Finance ministers come and go. Governments too are not forever. But India is forever. And our interests, regardless of who is in power, are about the same given our state of development. To be fair to all parties, they have understood this imperative – only came up with different prescriptions depending on their ideological moorings and vote bank politics. I will not go too much into that other than to remark that the results speak for themselves. You can pore over statistics or just take a walk around wherever you are. The conclusions are inescapable.
When it comes to analysing the Budget presented by FM Smt. N. Sitharaman, the first thing one must keep in mind is that this is the last full Budget of the current government before the nation goes to polls in April 2024. The next budget is likely a smaller interim one with no big bang. The temptation to play to galleries is strongest. The disincentive to think long-term and keep national interest above party interest is huge.
Thanks to fiscal prudence especially during the COVID pandemic, her options were wider. Remember those days, when corrupt media coolies of dynasties and NRI charlatan economists were comparing with rich Germany or USA telling us we are spending too little – obviously waiting to attack yet again when bills fall due. Modi and NS held firm. So she could have really gone to town and spent hugely on stuff that shows up in results before April 2024.
And that is revenue expenditure. Because that can be doled out as freebies in myriad ways to hit our bank accounts and pocketbooks sooner.
Capital expenditure (CAPEX) on the contrary, takes far longer to take effect. Just preparing and publishing tenders, reviewing bids, issuing work orders and starting work may take anywhere from 2 years to more – even assuming land issues are not there.
But it is a no-brainer that CAPEX prepares us for the challenges ahead. Growth needs jobs, and jobs need investments. Investments need infrastructure. Our East Asian rivals like Indonesia are ahead because they built infra when we built a corrupt inefficient socialist state. We kept eating half chapathi and voted same family. Their land is cheaper and easier to get. They don’t need permission from Rihanna or NYT Editorial Board to formulate policies. You don’t see Washington Post editorials attacking Jokowi of Indonesia for banning exports of certain minerals.
And infra needs money. Money that we invest today and see results in 5 to 10 years. Not before spring 2024.
And to spend on it in 2023 just before the general elections takes courage. And faith in Indian voters and confidence that you can trust their intelligence.
IMHO the best benchmark to compare 2023 budget is with 2013 budget of P Chidambaram. Because UPA too faced the exact same problem – looming general elections. Obviously many things are different this time, COVID for one, but this comparison is as good as any other. It is also relevant because Indian voters face the exact same choice in 2024 they faced in 2014. Few things have changed.
You can see the table and do your own maths.
Let me highlight a few observations.
At the outset let me clarify a couple of things.
- I am not an economist, statistician, or policy expert. I have taken figures from government websites and regret any error in the tabulation.
- The blue highlight on the finance row is to say I am not sure of the figures – the problem is the list of ministries and the way information is presented is very different across years. I am not using those numbers.
- I will be happy to stand corrected on facts. Always. Even if a 5-year-old points it out.
Obviously to be fair to PC, NS is working with a much larger economy thanks to ten years of nominal as well as real growth. So absolute comparisons are somewhat meaningless. Her total budget is about 2.7x higher. But one thing is clear – the percentage spent on capital is much higher – 22% vs 14%.
Second, please see the percentage on defence. 13% of spending vs 7.6%. I take this metric not the share in GDP because as FM there is only so much you can spend and you basically divide it among competing interests. GDP % is for analysts.
Again, whether revenue or capital, defence is something that gets a few claps during speech and everyone forgets – it doesn’t hit the voters’ pocketbook that much. My only concern is although total spending is 4.7x higher, revenue numbers are creeping up. That needs further research.
Road and railways get 9x the amount in total – CAPEX increases are even higher – 14x for road. Rail gets 9x capital increase. Yes, that is 9 times – or 9000%. Even allowing for a larger budget by 2.7x, that is a HUGE increase.
Communication too gets a huge bump – mainly spending on BSNL’s 4G/5G rollout. This again is a big investment in the future – when the rest of the developing world relies on Chinese equipment that comes with a huge strategic cost, India under Modi is charting a different course. Although I am against PSU dominance, in this case, it is good to keep a Plan B going in the public sector – it is too important to risk facing shutdowns if West holds back spares in future.
As I pointed out, all CAPEX by its very nature is an investment in the future. That is not to say revenue expenditure is bad. But the hands of most finance ministers are tied – pay, pension, and interest costs are huge and can’t be avoided. But it appears it is in control although regressed a bit – 2.9x or 24% of the total which is pretty close to the overall budget increase 2.7x and 22% under P Chidambaram. But it could be better. And we as citizens have to speak out if anyone wastes our tax rupees on vote bank politics like Old Pension Scheme.
Once again, these figures, looked at with perspective should give us the comfort that we have a team that thinks for India. And not for one family and its commercial interests. Yes, they can make mistakes and we point that out. But the niyat is good.
