Booster Dose For Capex, But Budget Falls Short On Some Fronts, Say Analysts

The Union Budget promises to raise capital investment to boost the economy, but certain analysts are criticising it for flaws like welfare cuts, a tiny boost in medical allocation notwithstanding the pandemic's consequences, and reduced subsidies.

In terms of spending, the budget increased capital spending by a record 35 per cent to 7.9 lakh crore. The administration has embraced what is known as the conventional economic credo, which states that investments lead to growth.

According to several commentators, the budget was low on welfare despite a strong emphasis on supply-side economics. It omitted immediate steps to help the poor and middle class, given the fact that millions are struggling to recoup income squandered owing to pandemic-related unemployment.

To compensate for price increases, the PM-KISAN plan did not raise social pensions or cash payments to farmers.

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Food subsidies were slashed by 79,000 crores in the budget, whereas fertiliser subsidies were lowered by 34,900 crores.

The budget's health care spending, at roughly 86,201 crores, is only 0.2 per cent more than last year. There has been no significant news in the healthcare system.

The health ministry's budget expenditure is expected to fall from 2.3 per cent of the entire budget in 2021-22 to 2.2 per cent in 2022-23, according to budget records. When entire social-sector expenditure is included, which includes schooling, pensions, and rural development, outlays have fallen to 6.1 per cent of total funds allocated from 6.5 per cent in the current financial year.

The investment in infrastructure has increased, according to economist Gurbachan Singh, a visiting faculty member at the Indian Statistical Institute (ISI), Delhi centre, but the difficulty is that it is highly capital demanding. That's where the worker issue comes in since job generation is essentially the most important issue.

Investment in physical infrastructure, like railways and ports, as well as capital goods, like machinery, is referred to as capital-intensive expenditure. This type of investment is necessary for development, but it also boosts the capital-output ratio and results in job-saving automation. According to Singh, large-scale employment development necessitates labour-intensive investment.

Nirmala Sitharaman, who is the Finance Minister offered 50-year interest-free financing of Rs 1 lakh crore to the provinces, providing a significant boost to their budgets. This would allow states to expand on capital developments, particularly infrastructure, as part of the Prime Minister Gati Shakti Master Plan for the years 2022-2023.

M. A public finance specialist, Govinda Rao, who sat on the 14th Finance Commission, believes that aggregate data might be deceiving at times. Except for railroads, highways, and telecommunications, there isn't much for other industries except for this additional 1 lakh crore in interest-free financing to states. As a result, he does not believe that expenditure will be much increased at his level.

Because government-sponsored initiatives like PM Awas Yojana and Har Nal Jal are grants, spending under them is considered as revenue expenditure rather than capital expenditure, which is why Rao's estimate is modest.

In the fiscal year 2022-23, the Union Budget set aside 60,000 crores to provide piped water to 30.8 million homes. It has set aside 48,000 crores to construct eight million residences for the needy in both cities and suburbs.

These are subsidies, according to Rao, and are not considered capital expenditures.