INTERIM BUDGET 2024 — IN CAMPAIGN MODE

THE CONTEXT: The budget reflects the government’s narrative of “transformative growth” during the 2014-24 decade under the Modi administration. However, the focus of welfare schemes and fiscal consolidation may not align with actual spending and resource allocation. The fiscal deficit for 2023-24 is projected to be 5.8% of GDP, marginally below the budgeted level.

THE ISSUES:

• Introduction of an interim budget: The Interim Budget for 2024-25 was presented due to the upcoming elections, as Prime Minister stated. The Interim Budget is seen as a vote-on-account, which could be perceived as an attempt to influence voters before the elections. This indicates that the budget may not fully reflect the government’s long-term vision and plans.
• “Transformative growth” narrative: The Economic Survey presented in the budget portrays 2014-2024 as a decade of “transformative growth.” It suggests that previous periods of growth were inadequate, either due to unaddressed structural challenges or unsustainable credit booms.
• Focus on welfare schemes: The Interim Budget speech primarily focuses on various welfare schemes attributed to the Prime Minister in housing and food. However, apprehensions are raised about these schemes’ implementation and effectiveness, given the discrepancies between the claims and the actual expenditure. For instance, the total food subsidy has fallen from ₹5,41,330 crore in 2020-21 to ₹2,88,060 crore in 2021-22 and a projected ₹2,87,194 crore in 2023-24.
• Fault lines in spending: A significant deviation exists between the actual expenditure and the revised estimates for schemes such as MGNREGA and PM-KISAN. The budgeted expenditure for MGNREGA was ₹1,57,545 crore for 2023-24. The revised estimates are placed at a higher ₹1,71,069 crore. However, the actual expenditure till December 2023 amounted to only ₹1,07,912 crore, or 63% of the total projected in the revised estimates. The budgeted expenditure for the PM-KISAN scheme was ₹1,15,532 crore for 2023-24. The revised estimate is projected at ₹1,16,789 crore. The actual expenditure till December 2023 was ₹70,797 crore or 61% of the revised estimate.
• Pre-election blitz: There are two possible interpretations: either the finance minister is inflating the revised estimates to support farmers and rural workers, or the government plans to initiate pre-election spending to gain political advantage.
• The decline in food subsidies: Despite claims of expanding food support, the data made available by CGA points out that the total food subsidy has declined from 2020-21 to 2021-22 and is projected to decrease further in 2023-24. For instance, the total food subsidy has fallen from ₹5,41,330 crore in 2020-21 to ₹2,88,060 crore in 2021-22 and a projected ₹2,87,194 crore (RE) in 2023-24. This raises concerns about the government’s commitment to food security.
• Revenue projections and fiscal deficit: The government claims to manage its receipts and keep the fiscal deficit below the budgeted level. There is an expected increase in non-tax revenue receipts, mainly driven by income from dividends and profits. The government expects to raise its non-tax revenue receipts by 25% relative to the budget, with income from dividends and profits slated to rise from ₹99,913 crore in 2022-23 to ₹1,54,407 crore in 2023-24 (RE). However, uncertainties remain regarding the realization of disinvestment proceeds.

THE WAY FORWARD:

• Enhanced Transparency and Accountability: Implement more rigorous and transparent accounting and reporting practices to ensure that budget estimates, revised estimates, and actual expenditures are accurately reported and easily understandable. Regular audits and public disclosures of government spending can help maintain transparency and accountability, ensuring funds are utilized as intended.
• Addressing Deviations in Spending: Close monitoring of implementing schemes like MGNREGA and PM-KISAN to ensure that allocated funds are spent within the financial year and reach the intended beneficiaries. Establishing a real-time monitoring system and a dashboard accessible to the public can help track the progress of fund utilization and scheme implementation.
• Focusing on Effective Implementation of Welfare Schemes: Conduct impact assessments of welfare schemes to evaluate their effectiveness in achieving their goals, such as poverty alleviation and employment generation. Based on the assessments, refine and redesign schemes to make them more effective. Engage with stakeholders, including beneficiaries and local governments, for feedback and suggestions for improvement.
• Balancing Welfare Spending and Fiscal Prudence: While welfare spending is crucial, it is equally important to maintain fiscal discipline to ensure economic stability. The government could explore innovative financing mechanisms, such as public-private partnerships (PPPs) for infrastructure projects, to reduce the fiscal burden while continuing to invest in critical areas.
• Strengthening the Food Security System: Address the concerns regarding the decrease in food subsidies and ensure that the National Food Security Act’s objectives are met effectively. Enhance the efficiency of the Public Distribution System (PDS) through technology integration to reduce leakages and ensure the benefits reach the eligible population.
• Rationalizing Non-Tax Revenue Expectations: Set realistic targets for non-tax revenues, including dividends and profits from PSUs and disinvestment proceeds, to avoid overestimation that could lead to fiscal slippages. A strategic approach to disinvestment focuses on enhancing the value of PSUs before disinvestment and ensuring that disinvestment proceeds are used for productive purposes, such as infrastructure development.
• Promoting Sustainable Growth: Focus on addressing structural economic challenges to ensure sustainable and inclusive growth. Invest in education, healthcare, and skill development to improve human capital and research and development (R&D) to foster innovation, laying the foundation for long-term economic growth.
• Fiscal Prudence: The government could focus on maintaining fiscal discipline by avoiding pre-election spending sprees that could undermine the fiscal health of the economy.
• Public Engagement: Engaging the public and stakeholders in the budget process could help set priorities that reflect the needs and aspirations of the population, leading to more effective and accepted fiscal policies.

THE CONCLUSION:

The interim Budget for 2024-25 reflects a eulogy of the two governments of the last ten years, focusing on welfare schemes and infrastructure spending. However, a closer look at the actual expenditure figures reveals discrepancies and potential pre-election spending blitz. The government’s claims of pro-poor initiatives and fiscal prudence may not align with reality. The impact of these strategies on voters and the upcoming elections remains to be seen.

UPSC PAST YEAR QUESTIONS:

Q.1) Public expenditure management is a challenge to India’s government in budget-making during the post-liberalization period. Clarify it. (2019)

Q.2) One of the intended objectives of Union Budget 2017-18 is to ‘transform, energize and clean India’. Analyse the measures proposed in the Budget 2017-18 to achieve the objective. (2017)

MAINS PRACTICE QUESTION:

Q.1) Discuss the implications of the Interim Budget 2024 on welfare schemes, infrastructure spending, and fiscal deficit.

SOURCE:

https://www.thehindu.com/opinion/lead/interim-budget-2024-in-campaign-mode/article67801178.ece