Top priorities for the upcoming budget: What the experts are expecting!
The Union Budget 2023-24 should aim to support economic growth that is inclusive and benefits all segments of society, including disadvantaged and marginalised groups. This could involve investing in infrastructure and social programs that benefit these groups, as well as implementing policies that promote equal access to economic opportunities. The budget should consider the environmental impacts of economic policy and include measures to address environmental challenges, such as climate change, resource depletion, and pollution. This could involve investing in clean energy, promoting sustainable development and implementing environmental regulations.
There are a number of strategies that the government of India could consider in order to promote economic growth in the short term. Some potential options include:
Investing in infrastructure: Building and improving transportation networks, communication systems and other infrastructure can help to stimulate economic activity and increase productivity. Investing in infrastructure is an important aspect of economic development, as it can help to improve transportation, communication, and other systems that are necessary for businesses to operate efficiently and for people to live and work. Infrastructure projects can also create jobs and stimulate economic activity, particularly in the construction and manufacturing sectors. However, it is true that investing in infrastructure is a continuous process, as infrastructure systems need to be maintained and upgraded over time in order to remain effective and meet the needs of a growing and changing population. In order to ensure that infrastructure investments are sustainable and provide long-term benefits, it is important for governments to carefully plan and manage these projects, and to prioritise investments that will have the greatest impact on economic growth and development. The Gati Shakti initiative is expected to have a significant impact on the logistics sector in India and to contribute to the country’s economic development and growth.
Promoting exports: Encouraging businesses to export goods and services can help to increase demand for Indian products and create new opportunities for economic growth. Promoting exports is not something that can happen overnight. Increasing exports requires a concerted effort by the government, businesses, and other stakeholders to identify and target new markets, build relationships with potential customers, and create an enabling environment for exporting. This can involve a range of activities, such as developing marketing and promotion strategies, participating in trade fairs and exhibitions, negotiating trade agreements, and providing support to businesses to help them overcome any barriers they may face in exporting. Additionally, it is important to consider the competitiveness of the products or services being exported, and to invest in research and development, technology, and other areas that can help to improve their quality and attractiveness to international buyers. Promoting exports can take time and effort, but it can also bring significant benefits in terms of increased demand for domestic products and expanded economic opportunities for businesses and workers.
The Market Access Initiatives (MAI), Trade Information Network (TIN), Trade Promotion Councils (TPCs) along with ECGC and EXIM Bank, the Government of India is expected to give big thrust in this sector with the Make in India getting huge traction in the recent years.
Fostering innovation: Supporting research and development, and encouraging entrepreneurship, can help to generate new ideas and technologies that can drive economic growth. There are a number of ways that a country can support innovation and entrepreneurship in order to foster a culture of quality:
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Invest in research and development: Providing funding and other support for research and development can help to stimulate innovation and the creation of new ideas and technologies. Encourage a culture of innovation: Creating an environment that values and rewards innovation can help to foster a culture of quality and encourage people to pursue new ideas and approaches. Promote education and training: Providing education and training opportunities, particularly in science, technology, engineering, and math, can help to build the skills and knowledge needed to support innovation and entrepreneurship.
such as academia, industry, government, and civil society, can help to create a more dynamic and
Foster collaboration: Encouraging collaboration between different sectors and stakeholders,
Create an enabling business environment: Simplifying regulations, reducing bureaucracy, and providing support to businesses can help to create a more supportive and enabling environment for innovation and entrepreneurship.
Protect intellectual property: Ensuring that intellectual property rights are respected and protected can help to encourage innovation and create an environment of trust and confidence.
India already has a vibrant and dynamic innovation and start-up ecosystem, and it has become an important hub for entrepreneurship and innovation in the Asia-Pacific region. The country has a large and growing pool of talented entrepreneurs and a supportive ecosystem that includes incubators, accelerators, and venture capital firms.
According to the World Intellectual Property Organization (WIPO), India ranked first in the world in terms of the number of start-ups registered in 2020, with over 250,000 start-ups registered in the country. Additionally, India has a strong technology sector and is home to a number of innovative companies, including several that have achieved global success.
However, there are also challenges facing the innovation and start-up ecosystem in India, such as a shortage of skilled labor, inadequate infrastructure, and a complex regulatory environment. The government of India has taken a number of steps to support the development of the innovation and start-up ecosystem, including through initiatives such as the Startup India program and the Atal Innovation Mission.
Overall, India has made significant progress in building a strong innovation and start-up ecosystem, and it is well-positioned to continue to be a leader in this area in the coming years. The budget could include measures to support these activities, such as through funding and tax incentives.
4. Implementing fiscal policies: The government can use fiscal policies, such as adjusting tax rates and government spending, to influence economic activity and stimulate growth. It is important for the government to balance the need for fiscal stimulus and support to the economy with the need to maintain long-term fiscal sustainability. This may involve finding creative ways to fund expenditure, such as through debt or alternative financing mechanisms. The Government of India, under the leadership of Finance Minister Smt. Nirmala Sitaraman, has a number of fiscal policy options available to it in order to influence economic activity and stimulate growth. Some potential options include:
Adjusting tax rates: The government can adjust tax rates, such as income tax, corporate tax, and value-added tax, to influence economic activity. For example, reducing tax rates can encourage people to spend more and businesses to invest, while increasing tax rates can help to generate additional revenue for the government.
Changing government spending: The government can increase or decrease spending on various programs and projects in order to influence economic activity. For example, increasing spending on infrastructure projects can create jobs and stimulate economic growth, while decreasing spending on certain programs may help to reduce the budget deficit.
Using transfer payments: Transfer payments, such as welfare payments and social security, can be used to provide support to individuals and families and help to stimulate demand for goods and services. DBTs are implemented through various programs and schemes in India, such as
the Public Distribution System (PDS), which provides subsidized food grains to low-income households, and the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), which provides a guaranteed minimum wage for rural workers. DBTs are also used to deliver social security benefits, such as pensions and scholarships, and to provide financial assistance to farmers and other vulnerable groups.
d. Implementing monetary policies: The government can also work with the central bank, the Reserve Bank of India, to implement monetary policies, such as adjusting interest rates, in order to influence economic activity.
It is important to note that these are just a few examples of the fiscal policy options available to the government, and the appropriate course of action will depend on the specific economic circumstances and goals of the government.
This being the last full budget before general elections, how can it not incorporate populist measures. It is common for governments to include populist measures in their budgets, particularly in the lead-up to elections, in order to appeal to voters and demonstrate their commitment to addressing key issues and concerns. Some examples of populist measures that a government might consider incorporating into the budget include:
Increasing social welfare spending: Providing additional funding for programs such as healthcare, education and social security can help to improve the standard of living for disadvantaged groups and be popular with voters.
Reducing taxes: Lowering taxes, particularly for lower and middle-income earners, can be a popular measure as it can increase disposable income and stimulate consumer spending.
Increasing infrastructure spending: Funding infrastructure projects, such as building roads, schools and hospitals, can create jobs and stimulate economic activity, and can be popular with voters.
Implementing job creation programs: Providing funding for programs that create jobs or provide training and education can be popular with voters and help to address unemployment and underemployment.
It is important to note that while populist measures can be politically popular, they also have the potential to impact the fiscal sustainability of the government and may need to be balanced with other policy considerations.
5. Improving the business environment: Making it easier for businesses to operate, by reducing bureaucracy and simplifying regulations, can help to encourage investment and economic growth. There are a number of policies that a government can implement in order to improve the business environment and make it easier for businesses to operate:
Simplifying regulations: Reducing bureaucracy and simplifying regulations can help to reduce the compliance burden on businesses and make it easier for them to operate.
Providing support to businesses: Governments can provide support to businesses in a variety of ways, such as through grants, loans, tax breaks, and technical assistance.
Improving the legal system: A fair and efficient legal system is important for businesses, as it can provide a mechanism for resolving disputes and protecting property rights.
Encouraging investment: Governments can create a more attractive environment for investment by providing incentives for businesses to invest, such as tax breaks or other financial incentives.
Making it easier for businesses to operate, by reducing bureaucracy and simplifying regulations, can help to encourage investment and economic growth. The budget could include measures to improve the business environment, such as through regulatory reform or tax incentives.
6. Encouraging domestic consumption: Promoting domestic consumption of goods and services, through measures such as increased government spending or tax cuts, can help to stimulate economic growth. There is a trade-off between consumption and savings, as individuals and households must decide how to allocate their income between these two options. In general, consumption refers to the spending of income on goods and services, while savings refers to the portion of income that is not spent and is instead set aside for future use. Historically, the balance between consumption and savings has varied across countries and over time, depending on a range of factors such as economic conditions, cultural values, and government policies. In some countries and periods, consumption has tended to be relatively high, while in other countries and periods, savings has been relatively more important.
There is no one-size-fits-all answer to which of these factors weighs more, as it will depend on the specific context and priorities of each individual or household. However, it is generally considered important for individuals and households to maintain some level of savings in order to have a financial cushion for emergencies and to plan for the future, such as for retirement or for education expenses. At the same time, consumption is also an important driver of economic activity and can contribute to overall economic growth. Therefore, finding a balance between consumption and savings is generally considered to be important for both individual and societal well-being.
Thrust Area: In India, the unemployment rate has been relatively high in recent years, although it has improved somewhat since the early 2010s. According to data from the International Labour Organization (ILO), the unemployment rate in India was 6.7% in 2021, down from 7.9% in 2019. However, the COVID-19 pandemic has had a significant impact on the labor market in India and globally, and unemployment rates have increased in many countries as a result. It is important to note that the measurement of unemployment can vary across countries and may not capture all forms of employment, such as informal work or part-time work. Unemployment is a key economic indicator and is typically measured as the percentage of the labor force that is actively seeking work but is unable to find it. Unemployment rates can vary over time and across countries depending on a range of factors, including economic conditions, technological change, and government policies.
The Government of India should take steps to address unemployment and stimulate job creation, such as through fiscal and monetary policy measures by increasing government spending or lowering interest rates. Governments can also implement structural reforms, such as improving the business environment and investing in education, training and skill development in order to create a more favourable environment for job creation. Creating employment opportunities can help to drive economic growth and reduce poverty, and can also help to improve social and health outcomes for rural communities.
In conclusion, there are many factors that can influence the economic development and growth of a country, including policies related to infrastructure, exports, innovation, entrepreneurship, fiscal policy, and the business environment. It is important for governments to carefully consider these factors and to implement policies that are appropriate for their specific economic circumstances and goals. Finding a balance between consumption and savings is also important for both individual and societal well-being. Finally, it is important to recognise that economic development and growth are complex and multifaceted issues, and that addressing them requires the consideration of a wide range of factors and the input and collaboration of many different stakeholders.
While we invoke John Maynard Keynes to bring out the “animal spirits”, many of the concepts and ideas contained in the Arthashastra, such as the importance of a strong and efficient State, the role of Agriculture in economic development and the importance of trade and commerce, are still very much in relevance today. Let the rating agencies and world bodies in the economic and finance domain forecast the growth of the Indian Economy based on GDP or whatever! It is important to note that economic growth is just one aspect of a country’s economic performance, and it is not the only indicator of a country’s well-being or success. A country’s economic growth rate should be considered in conjunction with other economic and social indicators, such as employment, poverty, inequality, and environmental sustainability.