Amrit Kaal, or is it? My Take on Budget This Year

It has been some days since the finance minister Nirmala Sitharaman presented the Union Budget for 2022-23. There was some hope that considering the upcoming elections there would be massive giveaways and the creation of narratives. Although, narratives were created, but not through giveaways. The budget remained quite “Thanda”, in the words of Vivek Kaul, or very “non-populistic”, in the words of Swaminathan Aiyar. In this piece, I would like to address all the major points in the budget and the points which were missing, after which I shall present my conclusion of this year’s budget.

Let us first address the elephant in the room: the government’s capital expenditure or CapEx. Capital expenditure refers to the government expenditure on creating assets like railways, roads, factories, etc. It is an important part of the budget as it creates more economic activity in the country. The construction of infrastructure proves to be useful in the long run while giving employment to many people. In this year’s budget, FM Nirmala Sitharaman said,

“…the outlay for capital expenditure in the Union Budget is once again being stepped up sharply by 35.4 per cent from ` 5.54 lakh crore in the current year to ` 7.50 lakh crore in 2022-23.”

The Chief Economic Advisor Sanjeev Sanyal, in an interview, also justified no tax benefits in the budget by referring to the increased Capex. Now, let’s look at the reality of it.

First of all, the revised estimate of capital expenditure in 2021-22, i.e. the current year is 6.02 lakh crore. It is more than what was budgeted in last year’s budget. But, once we take into account the money spent in clearing off the liabilities of Air India before selling it to the TATA (51,000 crores), and subtract it, the revised CAPEX is less than the budgeted one. Also, now that we have a revised estimate, why is the finance minister comparing the government’s Capex for the upcoming year with the budget estimate of this year? Surely, this is done to show a higher jump. If we compare the Capex for 2022-23 with the revised estimate of 2021-22, then the increase is 24% and not 35% as was mentioned in the speech. Still, the increase is worth appreciating, but this is not the end of the story.

What Nirmala Sitharaman is talking about here is budget CAPEX and not the total CAPEX. Total Capex includes Internal and Extra Budgeted Resources (IEBR) along with budget CAPEX. IEBR, in simple terms, consists of money raised by public sector enterprises in the form of profits, loans, and equity, for capital expenditure. So, the revised estimate for this year’s total Capex is 11.05 lakh crore, which is less than the budget estimate (11.37 lakh crore) while the budget estimate for 2022-23 is  12.19 lakh crore. This means an increase of only 10% when compared with the revised estimate. There’s more to it. Out of this, 47,000 crores will be given to BSNL. Who will get this money? The government itself. If we take this into account, then the real increase is only 6%.

Now, coming to some other highlights of the budget:

The revised estimate for Centre’s tax revenue in 2021-22 is 17 lakh crore as compared to the 15 lakh crore budget estimate. This means that the Centre collected way more taxes this year than it actually predicted in the last budget. For 2022-23, the government hopes to get 19 lakh crore from it.

Interest payment of loans will form around 48.6% of the net tax revenue of the government. Thus, a large chunk of Centre’s revenue would go to pay interest on loans. To put it in perspective, this percentage was 41 in 2010-11 and 50.6 in 2020-21.

The Fiscal Deficit, or the difference between government’s income and its expenditure, was 37.70 lakh crore in the revised estimate as against the budget estimate of 34.83 lakh crore.

In spite of high hopes, there is nothing much for the middle-class. There has been no change in the tax slabs. The good thing is, there has been no increase in taxes as well. But, people who are still suffering from the ill effects of the pandemic were desperately in need of some relief which they didn’t get despite government collecting massive amounts of taxes.

Pradhan Mantri Garib Kalyan Yojna, which provided free ration to people will end in March this year and has not been extended, at least in the budget.

The government also plans to tax capital gains from crypto by 30%. Capital gain refers to profits from the sale of an asset. Also, RBI will issue its own digital currency. A Central Bank Digital Currency (CBDC) is a way to store and transfer your money digitally. It is similar to the payments that we do using the payments app but subtly different in two ways. As Vivek Kaul writes in a column,

“…one, the payment infrastructure is created and managed by the central bank. Two, payments are made using central bank money and not money created by banking system.”

Coming to the good part, there is no significant rise in import duties in any major commodity.

Also, the problem of mental health has been recognized in this year’s budget as well. A National Tele Mental Health Programme is being launched in partnership with IIIT Banglore.

48,000 crore is being allocated to PM Awas Yojna to construct 80 lakh houses. This is good for employment as a boost to real estate is considered good for many other industries, from pain to steel to electricity.

To develop the Electric Vehicles (EV) ecosystem, a battery swapping policy will be launched.

Bad Banks, in order to reduce the bad debts of banks, will be set up this year. (I wrote about what bad banks are and to what extent they will help us last year. Click here to read that piece.)

2022 was the year when a lot of things were to happen. This government promised many things which were about to be completed this year. But, there’s simply no mention of them. Farmer income will be doubled by 2022, said many ministers many a time. Every single Indian were to have a house, a bank account, 24/7 electricity, and an LPG cylinder by 2022. India was to be free from malnutrition by 2022. And many others. (Here’s a list of 40 things. Check how much were we able to achieve.)

Two-Wheeler sales are on a ten-year low. This is something that indicates the situation of the middle class. No one is ready to talk about it. Even the eco-survey points out the boost in car sales as an indicator of consumption recovery but blatantly ignores the aforementioned. In reality, the car sales are also in 2016-17 levels.

India contributed 55 new billionaires in the world while pushing more than 230 million individuals into poverty. This is what economists are calling a K-shaped recovery, where some have done well while others haven’t.

Nirmala Sitharaman said that for the next 25 years, till we complete 100 years of independence, we have entered the Amrit Kaal. An era where the gap between the poor and rich has widened. An era where a whopping 1.25 crore people applied for just 35,000 posts in Indian Railways. An era where for the first time in our independence we have seen a declining GDP growth rate for 5 consecutive years. An era where the government hides the data for poverty because allegedly it has increased for the first time after 1990. An era of Petrol prices crossing the 100-rupee mark.

Welcome to Amrit Kaal, everyone.

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