Expect a dose of political pragmatism in the Budget
Finance Minister Nirmala Sitharaman would be presenting her fifth Budget in about a month’s time. It used to be one of the most anticipated days for many, especially from the middle class, when they would know if the cost of accessing trusted goods and services would go up or down depending on the taxes and duties announced during the budget. Now, it is more of a policy document which talks broadly about the focus areas of the government in the upcoming fiscal year and priority sectors or sections of the society or
industry.
The upcoming budget for 2023-24 would be the last full year budget for the current government. Expectations are for a rather populist budget. However, the external world is going through a huge financial gloom with energy prices blowing a hole into the pockets of the richest consumers in Europe and the US. The war in Ukraine and its direct impact on prices of fuel and subsequently food grains is a concern. This has led to the central banks in western geographies pushing up interest rates.
The war in Ukraine doesn’t seem to die down in the next couple of months. Assuming a best case scenario, the road to recovery would be long drawn. It is safe to assume that even with a “fractured, suspended in animation” peace in Ukraine, the world won’t go back to having the kind of energy prices it did pre-invasion any time soon.
Meanwhile, China is going through one of the worst Covid infection stages in the last two years. It had managed to keep the virus under a physical prison in a limited way by restricting mobility of its citizens and enforcing hard lockdown measures with its zero covid policy in the last two years.
However, the nature of the virus is such that it can’t be restricted by limiting mobility. China had to eventually open up (there were the first of its kind protests on Chinese streets) and now the virus is having a run. This means more temporary lockdowns of important factories feeding into the critical global supply chains and a slowdown of demand from China (which also happens to be a large importer of global goods and services)
The dark clouds on global growth would have a telling impact on the Government of India’s flexibility in announcing big ticket items in the upcoming budget. The government could have expected private enterprise investment to pick up and a considerable push in exports (as was the case in last two years). However, the global growth story could dampen the move. This means the government would have to depend on keeping the rural and small town Indian economy wheels churning out healthy numbers. This means renewed commitment on already existing schemes of the government such as rural employment guarantee, housing, etc.
Chances are the government may also have some sops lined up for the urban poor, who have already in some way been factored in, through one nation one ration card, and the Ayushman Bharat insurance health benefits. This could possibly include having concrete houses for the slum dwellers with basic water and regular electricity supplies. The government is also likely to continue exploring new sectors which can be brought under the production linked incentive schemes, some of which such as mobile phones have worked headline worthy mentions across media. Expect a dose of political pragmatism in Budget 2023-24.
(The author is a foreign affairs commentator)