Budget 2023-24: In Pursuit of Growth but stressful for Farmers | S S Sangwan

by Prof S S Sangwan *

Vision and Priorities 

This Budget presented on February 1, 2023, by Hon’ble FM, at the outset clarifies that it hopes to “build on the foundation laid in the previous Budgets”. As per FM, the budget is the Vision for Amrit Kaal i.e next 25 years in which the economy will be technology-driven and knowledge-based with strong public finances and a financial sector. The Budget identifies the seven priorities viz., Inclusive Development, Reaching the Last Mile, Infrastructure and Investment, unleashing the Potential, Green Growth, Youth Power, and Financial Sector. The budget speech (BS) uses three years in as many as seven schemes making them non-committed. Let us dovetail these objectives with the allocation for major sectors and Schemes (Table -1).

Agriculture and allied activities

The allocation is Rs 84214 crores which are 1.87 % of total budget expenditure (BE) as compared to 2.02 % in 2021-22 and 1.82% in RE of 2022-23. It is 10.4 % higher than the overall budget increase of 7.4 %. It excludes Rs 60000 crores for Kisan Samman but includes usual schemes such as Rs23000 crore interest-subsidy for KCCs, Rs 13625 crores for crop insurance, Rs10787 crores for PMKSY and Rs7150 for RKVY. The other highlights as per the BS are Rs2000 crores for the supply of quality planting material, and Rs6000 crores for PM Matsya Sampada Yojana. A target of Rs20 lakh crores for agriculture credit has been fixed with a focus on animal husbandry. But it has nothing to take from the budget. Moreover, actual credit flow is much less than the target as per many studies.

The budget allocations for decentralized procurement by FCI and others is about one lakh crore less than the RE 2022-23. The other items mentioned in the BS are the agriculture accelerator fund, grant to ICAR for millet research, cold storage and multipurpose cooperatives. However, the fertilizers subsidy is reduced by 23 %. To compensate for it, the budget focuses on alternate fertilizers by establishing 200 compressed biogas (CBG) plants and 300 community or cluster-based plants at a total investment of Rs10, 000 crores. About one crore farmers will be facilitated to adopt Bhartiya Prakritik Kheti/ natural farming. If these are not set up in time farmers may feel the stress of the non-availability of fertilizers

Health

Health is the other important sector which has got Rs88956 crores i.e 1.98 % of total BE as compared to 2.22 actual in 2021-22. But it is 15 % higher than the RE of 2022-23. Out of this, Rs 33807 crore for the usual health mission and Rs 6427 crore and Rs 8270 crore will go towards PM Ayush and KS Yojnas. The other highlights of the BS are setting up 157 new nursing colleges with the existing medical colleges, ICMR Labs for research by public and private medical colleges, Centers of excellence for research & innovation in pharmaceuticals, multi-disciplinary courses for medical devices to increase skilled manpower, etc. The allocation is higher for this sector than the total budget.

Education

 Education is another big sector which has been allocated Rs112889 crores i.e 2.51% of BE and 13 percent higher than the RE in 2022-23. Out of this, Rs32712 crore will be for the usual “National Education Mission” and the maximum for 54 Central Universities. The highlights of the BS are improvement in District Institutes of Education and Training for teachers, continuous professional development and setting up a National Digital Library for children and adolescents for quality books across geographies, languages, genres and levels. Additionally, to build a culture of reading, the National Book Trust and Children’s Book Trust will provide non-curricular titles in regional languages and English in grass root libraries. To inculcate financial literacy, RBI and other institutions will provide age-appropriate reading material in the libraries. Further, the National Education Policy will focus on skilling, job-creation and supporting business opportunities under Pradhan Mantri Kaushal Vikas Yojana in the next three years. It is targeted to link skilled youth with employers and entrepreneurship schemes and to provide stipend support to 47 lakh youth during these three years, the catch-period of the BS.

Rural Development 

It is another major sector of political implication too. It has been allocated Rs 238204 crores i.e. 5.29 % of total BE. But it is less than 6.03% in 2021-22 and even less than the RE of 2022-23 in absolute terms. Its major chunk, about Rs50000 crore(of a total of Rs79000 crores) will go for PMAY in Rural areas, Rs 7000 crore for drinking water supply, Rs10177 for Ajivika mission and about Rs47000 crores will be transferred to PRIs. As per the BS highlights, the aspirational Blocks Programme will continue in 500 blocks for their saturation with essential government services for health, nutrition, education, agriculture, water resources, financial inclusion, and skill development. Besides, Rs15000 crores will be provided for particularly vulnerable tribal groups (PVTGs) to provide them safe housing, clean drinking water, road and telecom connectivity, and recruit 38800 teachers/staff, for the 740 Eklavya schools.

Social Welfare

The Budget has allocated Rs55080 crores i.e. 1.22 % for social welfare schemes. It has continually increased in the last 3 years with an 18.45 % increase in 2023-24 over the RE of the previous year. Of this, the budget has allocated Rs20554 for Anganwaries, Rs9636 crores for the pension of elders/ widows /other impaired persons; Rs4616 crore for women & child development, and other miscellaneous assistance.

Transport

Transport including rail, roads, and waterways is one of the biggest sectors accounting for 11.48 % of total BE. This sector has continuously increased its share since 2014-15 and increases is 32.40 % in BE of 2023-24 over the RE of 2022-23. Railways have been allocated the highest-ever capital investment of Rs2.40 lakh crores. Besides, NHAI will invest Rs162307 crores under PPP mode. The road quality and fast connectivity have reduced the time between almost all metro cities of the country. Improvement in the freight system of railways is been focused on.

Capital Investment 

Capital Investment (CI) is the main focus of the budget in continuity with the previous budgets. After the subdued period of the pandemic, this Budget has steeply increased the CI outlay for the third year in a row by 33 % to Rs10 lakh crores (3.3 % of GDP). It includes central assistance of Rs5300 crores to poll-bound Karnataka for the Upper Bhadra Project to provide sustainable micro irrigation and providing drinking water from surface tanks. The other main capital heads are Railways Rs2.4 lakh crores, the PM-Awas Yojana Rs79,000 crores, 100 critical transport infrastructure projects for the connectivity of ports, coal, steel, fertilizer, and food grains sectors with the investment of Rs 75,000 crores(Rs 15,000 crore from private sources). Besides, Rs1.3 lakh crores grant-in-aid will be given to States for creating capital assets of Rs3.57 crores, thus the ‘Effective Capital Expenditure will be Rs13.7 lakh crores. Urban infrastructure will be developed by mobilization of property tax, user charges and municipal bonds. Like the Rural Infrastructure Development Fund (RIDF) with NABARD, an Urban Infrastructure Development Fund (UIDF) will be established with National Housing Bank, through priority sector lending shortfall of banks. The UIDF will be used to lend to public agencies for creating urban infrastructure in Tier 2 and Tier 3 cities of Rs 10,000 crores per year. National Green Hydrogen Mission, will be given Rs 19700 crores, to facilitate the transition of the economy to low carbon intensity and reduce dependence on fossil fuel imports. Further, the budget provides Rs 35,000 crore for capital investments towards energy transition and net zero objectives.

Other Highlights of the Budget

• The budget has given the highest increase of 114% in allocation for the development of NES.
• Higher allocation with a 25 % increase for scientific departments.
• Transfer to states will be 19.82% as against about 7% in the last three years.
• The increase in miscellaneous items is 11.49%, higher than the budget increase of 7.4 %.
• Higher increase of 26.14% in IT & telecom sectors to support knowledge-based activities
• There is 28 % for Commerce & Industry, though its share is just 1.07% in the budget.
• Interest payments are 24 % in the BE with a 14.81 % increase over the RE of 2022-23.
• Allocation is almost constant for Defense, Tax administration, and Urban Development.
• Reduced for pension (-4.26%), fertilizer subsidy(-22.25%), food subsidy (-31.28%), petroleum (75.39%), Union territories(11.47%)MGNREGA((-32.59) and PMAY(-)
• The customs duties have been reduced for the items which can be manufactured in India to replace imports or to increase their exports.
• In Direct taxes, the new tax regime has been made attractive with reduced slabs, lower tax rates and allowing Standard Deduction for salaried and pensioners. Moreover, the persons with Taxable income up to Rs7. Lakhs will pay no tax as against up to Rs 5 lakh in the old regime. Even the cess on higher slabs was reduced to reduce their tax rate from 43 % to 39%.
• At least 50 new tourist destinations will be selected and would be developed as a complete package for domestic and foreign tourists.

Conclusions 

The above allocation indicates the budget aims toward a knowledge and technology-based economy. It focuses on capital investment in pursuit of its make-in-India objective. The budget has dared to reduce, pensions, and subsidies on fertilizers, food and petroleum. This budget gives relief to all categories of tax. The budget may be termed a win-win for all except the farmers who may feel stress due to reduced subsidies for procurement and fertilizers. The budget even failed to the mobilization of resources from those who have the capacity to pay through wealth and inheritance taxes.

Notes:: BE= Budget Estimates, RE=+ Revised Estimate, Source: Budget at Glance, MOF, 2023

(Author: S S Sangwan, Former Professor SBI Chair at CRRID, Chandigarh(2012-18) and General Manager NABARD (1983-2008)