FORTHCOMING UNION BUDGET -Some Thoughts.

 Budget is a financial statement of anticipated annual revenue and expenditure of the  Government. When finance minister presents the budget for the year 2022-23 we will be able to get data on actual estimates (AE ) for the previous year 2020-2021 budget and revised estimates (RE)for the current year 2021-22 and budget estimates (BE)for the forthcoming year 2022-23. Budget is broadly divided into two. 1.Revenue Budget and 2. Capital Budget. Revenue budget deals with receipts from taxation, non tax sources and expenditure met out of these sources. Capital budget deals with Capital receipts like net recoveries of loans and advances made previously to state governments, UTs and PSUs,market borrowings, net small savings and other capital receipts like provident funds, special deposits etc and expenditures involved in that. Fiscal deficit is a situation where the government spends more than it earned. It consists of budgetary deficit plus market borrowings and other liabilities of the government of India. The National Statistical Office has projected GDP for the financial year 2021-22 at ₹147.54lakh crores a 9.2% increase  from ₹135.13 lakh crores when output actually contracted-7.3% in 2020-21.Budget has to maintain fiscal sustainability and to focus on containing Fiscal deficit. Experts opine that with about 35% growth in annual  Gross tax revenue the government may be able to limit the 2021-22 fiscal deficit to the budgeted level of 6,8% of GDP, despite shortfall in disinvestment proceeds and additional demand for supplementary grants in the current year,  although a marginal slippage may not be  ruled out.According to Raguram Rajan fiscal deficit may go upto7% in 2021-22 and 6,5 next year. 

 In addition to the problems associated with Covid19 and it's various mutants economy also suffer from fragile - supply chains, consumption demand and contact intensive services,rising unemployment, inflation and inequality of income and wealth. Ironically private consumption expenditure which two years ago accounted for about 60% of GDP is still struggling to recover from the 9.1% contraction it suffered. Other main sectors that suffered setback were trade,hotels and transport .In financial year 2021-22 agriculture performed well with 3.9% on the back of good monsoon. Manufacturing and construction to grow double digit supported by a favourable base. However growth in the contact intensive service sectors almost remained muted. Private consumption is expected to grow at 6.91%in 2021-22.On the positive side many of the large companies were performing well especially roaring business in IT and IT enabled services including the emergence of Unicorns in different areas and the strength of some parts of the financial sector. It may be noted here that a record number of 61000 startups are so far registered in India and a record number of 42 startups turned into unicorns in 2021 itself. India aims to become a $ 5 trillion economy by 2025 for which development of robust infrastructure sector is vital. Government has already started National infrastructure pipeline, National Monetization pipeline and National bank for financing infrastructure &Development.Currently banks have finalised plans to transfer 15 non Performing assets (NPAs) worth ₹50000 crores to the newly created National Asset Reconstruction company (NARCL,Bad Bank).

 In order to tackle fall in private consumption expenditure job creation should be budget's top priority. Accelerate growth and convert growth into incomes and jobs to the disadvantaged sections so that the inequality impacted from the pandemic is addressed to some extent. Service sector alone cannot provide jobs to all.MSME sector can play a dominant role in that.MSMEs should get continued support in terms of trade guarantee support and credit support especially in contact intensive sectors to generate employment.Already more than 20 crores of informal workers are registered for skill mismatches in MSMES.  If small industries are optimally supported it would do away with the need for welfare programs. More over upskilling and reskilling of labour as per requirement is vital. Urgent policy measures to strengthen job guarantee programmes, welfare models in providing food security to poor households and designing gender budgeting are required. Not only MGNREGA need to be extended but also a new urban employment guarantee schemes should be launched to the urban poor and migrant workers. Investment demand as indicated by Gross Fixed Capital Formation (GFCF) is likely to grow in double digit at 15% with govt likely to push up capital expenditure owing to robust revenue collection. Government launched the Production linked incentive (PLI) scheme with incentives worth ₹1.97 lakh crores over a 5 year period for 13 key sectors to boost production and exports .However as per available indications government spending on National Infrastructure pipeline, rolling out 4G technology, Digital India Mission,remission of duties and taxes on export products(RODTEP) and JalJeevan Mission has been behind the target. Obviously a more efficient and effective mechanism to monitor government expenditure is required.

   Budget making in 2022-23 during recovery is more daunting than those in 2021-22. While remaining committed to broad goals of fiscal consolidation 21 budget launched an ambitious National Monetization plan and massive national infrastructure pipeline both to augment government revenue and revive investment. In the forthcoming budget 2022-23 an increase in public sector investment(capital expenditure)is badly needed in the economy where the private sector with low capacity utilization has no desire to make fresh investments. Streamlining of PLI scheme  increased focus on MSMES and export sector are very significant. MSMEs desires easier access to capital at lower interest rates. Real estate sector also expects tax relief and industrial status while pharma industry expects incentives for research and development. Incentives for green technology-based industries, energy sector along with  imposition of carbon tax are advocated.Market experts believe that disinvestment and privatisation are likely to gain further traction. However high inflation,high fiscal deficit and any further widening of current account deficit may weaken the rupee and further fuel inflationary pressures. Even though  increasing interest payments, subsidies, defence expenditure and pensions  constitute major chunk of public expenditure - ULTIMATELY THE QUALITY OF PUBLIC EXPENDITURE MATTERS MORE THAN THE SIZE OF FISCAL DEFICIT .