Budget

Published: Jan 24, 2023
Updated: Jan 24, 2023

Budget 2023: A Blueprint for Economic Recovery and Growth

As India looks to recover from the economic challenges of the past year, the upcoming budget event is a crucial opportunity for the government to lay out a clear plan for economic recovery and growth. With opinions and expectations running high, it's important to consider what specific steps the government can take to put the economy back on track.

Fiscal Consolidation: A Foundation for Stability

One of the most critical steps that the government can take is to focus on fiscal consolidation. The pandemic has put the fiscal consolidation roadmap on hold, but it's now time to revise targets and provide a clear roadmap for getting the government's finances back in order. This can be achieved through a combination of revenue increase and expenditure rationalization. For example, tax revenues can be boosted through nominal growth, while indirect taxes should be limited to support domestic activity. Additionally, divestment and a long-term vision for it are critical for support.

Capital Expenditure: Investing in the Future

Another key lever for economic growth is capital expenditure. A rupee of capital spending has a potential GDP multiplier of ~3.25 times, while revenue expenditure is less than 1. In the past two years, the government has increased its focus on capex, and this should continue with a focus on sectors like railways, roads, defense, and encouraging states to spend as well. The Production Linked Incentive (PLI) scheme, which has been implemented in 13 sectors with a budget of Rs 2 lakh crore, has been successful and should be expanded to include more sectors to boost revenues, jobs, exports, and reduce import dependency.

Commitment to Execution: Delivering on Promises

Finally, the government must demonstrate a strong commitment to execution in order to deliver on its stated objectives. While the government has shown intent to deliver on its promises, there have been issues with execution in the past, particularly in areas like divestment, subsidies, and capital spending. The budget statement should reaffirm the government's commitment to executing its plans and delivering results.

A Moment for India to Shine

Despite external headwinds, India's domestic growth has held up well in recent years, thanks in large part to the efforts of policy makers. The upcoming budget is an opportunity for the government to continue this momentum by focusing on fiscal consolidation, capital expenditure, and commitment to execution. By taking these steps, the government can position India