A WISHLIST FOR BUDGET 2022-2023

The Union Budget for the financial year 2022-2023 will be presented in 3 days from now. Last year, the Finance Minister Mrs Nirmala Sitharaman said the Government would present a Budget “which is like never before”. It is pertinent to recall here that the present Finance Minister holds the distinction of presiding over the first recession in 40 years! In this blog I wish to lay out a brief overview of the economy and few aspects which I believe should be the focus of the Budget for 2022-23:

Economic Overview 2021-22

The first Advanced Estimate of National Income for the financial year 2021-22 was released by the National Statistics Office (NSO) on 7^th January. For a few hours, I was dazzled by one aspect of the Press Release – that estimated GDP growth for 2021-22 (at constant prices) is 9.2% against the contraction of -7.3% in 2020-21. This means, our economy will overcome the decline of the previous year and grow by about 1.9%. The World Bank has projected a GDP of 8.3%. Anyone would obviously be happy looking at these numbers. But, there is a need to look at it little closely.

The GDP (at constant prices) in 2019-20 was Rs 145,69,268 crore (this is before the pandemic). In 2021-22, the GDP fell to Rs 135,12,740 crore. What the NSO estimate means is that in 2021-22 we will cross the GDP of 2019-20. Most economists have been sceptic about it, especially after Omicron variant has given a new turn to the pandemic.

As I said, we need to look at the Advanced Estimates more closely. As per the NSO estimate, we will exceed the GDP of 2019-20 (Rs 145,69,268 crore) by Rs 1,84,267 crore, which in my view, is not a very big amount for a large economy like ours. However, even if we assume that the Advanced Estimate numbers turn out to be right, it will only mean that we will reach the GDP figures before the pandemic set in – this we can fully attribute to the incompetent management of our economy from 2016 to pre-pandemic times.

A closer look at the Advanced points out another worrying aspect – that the average person has become poorer than 2019-20 despite the economy reaching the level of 2019-20 (if we assume the Advanced Estimate to turn out to be true). This suggests that the estimated recovery to pre-pandemic levels has not been inclusive. I am sharing an illustration which would drive home my point:

Year	Per Capita Income (In Rs)	Per Capital Expenditure (In Rs)
2019-20	1,08,645	62,056
2020-21	99,694	55,783
2021-22	1,07,801	59,043

The numbers speak for itself.

Apart from this, the unemployment figures are alarming. As per CMIE, the urban unemployment rate is 8.51% and the rural unemployment rate is 6.74%. Parents are concerned about education of their children – most children in rural and semi-urban areas have struggled to learn amidst the pandemic and the learning outcomes in urban areas too cannot be determined fully due to lack of proper assessment mechanisms.

Though this Government does not value any assessment or suggestions from those who don’t subscribe to their views, I will proceed to share few aspects on which I believe the Budget for 2022-23 should essentially focus on.

What should be the Focus of Budget 2022-23?

To be frank, I have no expectations from the Budget given that the present administration lives in its own world where ‘All is well’. However, I will jot down few points around which I believe the Budget should be built:

1.   1. Direct Cash Transfer to the poor – As I have highlighted in the earlier portion of this essay, the per capita income & expenditure is still below the levels of 2019-20. To prevent those at the bottom of the pyramid from becoming poorer, Government must provide minimal direct cash transfer to them (of atleast 3,000 per month) for a period of 1 year.

2.  Fiscal stimulus to boost demand – Most sectors, especially such as Tourism, have still not recovered from the impact of various COVID-19 restrictions. The much famed ‘Atmanirbhar Bharat’ package has ended up as a damp squib with the fiscal component of it being extremely less. The Finance Minister must announce a customised stimulus package for each of such sectors.

3.    Cut Indirect Taxes – Many economists have repeatedly pointed out that our economy is facing the problem of sluggish Demand (since pre-COVID days). In order to boost Demand (which will also result in increase of investment in production), Finance Minister must cut indirect taxes significantly. It is true that Government revenues will be impacted by such a move but most of it can be made up with the resulting increase in production.

4.    Shun Protectionism – The Finance Minister must do away with protectionist policies such has high custom duties etc. The focus should instead be towards lending a helping hand to export industries and making them more competitive.

5.    Increase CAPEX – In this Budget, the Government must focus on increasing its Capital Expenditure. The focus should not be on selling, but on creating permanent revenue yielding assets to the Government, which could be used to fund welfare schemes.
 
6.    MSME policy – MSMEs are at the core of job creation for any economy. Given the worrying unemployment numbers, Finance Minister must come out with a comprehensive and implementable policy to spur job creation and revive MSME units that have closed down.

7.    Timeline for Financial Sector Reforms – During the time of UPA, Government constituted Financial Sector Legislative Reforms Commission (FSLRC) under the chairmanship of Justice (retd) BN Srikrishna to review the legal architecture of our financial sector. The Commission has submitted its report. It’s been eight years since this Government has taken over. It boasts of its huge majority in the Lok Sabha. It’s high time the Finance Minister draws up a timeline to implement recommendations of FSLRC and Direct Tax Code. She must also reverse and resist from resorting to any retrospective policies or policies that would be termed as ‘tax terrorism’.

8.    Shun Bullying – The Finance Minister must send strong signals through the Budget that Government desist from probing every big loan unless there is sufficient and strong prima facie case to do so. This will enable the banks to lend without the fear of investigating agencies.

9.    Increase in Defence Budget – Given the tensions with China and the strategic implications of Taliban take-over of Afghanistan, Finance Minister must increase allocation towards Defence. She must also ensure that adequate funds are made available for full implementation of One Rank One Pension.

10. Nari Shakti – All talks of women empowerment sound hollow if it does not have a financial aspect to it. In Budget 2013-14, Mr P Chidambaram had announced Bharatiya Mahila Bank which was launched by then PM Dr Manmohan Singh in October 2013. The Finance Minister must revive this Bank as it would go a long way in empowering women financially.

In short, the Budget should focus on putting more money in the hands of the common man, stress on job creation and focus more on true reforms than electoral populism. Will any of these points be addressed in the Budget? Lets wait till for three days.