Union Budget: 2022 reality intrudes in 2047 vision

Urgent needs of poor, middle class unaddressed

The Union Budget for 2022-23 has brought cheer to the stock markets with a host of initiatives that promise to build robust infrastructure, support the expansion of the digital economy, and pivot to a greener future in mobility. There is also the Rs 1 lakh crore loans to the states to improve their infrastructure and ease of doing business. These are critical investments required to integrate India into the global supply chains and achieve a high growth trajectory in the coming years. The stock markets have given a huge thumbs up, with the BSE Sensex rising almost 850 points. At another level, the temptation to offer political sops and freebies has been resisted, and that’s good, especially in an election year. There is also a more realistic view of disinvestment.

Finance Minister Nirmala Sitharaman spoke of laying the foundations for a 25-year roadmap -- from India at 75 to India at 100. It is good to look at the longer term and to plan and build accordingly. But equally, there is no denying that any futuristic scenario needs proper anchoring in the present to see just how much the economy is capable of handling and how the masses will hold on in the near term. In this light, there is very little for the poorer sections, burdened by the rise in fuel prices, higher trajectory of inflation, and a health crisis that has impacted the livelihoods of hundreds of millions. There is equally very little for the middle class, which, left with a bit more money in its hands, could help revive consumption. In fact, the FM “apologised” to the middle class for not changing the income tax slabs or giving some relief to the salaried class.

Consider the hope of relying on a virtuous cycle starting from private investment, with public capital investment helping to crowd-in private investment. The FM did note that “at this stage, private investments seem to require that support to rise to their potential and to the needs of the economy. Public investment must continue to take the lead and pump-prime the private investment and demand in 2022-23.” It is a plain fact that the growth recorded in the economy is driven mostly by government spending. The private sector has been almost absent. Thus, while the economy is running on only one leg -- public expenditure – the opportunity to restore a second leg – private consumption – has been missed for the third Budget in a row. It is not at all clear how this can revive private investment and therefore growth that is sustainable in the near or medium-term, let alone thinking of a 25-year horizon. Unfortunately, while the Budget addresses the long-term and the needs of the formal business sector, it fails to address the needs of the people and the informal sector in the short term. That reminds us again of John Maynard Keynes’ observation that “in the long run, we are all dead.”