The Economic Survey released before the Budget for 2023-24 emphasised that India has staged a spectacular broad-based recovery to achieve the pre-pandemic level of income.
Budget: The government’s blueprint for expenditure, taxes to be levied, and other activities that influence the economy and citizens’ lives. Article 112 of the Indian Constitution reads as follows: The Annual Financial Statement refers to the Union Budget for the fiscal year (AFS).
The Budget Division of the Department of Economic Affairs in the Finance Ministry is the main entity in charge of budget preparation. Budget components include expenditure, revenue, and deficit indicators. There can be several classifications and indications of spending, revenues, and deficits depending on how they are defined.
The globe faced several challenges, including a pandemic and a war between Russia and Ukraine. Western sanctions on Russia, major sections of the world are experiencing a slowdown and recession. Inflationary pressures cause significant increases in interest rates. The pressure on the currency rate is caused by capital outflows.
The economy remains 7% below its pre-pandemic GDP trend; growth must be fueled by increased public investment. Inflation remains over the top tolerance level. The aggregate budget deficit (Centre and States) remains in the 9% to 10% level of GDP.
The government is caught between stimulating growth by expanding public investment and reducing the budget deficit. With interest payments accounting for 40% of the Centre’s net revenues, there is little space for complacency.
Keeping the budget deficit in the current fiscal year to 6.4 percent of GDP, despite a 2 lakh crore increase in food and fertiliser subsidies. Despite the fact that the income shortfall has increased in absolute terms, from 9.9 lakh crore in the Budget projection to 11.1 lakh crore in the revised estimate, It increased from 3.8% to 4.1% of GDP.
In the case of a budgetary deficit: The rise was 1 lakh crore — from 16.6 lakh crore to 17.6 lakh crore — but it was limited to 4% of GDP, owing to an increase in the nominal value of GDP as well as an increase in tax receipts.
It is planned to rise from 2% to 3% of GDP. According to the Reserve Bank of India, the multiplier impact of capital expenditure is 1.2. It should assist to revitalise the dwindling investment climate.
The continuance of the interest-free loan to states to supplement capital expenditures should aid in expanding capital expenditures in states. The Economic Survey’s predicted 6.5% growth rate for 2023-24: It might definitely materialise with the budgeted rise in infrastructure investment.
The fiscal adjustment is planned to be accomplished primarily through limiting revenue spending. The planned rise in revenue expenditures for 2023-24 is just 2% greater than the current year’s revised forecast.
Food subsidies are expected to be reduced from 2.87 lakh crore to 1.97 lakh crore in 2022-23 (RE) to 1.75 lakh crore in 2023-24. Fertilizer subsidies are expected to be reduced from 2.25 lakh crore in 2023-24 (RE) to 1.75 lakh crore in 2023-24 (RE).
Foodgrains distributed under the National Food Security Act have been phased off. Allocation to centrally sponsored initiatives is projected to be reduced by around 20,000 crore, while the current transfer to states is maintained at 3%-3.4% of GDP.
On the tax front, there has been some fiddling with customs duties, and the general protectionist approach has been maintained. On the personal income tax front, an attempt has been made to entice people to switch to the new tax regime, which includes no discounts and lower rates.
The Motihari-Amalekhgunj petroleum pipeline is not directly mentioned in the Indian Constitution. Article 112 requires the presentation of a ‘Annual Financial Description’ to Parliament, which includes a statement of the projected receipts and spending for the next year in connection to estimates for the current year, as well as actual expenditure for the preceding year.
This statement documents the government’s income and expenditures in three distinct segments for which accounts are kept, namely the Consolidated Fund (Article 266), Contingency Fund (Article 267), and Public Account (Article 266).
As prescribed by the Indian Constitution, AFS differentiates expenditure on revenue accounts from expenditure on other accounts. It consists of a revenue budget and a capital budget. The receipts and spending estimates provided in the Annual Financial Statement are for expenditure less refunds and recoveries.
Capital spending has a large ‘crowding in’ impact, which should aid in increasing private capital spending. This follows a 25% rise in capital spending in the previous Budget. Increased capital spending should assist to further revitalise the investment climate and halt the country’s overall investment-GDP ratio decline.
In the 2020-21 Budget, the Finance Minister said that the government’s budget deficit will be reduced to 4.5 percent by 2025-26. The deficit must be decreased by 9 percentage points during the following three years. Overall, this is a well-crafted Budget, but its success will be determined by how well it is implemented.