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New Delhi, India – On February 1, India’s Prime Minister Narendra Modi-led government released its final budget for the fiscal year ahead of elections for the first half of 2024 by Prime Minister Modi and his party, the Bharatiya Janata Party (BJP). will be announced. Rule the country for 3 consecutive years.
The Modi government must deliver economic growth and a broader social welfare package at a time when global economic headwinds and domestic economic factors make it difficult for India to improve further.
The country’s main economic statistics agency, the National Bureau of Statistics, recently estimated India’s economic growth at 7% for the year ending March, below the government’s 8.7% growth forecast at the start of the year. The World Bank forecasts India’s growth to slow to 6.6% in the next financial year. Some other economists have looked at the latest government estimates and have lowered them even further.
The ability of the federal government to increase the amount it collects in taxes in proportion to the size of the economy and its commitment to reducing the deficit rate (the amount that must be borrowed to spend as a percentage of the country’s national income). In subsequent fiscal years, it is now clearly suppressed. Finance Minister Nirmala Sitharaman plans to cut back on her work to ensure both her growth and welfare.
“Assuming the government manages the deficit at 6.4% of the budget in 2022-23, it will need to reduce by 1.9% over the next three years, a significant part of which will have to be done over the next three years. Economist M Govind Rao, who has held top decision-making and advisory positions, writes:
With an eye on that goal, New Delhi has tried to build up cash last year by selling stakes in several state-owned companies, with limited success. Combined with the inability to significantly increase tax collection, governments are discouraged from opening their purse strings.
The government is already dealing with continued high prices for food and energy, or other goods and services than the so-called core inflation, which hovered above 6% in November and also needs to be contained.
India’s central bank, Reserve Bank of India Governor Shaktikanta Das, said on January 27, “Inflation in our country continues to rise, but we have seen a welcome softening in November-December 2022. But core inflation remains solid and rising.”
Repackaging of existing schemes
New Delhi’s spending on basic needs such as health and education is already low.
As a percentage of GDP, government spending on education fell from 0.45% in 2019-2020 to 0.40% of the budget in 2022-23. According to the Center for Budget and Governance Accountability, a non-profit watchdog, the government budgeted his 0.35% of GDP as spending on health, lower than the previous year.
The government plans to significantly increase these figures in the new year, as much of the budget spending is already pegged to fixed expenditures such as salaries and pensions, and the interest repayment burden on previous years and borrowings has increased. The operating space for changing to is limited. current year.
“Substantially [after discounting for inflation], Government financial support for many projects has stagnated or decreased,” said Dipa Sinha, assistant professor of economics at Ambedkar University in Delhi. “In some cases where governments have announced expansions to social welfare schemes, expansions have not actually happened.”
In the past, the Modi government, despite enjoying political dividends by spending consistently on propaganda, has re-packaged and restructured the existing social welfare system, resulting in budget constraints and constraints. It has also focused on more efficient delivery of social welfare schemes using residents’ unique digital identities, called ‘Aadhaar’, and has varied about the exclusion of legitimate beneficiaries. There is controversy with the results.
During the pandemic, Modi added a subsidized grain program for the poor. Under his 2013 legislation by the previous parliament-led government, India provided subsidized grain to 75% of the rural poor and 0% of the urban poor, Modi said. Added additional free supplies.
However, according to various estimates, in December 2022, the government will launch subsidized and free loans to save the government Rs. We have repackaged and revised the complete set of food plans. The government has not officially announced how much subsidy the transition will save. Instead, we are celebrating the repackaged scheme as a move to further help the poor.
To further strengthen its claim, the entire food subsidy scheme was renamed and is now called ‘Pradhan Mantri Gharib Kalyan An Yojina’ (Prime Minister’s Food Scheme for the Welfare of the Poor). The Modi government has instructed states to ensure poor beneficiaries receive receipts along with free meals that show the economic benefits provided by the government.
At the same time, the government urged India’s Supreme Court not to expand the coverage of the social welfare scheme by identifying new beneficiaries given the population growth since 2011. India’s last census was taken in 2011 and quotas for some social welfare schemes are used as a basis for that census. The government has repeatedly postponed the start of the new census, citing technical and technological reasons.
record of unemployment
Since 2019, the BJP-led government of India has relied on the private sector to drive growth and provide jobs while trying to focus on investing in infrastructure. That year, the federal government lowered the tax rate it levied on corporations. This was because companies hoped to invest the money they saved from the tax office to start higher growth and provide more jobs.
The ruse has paid off and Finance Minister Sitharaman is now complaining loudly about it. “We’ve heard the industry hasn’t encouraged it since 2019. [to invest]so I brought [corporate] tax rate down. I continue to defend the private sector but even provocatively say what people want to say to the private sector…I would like to hear from India Inc. what’s stopping you? ‘ she asked rhetorically at a public event.
As a result, the employment scenario remains bleak. India’s unemployment rate hit 8.7% in December 2022, the worst he’s seen in 16 months, according to the Center for Economic Monitoring of India (CMIE).
Despite rising inequality being a real concern for India, the upcoming budget will turn the boat and encourage growth to displace a reluctant industry, while at the same time providing more to the social welfare system. It may be too late to find resources for Rashtriya Swayamsevak Sangh (RSS), the BJP’s ideological parent organization, noted at his October webinar.
“In contrast to what even the finance minister admitted months ago, the economic survey released today by the government [January 31] All is well, suggesting the private sector is stepping up investment and consumption [expenditure by citizens] rose. But it is the consumption of his richest 10% of the population that is driving consumption,” said Jayati Ghosh, an economics professor at the University of Massachusetts Amherst.
“If governments are really turning a blind eye to economic research, the budget should present a different approach to addressing economic challenges, seeking to improve the incomes, livelihoods and consumption of the bottom 70% of the population. “I doubt it,” she said.
Nitin Sethi is a member of The Reporters’ Collective.
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