An explanation is that the government has been forced to be prudent because of inflation considerations. This is totally misplaced reasoning as the simple fact is that the present inflation is not because of high demand but on account of cost-push factors. The biggest culprit in pushing up the cost and prices is the increase in prices of petroleum products. A key premise of the budget calculations is that the international price of crude oil would remain at $70-75 per barrel. But it has already breached $93 per barrel. The increase in retail prices in India is held in check because of the ongoing State elections. The budget should have rolled back in entirety the additional taxes and cess imposed on petrol and diesel since 2014, when international crude oil prices saw a sharp fall and the argument was that the new taxes would therefore not get reflected in domestic retail prices. The union finance minister does not want to adhere to the same logic when the crude oil price trend has reversed and has now moved up sharply. Therefore, the budget is a recipe for stagflation.The great expectations of the budget are on capital expenditure and the focus on digital technology. The ‘Effective Capital Expenditure’ is ₹10.68 lakh crore in 2022-23 or about 4.1% of GDP and 27% more than the revised estimate of ₹8.4 lakh crore for the current year, which in turn is nearly 28% higher than 2020-21 allocations. But these are long gestation projects and would take time before their beneficial impact is felt. Nevertheless, the effort to increase capital expenditure is a welcome turn. China has been a forerunner in infrastructure creation, sustaining higher than 5% investment to GDP ratio for nearly three decades. This has been the main contributor to its international competitive strength.But the key question is how this capital investment is being financed? In the 2022-23 budget, it has been achieved by squeezing social expenditure. With the overall expenditure remaining virtually the same and escalation in non-developmental revenue expenditure, the development revenue expenditure had to be cut. This total neglect of the poor and ordinary people is best exemplified by the reduction in the outlay of MGNREGS from the actual expenditure exceeding ₹1 lakh crores in the past two years to ₹73,000 crores. For core schemes for the poor, allocation has been reduced to ₹99,000 crores from the previous year’s revised estimate of ₹1.21 lakh crores. This includes the allocations for SC/ST. The finance minister talked about Narishakti upgrading 2 lakh anganwadies but the allocation is frozen at the revised estimates at ₹20,000 crores.
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