The FM walks a tightrope as she presents the Union Budget for 2022-23 today
Today, when Finance Minister Nirmala Sitharaman rises to present the Union Budget for 2022-23, she would need to work really hard to overcome several challenges. The Government’s economic planning has been the weakest chink in its armour. Despite several initiatives, it has failed to boost growth and offset the COVID-19 losses. In fact, its policy decisions worsened the situation as it unduly pressured banks which led to the collapse of several banks and strained the economy. The demand despite cash incentives remains low and the manufacturing and service sectors are in dire need of a kickstart. The Union Budget is an annual accounting process as also the Government’s policy initiative for course correction. So the Budget, one expects, should not only make the economy sustainable but also prepare a roadmap for growth and development. The Union Budget will have to factor in rising prices in global oil and metal markets and volatility in global financial markets as the US tightens its monetary policy. It is general consensus that the Finance Minister will have to focus on infra and investment to revive the economy. This could generate demand and ensure greater employment. But, in the given scenario, it is easier said than done.
Financing infrastructure has been lacklustre. In her FY22 Budget, the Minister laid out her National Infrastructure Pipeline (NIP) and an associated National Monetisation Programme (NMP). Of the `88,000 crore targeted for FY22, nothing seems to have been actually utilised. Then, the Union Budget will have to persuade the industry to increase private investment. Gross capital formation has declined from 34.2 per cent of GDP in 2014 to 29.2 per cent of GDP in 2020. Both public and private investments have declined in the previous years. Credit growth has remained stuck at below 10 per cent The Budget must Increase private sector investment, which would need a huge dose of incentives. Budget measures must encourage consumption to drive growth. In the last two Budgets, stimulus measures were expected to do some of that but the results have not been satisfactory. In this scenario, what she can do is give incentives. The challenge here is picking the right ones: One could be a better and more effective rationalisation of the tax structure. Another policy measure could be to revive the PPP model but, for that to happen, she will have to do some out-of-the-box thinking.