It’s a ‘Feel Great Budget’ for all, especially Indian middle class


By Dr. Jaijit Bhattacharya

It is another mature budget presented, with budgetary support being extended to only the vulnerable sections of the society such as those requiring foodgrain support or for MSMEs that are the backbone of the economy.

As the size of the Indian middle class is snowballing, the music to their ears came towards the fag end of the budget speech by our finance minister Nirmala Sitharam. The announcement of significant tax reductions for the middle class definitely was the cherry on the cake for making the budget a “feel great” budget for the masses, while avoiding populist measures and avoiding unnecessary freebies. It is thus another mature budget presented, with budgetary support being extended to only the vulnerable sections of the society such as those requiring foodgrain support or for MSMEs that are the backbone of the economy and not resorting to mass populisms that lead to fiscal pressures and ultimately to inflation. Hence in this context, a budgetary support of Rs 2 trillion for foodgrains is most welcome. In the same spirit, targeting a spend of 2.5 percent of GSP on healthcare by 2024 is a very desirable step.

So what really was the theme of the budget? It appears to be a focus on enabling people and small businesses to earn their own living, that is to be economically self-sustaining. In other words, it is a budget that enables people to be atmanirbhar. How does the budget achieve such an objective? The massive capital outlay of Rs 10 lac crores or 3.3 percent of the GDP ensures that the public sector spend creates the demand for cements, steel, labour, transportation, logistics and so on that would give an opportunity for people to provide the goods and labour. This is further amplified by the proposed increase in budgetary support for PM Awas Yojna (Housing for all) to the extent of 66 percent, making it a 79,000 crores outlay. There is also Rs 2.4 trillion of additional investments for the Indian railways, which is the highest in a decade and four times last year’s budget. This outlay is double of what was generally expected. In addition, there are multiple other infrastructure outlays such as 50 new airports and heliports, coastal shipping etc. The multiplier effect of such an unprecedented capital expenditure will ensure that all sectors of the economy grow in an economically sustainable manner.

Along with economic sustainability, there is a very significant focus on environmental sustainability, both in terms of moving the economy away from polluting industries and energy sources to promoting production of green capital goods such as batteries, solar power, hydel power etc. To this goal, committing Rs 20,700 crores to generate 13 GW from Ladakh has repercussions in not only making our energy sources green, but also making Ladakh a green energy hub and increasing local job opportunities in a future industry. There is also a very significant commitment of Rs 19,700 crores to accelerate the green hydrogen industry and a humongous target of having capacity for battery storage of 4 GWH.

Another aspect of the budget is sharp focus on future industries, be it industry 4.0, with considerable focus on Artificial Intelligence to the next generation of diamond industry that is driven by lab grown diamonds (LGD) which is environmentally responsible and can feed the massive diamond cutting and polishing industry of India that sustains an army of skilled labour. The budget also proposes to leverage digital for multiple sectors, including what caught people’s attention was digitization of one lac ancient inscriptions, thus democratizing the quest for discovering more about our rich cultural and scientific heritage. There is also a push for drone adoption, thus incentivizing the creation of future industries.

As with all Indian budgets, this budget continues to provide significant support to agriculture. Agriculture has grown by a sustained average annual rate of 4.6% in the last 6 years. However, what is different in this budget is that it aims to steer the agriculture industry towards more sustainable practices such as growing of millets that are natural, indigenous crops for India that require less water, and thus making India the global hub for millets, to moving away from chemical pesticides and fertilizers through 10,000 support centres. I am assuming such a change would be affected responsibly and in a graded manner such that we do not fall into the trap that Sri Lanka fell into by adopting natural agricultural practices in a knee-jerk manner without scientifically sanctified practices for the same.

Finally, the budget continues this government’s quest for enhancing ease of doing business by creating centralized KYC infrastructure and having PAN as a single identifier. It also aims to build a Digilocker for companies so that they can have the same benefits as individuals. It also provides significant relief to MSMEs.

However, the question at the end is always on how the budget will get funded, with the lofty and desirable goals of getting back to the fiscal responsibility targets, gliding back to 5.9% fiscal deficit in the coming year and to less than 4.5% in the year after? Such a fiscal deficit target also makes the inflation target of sub 6% more believable. But where would the Government get the funds to fund this budget? The budget speech was silent on the disinvestment targets. Perhaps the actual budget documents will have the details. Going by previous track record, there is reason to believe that the budget numbers will add up, especially on the back of higher formalization of the economy which is also reflected in record GST collections. If we are able to implement this budget in the way it has been presented, it would be a great start to the Amrit Kaal, supporting sustainable agriculture, next generation industries, massive infrastructure rollout and supporting the vulnerable sections of the society, that will further accelerate the growth of per capita income from the current USD 2,500, bringing more prosperity to the common people.

This article first appeared in ET Government,