The rich class flourished; The poor got poorer: Budget 2022-23

- Dr. Jayanarayana Vyas

- Budget on Tuesday: MSME sector seeks relief in budget: Small businesses contribute heavily to country's economy

- 5% reduction in income of poor family: while income of rich family increased by 3%

It is said that the government's budget is not Mehtaji's balance sheet. The budget presents the details of what the government wants to spend for development in the future and where and how it wants to raise the money needed to spend it. For this reason, the budget of the state or central government is a policy document which indicates the work to be done in the future. There was a time when people used budgets to calculate income tax, sales tax, central excise, customs duty as well as income tax and decide what would be more expensive and what would be cheaper. Today, the central government makes announcements that affect the expenditure and revenue of the central government in one way or another, almost throughout the year. So the importance of the budget at that time has changed a lot. Apart from this, the central government is putting before the country the fiscal deficit, the current account deficit, the gross domestic product, etc.

Last time, Time Magazine put the title page of the year 2020 as a crossroads and showed the whole year as a year that has been ruined in terms of economy. The big culprits are Corona, Trump's outspoken foreign policy rhetoric, the escalating trade war between the US and China, and the quad, as well as the explosive situation in Afghanistan. In view of the fact that India's plans in Pakistan, China, Nepal and Arunachal Pradesh go awry, in view of all this and the second wave of corona, lack of medicines like Ramdisivir for treatment of covid, shortage of oxygen and hospital beds with ventilators, all these And Ajanpo was rocking 2021-2.

The country's GDP growth rate has been declining since the financial year 2016-17. In 2016-17, it fell to 7%, in 2016-17, it fell to 7.5%, in 2016-17, it fell to 9%, in 2016-17, it fell to 8.1% and in 2015-16, it fell to 6.5%. In the year 2020-21, when the Corona epidemic took place, the GDP growth rate fell to a negative, minus 7.5. In the first quarter of this year, it was minus 2.2 percent. In the first quarter of FY 2021-21, the GDP growth rate picked up and achieved a growth rate of 7.5 per cent. In the second quarter of July-September of the same year, the GDP growth rate was recorded at 7.5 per cent.

The Indian economy, which had been in the doldrums since the first quarter of FY17, had a declining GDP growth rate and was still recovering from industrial production to trade and restaurants as well as services such as transport and cinema. Focusing on the efforts to keep the economy afloat, the government as well as those sectors were waiting for the 2021-28 central budget to come out in a worrying situation. Nirmala Sitharaman presented the budget for the financial year 2021-2 in the midst of these hurricanes, some aspects of which were as follows.

Fiscal Deficit - Nominal GDP of 7.5%

Estimated GDP Growth Rate: Minus 10% for 2020-21 (Estimated 12.5% ​​for 2021-2)

Current account deficit: 1.5% of GDP in the second quarter of 2021

Revenue deficit: Target 7.1% of GDP

When the Union Budget 2031-6 was to be presented, the Finance Minister expected that -

Fiscal Deficit - Nominal GDP GDP Growth Rate: 2.7% (6.8% in 2020-21): Minus 10% for 2020-21 (Estimated 12.5% ​​for 2021-2) Current Account Deficit: Second of 2021-2 1.4 per cent GDP revenue deficit in the quarter: Target 5.1 per cent of GDP When the Union Budget 2031-6 was due to be presented, the Finance Minister expected that the next budget would lift the ailing economy. There will be a budget to increase employment. There will be a budget that will revive the demand that has reached the bottom in the home market. There will be a budget that will boost the Indian economy and then drive the economy on the path of growth. An additional ten to twelve crore people who have reached below the poverty line due to the epidemic of covid will have a budget to bring them above the poverty line.

These expectations have met with partial success and have led to optimism. At the same time, we are still trembling with fear of the third wave of corona and omikron. If we look at the year 206-2 in this context, in the budget of the year leaving the finance minister, especially the middle class of the country had big expectations. This class is the most injured and affected. And so the outgoing fiscal year's budget has to work to keep the economy afloat and restore employment for the middle and working class. When last year's Union Budget was presented, the inflation rate was 3%. In December 2021, it has been found to be 7.5 percent. However, people expected that the standard of living would improve this year as compared to last year. A large section of the society has not yet been able to meet the standard of living that combines income and outflow. In the markets, the household has not come out as it should and prices have gone up. According to a conservative figure, this has affected the living standards of about half of the population. While these people are trying to combine the two, Dhanwan has become richer and Gautam Adani has become the top Dhanpati of this country by overtaking Mukesh Ambani. If a middle class job has a full month's salary, then these rich people earn money in a matter of moments. Thus, the country's economy is making the rich richer and the poor are getting poorer and poorer. In this context, the expectation of the common man in the outgoing financial year has in many cases remained a mere wish. For the financial year ending March 31, 203, the GDP growth rate is estimated to be around 8 to 10 percent. The growth rate of small and medium enterprises has not grown as fast as it should. The contribution of industrial sector to GDP is about 4%. About 7% of this production comes from the medium, small and micro sector whose vehicles are not yet running at flood speeds. At the end of the financial year, it would not be a surprise if the economy still has to bear 40 per cent depreciation in the SGC sector.

The effect of government spending?

If the government spends more, it will help development. But in monetary policy, money supply / liquidity has to be cut through monetary policy. But doing so affects demand. Considering how much the output gap exceeds the output of the economy at the time of crisis, integrated policy action to maximize the potential of the economy must be used to determine growth.

Ever since the Fiscal Responsibility and Budget Management (FRBM) Act of 2003 came into force, India has been trying to limit the fiscal deficit to 5%. The fiscal deficit was reduced from 7.5 per cent in FY16 to 7.5 per cent in FY16. But then financial support was needed to get out of the crisis caused by the Kovid epidemic. For this reason, the FRBM provisions have been set aside and the fiscal deficit has been kept at 7.5 per cent in 2021 and 5.5 per cent for the fiscal year 205, which has led to a gradual curb on the money deficit due to the epidemic that required financial resources to boost the economy.

In addition to financial support, India has adopted a friendly policy. Today, interest rates in the Indian economy have been at an all-time low of 8% and the longest, at seven straight quarters. The pre-pandemic interest rate was 7.5 per cent. Despite the current high money deficit, monetary policy has not only been growth-oriented, but also assumes that inflation will soon reach maximum levels. In order to keep the country's financial system running smoothly, the government had to double the pre-epidemic market borrowing rate. High deficits make imports more expensive and make the current account more expensive.

The effect of fiscal deficit is created by inflation, interest rates, shortage of currency, etc. Monetary deficits affect equities, public debt and currency. However, if the money deficit is due to high and non-productive expenditure such as subsidy type, it does not lead to corporate growth. Overall a high fiscal deficit is positive in the short run but interest rates / taxes go up after a while which consumes these benefits.

It is more likely that the government will focus on non-budgetary measures to control the money deficit. When the government raises money through loans, guarantees or other means to show less borrowing by issuing bonds from the market, the money deficit remains low and the impression is created that the government is running in financial discipline. At a time when the final touch is being given to the central budget, it is said that if the central government opens the government coffers to provide relief for budget 203-2, government expenditure will increase or revenue will have to be lost. It remains to be seen which path the government will take in this situation. As far as the last budget is concerned, 90 per cent of this, or Rs 12.51 lakh crore, was raised through measures taken by the Reserve Bank.

The biggest challenge facing Budget 203-2 is to meet many expectations from the root of the expectation of relief, incentives and funding in the budget. The MSME sector, which accounts for one-third of GDP, expects budget relief, stimulus and funding. There are about 25 million micro, small and medium (SME) units in India. The sector contributes a lot to employment through these units and to the economy of the country. The problem is that 80 per cent of the total MSME manufacturing in the country, 5 per cent is involved in trading. But the biggest problem is that out of a total of 2.5 crore units, 2.50 crore units are micro, 2.61 lakh are short and only five lakh are medium. The smaller the unit, the greater the problem. With less capital, fewer workers and larger buyers, the sector has a very limited ability to withstand any unforeseen setbacks. For this reason, increasing the limit of NPAs, getting timely payment against the supply of goods made to them, sudden increase or decrease in demand, all of these can be very difficult to deal with. Thus, in addition to the above limitations of the MSME sector, it is not easy to satisfy the expectation of changing the definition of their NPAs and increasing the limit of collateral free loans, as well as relief in the previously discussed sector.