As expected, the Union budget 2022-23 has proposed a 35 per cent increase in capital expenditure (capex) to boost the pandemic-hit economy. The capex outlay for the next fiscal year is INR 7.5 lakh crore, up from INR 5.54 lakh crore in the 2021-22 financial year. If one adds grant-in-aid to the states, real capex will amount to INR 10.7 lakh crore, which is nearly 4.1 per cent of the GDP. The amount is substantial and it will help speed up all infrastructure projects being implemented in the country at present, which in turn will definitely attract investment. One can only hope that the proposals made in the budget will be implemented properly and on time in order to enhance the infrastructural facilities in the country, which is a prerequisite for economic growth. The thrust on infrastructure may allow the Indian economy to grow at a faster rate than other nations.
However, the increased outlay in infrastructure may push the fiscal deficit higher than expected. It is anticipated that the fiscal deficit will reach 6.9 per cent, which is not a good sign for the economy. Higher fiscal deficit is an indication of uncontrolled expenditure and may invite inflation. Some economists argue that the fiscal deficit is bound to increase with growth. Even so, it is more advisable to keep the fiscal deficit under control, so that it does not incite a higher inflation rate. Moreover, as crude oil price is on the rise in the international market, the government should keep a close watch on fiscal deficit as India’s oil import bill is expected to be $120 billion in the next fiscal, which is double the amount that the country paid in the previous fiscal. So maintaining a balance between growth and spending is the best way to reap a rich harvest from increased allocation in the infrastructure sector.
It would have been more advisable if the budget had given similar attention to agriculture and service sectors as both sectors are in dire straits. It appears that the government is yet to formulate a new agricultural policy after the reverse it suffered due to the farmers’ agitation and withdrawal of farm bills. Use of modern technology or river linking proposals are too minuscule to revitalise the country's agricultural sector. Agriculture in India is hampered not due to productivity, but because of lack of profitability. This is why the sector’s contribution to the country’s GDP is nominal though more than 50 per cent of India’s workforce is engaged in this sector. On the other hand, presently unemployment is at an all-time high. Creation of sixty lakh jobs in the next five years is not an appropriate answer to this problem. The country will have to create more jobs by supporting labour intensive industries such as the garment industry. Support to MSMEs will also create jobs. The budget is not forthcoming about solving such problems, perhaps it is in anticipation that a higher growth rate will ease things in troubled sectors. Overall, the budget is on expected lines, sans populism for short-term gains.