Day 16 – Q. 3 The government is going to present the annual budget in a couple of months. What according to should be the top three areas of focus in next year’s budget. Why do you think so? Substantiate your views.

The government is going to present the annual budget in a couple of months. What according to should be the top three areas of focus in next year’s budget. Why do you think so? Substantiate your views.

सरकार एक दो महीने में वार्षिक बजट पेश करने जा रही है। आपके अनुसार अगले साल के बजट में फोकस के शीर्ष तीन क्षेत्र क्या होने चाहिए? आप ऐसा क्यों सोचते हैं? अपने विचारों की पुष्टि कीजिए।

Approach –

In this question candidates need to write about which areas should be remain in focus in upcoming budget and why should these sectors remain in focus, substantiate their views.

Introduction –

The Union Budget 2023-24 is being presented at a crucial juncture of geo-political uncertainties, high inflation and slowing world economic growth. At this juncture, calibrated steps to enhance domestic sources of growth would be crucial to maintain the steady economic growth trajectory,

Body –

The external scenario is likely to continue to be unfavourable for some time. Hence, we must broad-base our domestic economy by creating new sectors of growth and driving employment generation to boost domestic demand, inclusion, and growth.

• With the Indian economy doing well in first three quarters of FY22, when compared to FY21, and the government’s determination to carry this momentum to the next financial year, the expectations from the Union Budget FY23 remains reasonably high.
• Three broad areas which could cement this growth would be in terms of domestic growth, facilitating export infrastructure, access to healthcare,while also supporting geo-economic preparedness.

Widening PLI-

• Trade has been the driving force for the prosperity of most economies across the globe A lot of hope is on the PLI scheme, which advocates incremental production-based incentive, and has the potential to take India’s exports to a new high, while also diversifying the export basket.
• In this context the government can consider enhancing the exposure under PLI and have more upcoming industries identified. For example, industries like aerospace, warehouse robotics, waste management, including maintenance, repair, and overhaul (MRO), amongst others, could be bought under the ambit of PLI.
• Hopefully the Budget FY23 will widen the PLI scheme while considering upcoming potential industries, especially while targeting India’s exports to reach $1 trillion by 2025.

Healthcare infrastructure –

• While hopefully the upcoming Union Budget will provide rebates on medical insurance premiums, and further inducements for R&D spend to boost pharma companies, it is important to strengthen the healthcare infrastructure in tier 2 and tier 3 cities. This lack of infrastructure was tragically exposed during the Covid-19 second wave.
• According to the National Health Profile 2018 in the country, the number of district hospital stands at 1,003, government hospitals in rural areas at 19,810, railways 136, and employee state insurance company 151.
• If these hospitals are strengthened on a public-private mode by extending attractive incentives, including exploring a tax holiday, the population of the country will be healthier. In fact, even if 5 per cent of these 21,000 odd hospitals get the attention for time-bound upgradation, the pressure on tier-1 cities will be much reduced.

Strategic institutions-

• While supporting exports have a multiplier effect like creating jobs, boosting manufacturing, earning foreign exchange, in today’s emerging scenario exports also play a critical role amidst the changing geo-economics.
• As India aspires to move into producing EVs, mobile phone, solar panels, aerospace, etc. it is also important to acknowledge that there are many inputs like lithium which go into these but are not available in abundance in the country. So India would be glaring at a new form of dependency on imports. This revives the need to secure certain assets overseas.
• In this context Budget FY23 could explore having a dedicated financial institution like Exim Bank which can cater to such overseas strategic needs with government backing, something akin to Chinese government banks and institutions. Beneficiaries of such a support could be Indian PSUs and quasi-sovereign institutions.
• It may be mentioned that US, at the onset of the pandemic in December 2019, operationalised a new, ‘Development Finance Corporation (DFC)’ to pursue its strategic interests.
• This initiative is considered as an effort towards its needs, specifically countering China’s influence on global trade and business, and furthering the US foreign policy goals whilst supporting US direct investments abroad.

Way forward-

Gross tax collections in this fiscal have been robust so far at ₹16.1 lakh crore (+18% YoY & 58.4% of FY23 budget estimates till October 2022,The key expectation from the finance minister is to maintain the growth path while keeping fiscal deficit and inflation in check.

Conclusion-

In this year  government will reflect fiscal prudence and not resort to any big ticket radical announcements or reforms. It would continue the existing strategy of Infrastructure development, broad-based Capex and manufacturing-led growth as a sustainable way ahead for India.