliamentary approval is required for expenditure out of the Consolidated Fund (Articles 113, 114). When a full Budget is presented, the Budget should be passed in parliament so as to spend. But it takes time. If the budget is not passed before the beginning of the financial year, then the government cannot function. Article 116 provides a temporary reprieve.
Article 116 of the Constitution allows the Lower House to make any grant in advance for the estimated expenditure for part of any financial year by voting and passing such a legislation, i.e. vote on account. The Lok Sabha is empowered to authorise withdrawal of required funds from the Consolidated Fund of India for such expenditure.
A simple vote on account includes presenting the Centre’s fund requirements for salaries, ongoing projects and other expenditure for the transitional period, and is then passed via the Lok Sabha sans debate.
Vote on account is explicitly mentioned in the Constitution’s Article 116. But the interim Budget does not find any mention in the constitution.
However, we cannot say the interim Budget and vote on account are the same. Vote an account contains only expenditure aspects of both interim Budget or full Budget for certain months, while interim Budget and full Budget contains both income and expenditure sides. In the interim Budget, normally no change is made in tax structure.
Economic Survey Ignored
Conventionally, the Union Budget has been associated with the Economic Survey. This is equally true for state Budgets which are associated surveys. The Economic Survey is not a constitutional requirement but necessary to show how the economy is performing and what steps should be taken by the government. But unfortunately, the economic survey for 2023-24 has not been presented and has been shifted to the time of presentation of the full budget which is erroneous and a violation of tradition, system.
According to Bibek Debroy, the Budget speech had a long review of the economy. It continued in that way till 1958-59. That was the first year when we had a separate Economic Survey delinked from the Budget, but presented in parallel. In his Budget speech for 1950-51, John Mathai had said: “All that I propose to do at this stage is to give the honourable members a broad outline of the budgetary position and the general economic background of the Budget.
Supercilious Growth Story
Laden with ornamental words, Finance Minister has unabashedly resorted to self-patting and supercilious exaltation of Modi regimes. She converted the budget speech into election speech where she resorted to publicity blitzkrieg.
There was much iteration about India’s much vaunted growth story in Budget speech. The finance minister said the Indian economy has witnessed profound positive transformation in the last ten years. The people of India are looking ahead to the future with hope and optimism. The interim Budget marks a pivotal stride towards fostering inclusive and robust academic growth, she said.
Nirmala Sitharaman said that people are living better and earning better, with even greater aspirations for the future. Average real income of the people has increased by fifty per cent. Inflation is moderate. What is worrying is that India is behind 138 countries in terms of per-capita income in the world.
The per-capita income growth has dropped to 5.1 percent in this fiscal which is 21 years’ lowest. Per capita income in nominal terms has doubled during the Modi regime but in real terms, it might have not increased and if increased, the increase may be negligible.
But India is abysmally placed in almost all international indexes like human development index (132 out of 191 countries), global hunger index (111 out of 125), corruption perception index (93 out of 180 countries), sustainable development index (121 out of 163), human happiness index (136 out of 146 countries), world peace index (135 out of 163 countries).
Inflation rate may be moderate due to base effect but prices of goods and services rarely decline. The people are worst hit by price rise and their purchasing power has eroded and no attempt has been made to address the same. Around 90 percent Indians (income level below ₹25000) said their lives have worsened off, finds the latest Consumer Confidence Survey of RBI.
In the Budget speech, GDP term has been coined with Governance, Development and Performance while FDI as Fast Developed India to hoodwink masses and camouflage failures. But only miniscule rich people and corporates have benefited from GDP growth.
Growth is never inclusive but bereft of distributive justice. Inequality is so rampant which is evident from the fact that 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 does not try to reduce inequality by giving proposals of taxing rich, corporates.
Further, India’s core sector output growth hit a 14-month low of 3.8 per cent year-on-year in December. This was sharply down from 7.9 per cent witnessed in the previous month. According to the data, only fertilisers (5.8 per cent) and cement (1.3 per cent) sectors saw an acceleration in the output in December as compared to the preceding month.
Growth in the output of coal (10.6 per cent), natural gas (6.6 per cent), refinery products (2.6 per cent), steel (5.9 per cent), and electricity (0.6 per cent) decelerated sequentially in December. On the other hand, crude oil production contracted (-1 per cent) for the second consecutive month in December. Despite increasing FDI flow, overall investment has declined as a percentage of GDP.
Whoever forms a government or becomes a Finance Minister, the size of the Budget increases each year in nominal terms. Hence, each Finance Minister has to spend and float various schemes and increase outlay of old schemes. But our Budget size as a percentage of GDP is very low compared to that of other developed countries. Should the government try to take credit for each rupee spent which is more discernible in last ten years
Nominal GDP is the fundamental variable in any Budget. The real GDP growth that is commonly talked about is derived from nominal GDP growth after removing the effect of inflation measured through price deflator. Budgetary outlay should rise at least commensurate with expected rise of nominal GDP. If not increased, then the Budget will be said to be contractionary.
For the coming financial year (2024-25), the nominal GDP growth was estimated to be 10.5 percent but actually in the revised estimate it was reduced to 8.9 percent. The government is showing higher real GDP by using lower price deflators which raises questions on purity and sanctity of statistics.
According to the latest Budget documents, the government projects India’s nominal GDP to be ₹ 3,27,71,808 crore, assuming 10.5 percent growth over the estimated nominal GDP of ₹ 2,96,57,745 crore in the current financial year (2023-24).
The Revised Estimate of the total receipts other than borrowings is ₹ 27.56 lakh crore, of which the tax receipts are ₹23.24 lakh crore. The Revised Estimate of the total expenditure is ₹44.90 lakh crore as against budgetary estimate is ₹45.03 lakh crore. The revenue receipts at ₹30.03 lakh crore are expected to be higher than the Budget Estimate, reflecting strong growth momentum and formalization in the economy.
It means budgetary outlay is estimated to rise only 6.14 percent which is lower than projected nominal GDP and barely above the rate of inflation. Hence the budget is contractionary.
A Publicity Stunt
The same old slogan of ‘Sabka Saath, Sabka Vikas, and Sabka Vishwas, Amrit Kaal; Kartavya kaal, pancha pran, Atmanirbhar Bharat, Inclusive development, social inclusivity, geographical inclusivity, Bikasita Bharat, Social justice, Jaya Jawan, Jaya Kishan, Jaya Bigyan, Jaya Anusandhan, Garib Kalyan, Desh ka Kalyan, were repeated which is an affront to poor.
The Finance Minister said the fruits of development started reaching the people at scale. The country got a new sense of purpose and hope.
But today the situation is so precarious that, on an average 468 persons took their lives daily in 2022 and one-third of them were daily-wage earners, agriculture labourers and farmers or cultivators. Crime against women is increasing every year.
If the nation is progressing and there is development, then why is the government providing free food grains to 80 crores people. The much-trumpeted fact that 25 crore people got freedom out of multidimensional poverty in the last 10 years is a gimmick as it is a deprivation line. Further, the figure is wrong as it is based on a research paper of Niti Aayog.
The Finance Minister minister said Covid-19 has not affected Indians but India is second worst affected. What about the decline of real income (Oxfam report and Pew research), rise in poverty (World Bank), decline of employment and rise of unemployment (CMIE report)? What about 1. 47 lakh children who have lost parents (both or one of them)?
The Finance Minister said, “Our government is working with an approach to development that is all-round, all-pervasive and all-inclusive. It covers all castes and people at all levels. We are working to make India a Viksit Bharat by 2047. Structural reforms were undertaken. Pro-people programmes were formulated and implemented promptly. Conditions were created for more opportunities for employment and entrepreneurship. The economy got a new vigour.
There are opportunities for those who have money and power but not poor and vulnerable sections of society. The talk of Viksit Bharat by 2047 sounds preposterous as nobody can say what will happen tomorrow. All are dead in the long run. Election is won not by popularity or performance alone but through massive misuse of money and muscle power including propaganda, rallies etc. Voters are misled through spreading misinformation, disinformation.
In marketing, a publicity stunt is a planned event designed to attract the public’s attention to the event’s organizers or their cause. Publicity stunts can be professionally organized, or set up by amateurs. Such events are frequently utilized by advertisers and celebrities, many of whom are athletes and politicians. The Modi government always takes recourse to such publicity stunts for electoral gains. The Finance Minister has utilised this interim Budget for publicising own government.
The Budget neither creates any hope nor has any sense of purpose. it is not a blueprint of intent but a publicity stunt to derive electoral mileage. Overall, there is no effort to increase the standard of living, prevent erosion of purchasing power, solve the cost-of-living crisis, and enhance employment.
The author is an Odisha-based eminent columnist/economist and social thinker. He can be reached through e-mail at [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