The Union Government has begun budget exercises for the year 2023-24 in the right earnest with narrowed options and very high stakes for the ruling establishment led by PM Narendra Modi since it would be the last full budget before the 2024 Lok Sabha election. The Union Ministry of Finance has kick-started the series of exercises with a meeting held on November 21, chaired by the Union minister of Finance Nirmala Sitharaman, and attended by other Union ministers for State for finance Pankaj Chaudhary and Bhagwat Kishanrao Karad along with various secretaries and economic advisors. They heard the industry leaders and experts of various sectors which included leaders in climate change and infrastructure and tried to find out the challenges ahead and the demand of these sectors. The very first meeting showed that the Union Government is primarily concerned more about the three sectors – Industry, Infrastructure and Climate Change, than any other sector of the economy, though the Union Ministry of Finance has said that this first meeting would be followed by meetings with various other stakeholders in other sectors like agriculture, health, education, sanitation and water.
Only last week Sitharaman met Jin Liqun, the president of the Asian Infrastructure Investment Bank (AIIB), of which India is the largest client. She had urged AIIB to mobilise more private finance and scale up investment in India’s key priority areas like energy efficiency, renewable energy and more advanced climate technologies that have been deployed so far in the country. However, the challenges before Nirmala Sitharaman this time (her fifth) seem to be insurmountable since the Union Budget 2023-24 will have to address critical issues of high inflation, boosting demand, job creation and putting the economy on the sustained growth path of over 8 percent at a time when the domestic as well as global economy set to be tumultuous. She would have to make a tightrope walk between economic growth and providing social sector benefits to the people as voters in this pre-election budget. CII has been batting for income tax cuts to boost disposable income given the high inflation rate in the country which has remained around 7 percent well above the RBI’s tolerable limit of 4-6 percent range, and also the impending recession in advanced economies that is likely to adversely affect domestic growth momentum particularly due to decline in exports. However, increasing the income tax level and reducing the rates would not be an easy task this year.
However, for all these, the country would not only need much more public and private investment that will be available. However, to enhance private investment, which has not been coming forwards for years, India Inc has emphasised ease of doing business to the establishment level, rationalisation of cost, rationalisation of taxation, enhancement in infrastructure, to push up incomes of the people including in agriculture. Industry bodies have pitched for widening the tax base, boosting private investments, consumption and employment generation. They have emphasised that global uncertainty is likely to impact the incipient revival in private CAPEX and hence, public CAPEX would be critical to support demand and growth. However, the need for fiscal consolidation and reducing the budget deficit would restrain the Government from significantly increasing public investment.
