‘NOT A PRE-POLL DOCUMENT; BUDGET FAIRLY PRAGMATIC’

Madan Sabnavis, Chief Economist, Bank of Baroda

The Union Budget has something for everyone, though could have fallen short of expectations of the average household. The tax concessions given on income tax slabs and rates hold for only those switching to the new regime without exemptions and hence will be compared closely with the existing rates and slabs before a call is taken. The households would have been happy to see some increasing in the exemptions such as Section 80C or for that matter interest on loans taken for housing. These have been skipped. Quite clearly given the tight situation where the government had to take a lead in driving investment, there was not much scope left for further giveaways.

The budget has tried to balance expenditures given the overall revenue garnered which has been restrained by the lower GDP growth expected. There has been some rationalisation of expenditures on food subsidy, fertiliser subsidy and NREGA outlay which in turn has given scope to direct these savings in higher capex. With the private sector still lagging when it comes to investment, the

government may have to continue with the heavy lifting for some more time. This can be justified because the higher outlays were necessitated

The budget was expected to be populist, which it isn’t because the primary goal has been to follow the path of fiscal prudence and the fiscal deficit target has been lowered to 5.9% as we move along the glide path that ends at 4.5% of GDP by 2025-26

by the unusual circumstances starting with Covid19 and followed by the new waves of the pandemic and Ukraine war. With these episodes now behind us, it did make sense to roll back these schemes. The outlay on PM-Kisan which involves cash transfers to farmers has been retained at Rs60,000 crore.

The budget was expected to be populist, which it isn’t because the primary goal has been to follow the path of fiscal prudence and the fiscal deficit target has been lowered to 5.9% as we move along the glide path that ends at 4.5% of GDP by 2025-26. In fact this has been the starting point when drawing the budget and along with a nominal GDP growth number of 10.5% has formed the edifice.

The budget does hence not read like a pre-elections document and is fairly pragmatic – providing incentives where required and being conservative on growth numbers (GDP and tax collections), while allocating outlays to sectors that have stronger multiplier effects. This has been done keeping in mind that notwithstanding the fact that India will be the fastest growing economy in FY24, external conditions remain uncertain and could get volatile. Therefore, a conservative approach has been rightly preferred.