A courageous budget

02/02/2023

Finance Minister Nirmala Sitharaman's Budget speech on Wednesday was marked by the usual thumping of benches by the ruling alliance members, but the loudest cheer was reserved for her announcement of income tax relief, which was welcomed by 'Modi, Modi' chants in Lok Sabha that also witnessed a few instances of protest by the Opposition. Sitharaman's follow-up statement that the tax relief will only be available to those opting for the new regime might have dampened spirits, but another round of applause from the treasury benches came when she announced a massive 33 per cent hike in the capital expenditure to Rs 10 lakh crore. This is around 3.3 per cent of the gross domestic product or GDP. This will be almost three times the outlay in 2019-20. She went on to point out that the direct capital investment by the Centre is complemented by the provision made for creation of capital assets through grants-in-aid to states, thus making the 'effective capital expenditure' to Rs 13.7 lakh crore. She rightly emphasised upon her Govern-ment's focus on capital expenditure to enhance growth potential, generate jobs, crowd in private investment, and provide a cushion against global headwinds.
One of the biggest political budgets was the one that the Congress-led United Progressive Alliance government made in 2008. It announced a Rs 60,000-crore farm loan waiver, which went up to almost Rs 72,000 crore. The waiver helped the UPA's return to power next year. There was a strong correlation between the amount spent in states and the UPA's electoral fortunes in it. Thankfully, Sitharaman has steered clear of the reprehensible populism the UPA exhibited 15 years ago. Yes, she can be accused of trying to placate income-tax payers by giving them relief, but the fact is that it was long overdue. The point to be stressed here is that the biggest beneficiaries are those who are in the lowest brackets. This means more money in the pockets of common people which they will either invest or spend - and thus boost demand and savings, both of which are desirable. Micro, small and medium enterprises have also been extended income-tax benefits. What is conspicuous about personal income-tax cuts is the fact that the people in the highest tax slab have also been given relief. The highest tax rate in our country is 42.74 per cent, which is among the highest in the world. This is a very courageous step in a country where it is fashionable to slam the rich - and especially when her party is gearing up for the general elections in 2024.
A good thing about the Budget is that, even though it has something for everyone - from the middle classes to the rich, from MSMEs to big corportations - fiscal prudence has been maintained. While pegging the fiscal deficit for 2023-24 at 5.9 per cent of GDP, she pledged to tread "the path of fiscal consolidation, reaching a fiscal deficit below 4.5 per cent by 2025-26." The fiscal deficit already came down from 6.7 per cent in 2021-22 to 6.4 per cent in 2022-23 (revised estimates). What we can say is, Budget 2023-24 is good for all.

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