Augmenting Economic Revival

Given its prospect, India is set to touch the $5 trillion economy target by 2025 provided some major policy corrections are pushed
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Well, the Indian economy is in a rebounding state. Globally, it is adored as a Bright Star Economy, especially at a moment when some advanced economies are slipping into recession. Rightly, India is edified upon strong economic fundamentals and holds the distinction of being the world’s second-largest economy with a young workforce (68 percent ) and the largest market size.

Given its prospects, the state is set to touch the $5 trillion economy target by 2025 provided some major policy corrections are pushed. Vividly, a couple of its economic indicators are not moving in the right direction. The fiscal deficit is pegging at 6.5 percent and is expected to settle at 5.9 percent and 4.5 percent in 2023-24 and 2024-25 respectively.

While GDP has not even surpassed the infamous Hindu Growth Rate. The per capita annual consumption expenditure is sluggish and the gross domestic saving rate is at a two-decade low of 26.2 percent. The economy at home is fraught with low private investment along with FDI inflow contraction.

The exports and imports report negative growth of (-5.26 percent ) and (-1.95 percent ) respectively during 2022. The consumer demand is simmering welded not beyond basic essentials.

Moreover, shrinking industrial and agricultural growth unfolded by the Economic Survey 2022-23 is sending disturbing signals, especially at a time when labour layoff is gaining speedy ground in Europe and adverse effects of the Russia-Ukraine war are surfacing globally.

Although the euphoria of the Global recession is imminent, unemployment and underemployment are bound to surge in immediate future. Nonetheless, India appears loaded with appropriate economic capsules to ward off any recessionary tailwind.

Admittedly to nullify the internal and external extremities, the budget 2023-24 adopted a crystalized discourse to push profound changes through the creation of a strong and stable Macro-Economic Environment in some major domains of the economy including inclusive development, infrastructure, and investment, Green Growth, Youth Power, Financial Sector, and Unleashing Potential.

Rightly, the execution of inclusive development ideology is embedded to trickle down the benefits of the development process to the poorest of the poor through socio-economic transformation. The seamless policy to this effect in the proposed budget is somewhat missing.

The financial allocation for education and health has marginally increased in the current financial year compared to the last financial year, while it has contracted for rural development. Moreover, fertilizer and farm subsidies stand almost withdrawn.

The proposed expenditure on rural employment generation Programmes MGNREGA has diminished to Rs 60000 crore against Rs 84000 crore during the last financial year. These push factors of inclusive growth and development are the front-line casualty in the existing policy discourse that may hit badly to move closer to deriving long-term dividends.

Therefore, immediate policy intervention and corrections are required. However, around 5.9 percent rise in the allocation for agriculture, and introduction of the Agriculture Accelerator Fund (AAF) and extension of concessional institutional credit through the Kisan Card, emphasis on improving farming techniques, and growing of crops that have shorter growth periods which can sustain in challenging weather conditions, research financing support for millets, raising its quality and overall value chain and creating storage capacity for farm products were the budget injection and measures that surely will unfold positive effects on the rural economic outlook.

Under these circumstances, placing the economy on the trajectory to attain 7 percent growth is somewhat of an uphill task mainly due to continuing uncertainties at home and abroad. As the eminent Global Economic slowdown can dismay exports, domestic consumption, demand, private investment, industrial productivity, and growth outlook.

Accordingly, the budget embarked upon an aggressive capex growth-led strategy to create physical infrastructure to spurt employment and income.

The proposed increased capital outlay by 33 percent to Rs 10 lakh crore, one hundred transport projects, creating urban infrastructure in tier two and three cities surely would unfold manifold opportunities for progressive growth in multiple sectors and may push the economy to attain accelerated growth beyond 7 percent.

However, it is to be seen whether the capex investment model gets exactly translated on the ground or not. The past practice has seen wide gaps between proposed autonomous and actual investment.

This has remained a vital argument for low GDP growth besides the other policy flaws in the continuing financial year. The Government has spent only 65.4 percent of its capex allocation till December 2022 against 70.7 percent in 2021. This seems mainly due to net revenue lag in the current financial year.

The government has raised only 48 percent of the current year’s disinvestment target and Rs 20000 crore are yet to be raised even when more than ten months have elapsed.

Moreover, the financing capex-driven growth philosophy depends upon the rise in net revenue, pegged at 8 percent in 2022 against an expected 12 percent in 2023-24.

This, if realized in letter and spirit surely would augment growth prospects beyond doubt, provided emerging economic outlook offshoots global tailwinds. The government’s decision to step up revenue by almost 12 percent of GDP and contract expenditure by 1.2 percent offers a healthy opportunity for fiscal consolidation.

The trend continuing over the last couple of years has helped the government to push for effective allocation and utilization of revenues.

Alongside, the government announced some plausible Green Growth interventions to set its decks right for securing a Green Planet, Green Mobility, and Green Energy like setting up ten thousand bio-input resource centers to facilitate farmers to adopt natural farming, promoting battery energy storage systems, expansion of coastal shipping for energy-efficient transportation, a fund for replacing old polluting vehicles.

These policy dictums if pursued with greater consistency and follow up can yield productive environmental outcomes at home and globally in the long run.

The government’s focus on this domain is significant when the nation is leading Group 20 Presidency.

This would surely send signals of India’s commitment to the climate change transition measures adopted and help the nation to augment its economic revival and forward outlook.

Understandably, besides the other factors, inclusive development and economic transition depend upon the competence of working people in a country, especially of youth.

Since India has a significant portion (68 percent ) of the young working population in the age groups 18-60, which if empowered with the latest employable skills can push India to become domestically more productive and Globally competitive.

Accordingly, the budget proposed to launch Pradhan Mantri Kaushal Vikas Yojana (PMKVY) for the next three years to skill, re-skill, and up-skill youth through the establishment of thirty skill India international centers to make them relevant for the corporate sector and self-employment.

Moreover, the government contemplates exposing and training the youth about Artificial Intelligence, Robotics, Cloud Computing, Mechatronics, 3D Printing, Online Digital Libraries, etc.

These skills- employment-centric training Programmes can go a long way to enhance the competence of the young workforce provided they are adequately funded and executed.

Nevertheless, investment in skill development in India is far insignificant as compared to other countries like China. Therefore, there is an immediate need to speed up investment in skill orientation in India.

While financial reforms initiated in the budget addressed both fiscal and monetary aspects with the objective to bring down fiscal deficit and ensure financial discipline.

The fiscal target of 4.5 percent of GDP fixed seems more realistic in the wake of an expected rise in GST revenue collections by 12 percent and public borrowing 1.8 percent and robust growth prospects of 7.5 percent to be unfolded by a big push investment-driven approach.

Nonetheless, it all depends upon the realization of adequate funds from the disinvestment process which at present is almost 23 percent deficient to budget estimates for 2022-23 besides the other sources.

On the monetary front regulatory authorities have been directed to ease out the KYC procedure and devise a uniform KYC mechanism for different government agencies.

This will certainly help financial institutions to transact with their customers with convenience and reliability and can help them to peg down NPAs, and attain financial discipline.

For unleashing potential, the various measures proposed under the budget would un-doubly improve governance, accountability, and transparency of government through national data governance policy, know your customer initiatives, the establishment of Artificial Intelligence centres, the launch of 5G, entity digital locker, fintech Tech, the establishment of digital libraries, E courts, vivad-se Vishwas-I and II, common business identifier.

These measures if implemented ultimately would lead to a quality and productive work culture in governance. This in the long run would prove as supporting boosters for a capex investment-led strategy to augment economic revival.

Besides the above policy stipulations, there are many other measures proposed in the budget that collectively would strengthen the circle of income, demand, consumption, and production propagation process to augment economic revival under the assumption of ceteris paribus.

Dr Mehraj Ud Din Shah, Associate Professor, Department of Commerce, Central University of Kashmir, Green Campus Ganderbal

Disclaimer: The views and opinions expressed in this article are the personal opinions of the author.

The facts, analysis, assumptions and perspective appearing in the article do not reflect the views of GK.

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