Economic Highlights

New Delhi, 11 December 2023

Glitter Is Not Gold

FM’s DATA, REALITY VARIES

By Shivaji Sarkar 

Union Finance Minister Nirmala Sitharaman has projected a promising economy that could take the country to a path of glory with huge capital expenditure and rising deficits that is showcased politically to charm the voters. She was partially correct during a short duration discussion on the state of the economy in the Rajya Sabha. But despite efforts, deficits remain high, exports drop, rupee slides and government measures such as high cess on petrol, rechristened additional excise duties, and tolls have not added to the ease of the people. 

Occasional growth, such as in the second quarter of the year at 7.6 percent being termed as India being the fastest-growing major economy may cheer up countrymen, but it is not a solution to the overall economic situation. Despite increase in estimated GDP to Rs 41.74 lakh crore in 2023-24, against Rs 38.78 lakh crore last fiscal or 6.2 percent, the Reserve Bank of India’sgrowth estimates remain unchanged at 6.5 percent in September quarter. 

India’s growth is not constant but seasonal, often to cater to the festive mood. Most world economies are taking corrective steps before that. It seems as per the RBI, an economy is on fire facing persistent threat of food inflation and severe constriction on farm level prices, both considered extremes. It calls for easing of policies and firming of the dollar that makes imports expensive. 

The minister compared achievements with developed countries and their growth. The Indian economy despite its large size has yet to match the growth parameters of France, Germany, UK, the US or China, though many of them are in slowdown. Their economies are larger. Even a small growth is substantial than what India could achieve.  

Much of the inflation is because of government policies such as maintaining high petrol prices despite a longer period of soft international prices. Despite Israel-Gaza or Russia-Ukraine wars, the crude oil prices have slumped to $70 a barrel and may fall further as western economies, particularly the US sees a glut of oil owing to the slowdown. Instead of a demand of 2 million barrels, it remains at 594,000 barrels. The slowing global economy is impacting Indian exports. 

While the benefits of low oil prices are not being passed on to the consumers in India, it has led to an inflationary economy. The Indian GST is high. Organisations such as the National Highway Authority of India (NHAI), have taken advantage to jack up road toll rates atrociously. Toll collections have increased to Rs 48028 crore in 2022-23 from Rs 33907 crore last year and Rs 17942 crore in 2017-18. This is hurting the economy, including farmers’ input and transportation costs, according to the Statista site. 

Since July 2022, the government has reduced petrol cess on exports of Reliance and Nyara but none for the poor domestic consumers. It remains at Rs 32.90 per litre of diesel and petrol. Petro road cess collection was Rs 4.55 lakh crore in 2020-21 as per a reply in the Rajya Sabha by Minister of State Rameshwar Teli. By 2023, it can be assumed to have risen further. There is now a diversion of funds from the cess for other purposes. 

Allocations for education and health have been cut and insurance premia allowed to rise by 30 percent.Farmers finding prices unremunerative have been destroying many vegetable crops, including cauliflower, onion and tomato during the season, though prices of many commodities spiralled in the retail market. 

The Opposition charged the government with being cut off from the ground realities during the discussion following a notice from TMC’s Derek O’Brien. Former Finance Minister P Chidambaram said it was “jobless growth”. Ram Gopal Yadav of Samajwadi Party alleged the ruling members were only indulging in propaganda and publicity. Of 194 nations, India is at 133 in the growth index even though it is the fifth largest economy. AITC’s Jawhar Sircar said in 2022 India’s youth unemployment rate was 23.22 per cent, which was even higher than 11.3 per cent of Pakistan, 12.9 per cent in Bangladesh and 14.4 percent of Bhutan. 

Sitharaman says that investments in infrastructure and productive capacity have a larger multiplier effect on growth and employment. The 2023-24 Union Budget steeply increased the capital expenditure outlay by 37.4 percent to Rs 10 lakh crore. It is being spent to demolish government buildings, railways stations, National Museum, National Archives and others. 

This apart, reckless constructions of roads and other supposed infrastructure have had a heavy toll in the Himalayan states facing severe devastation. Various construction lobbies are preventing the government from reviewing vast delicate areas in Uttarakhand, Himachal Pradesh and northeastern parts of the country, including the newly built railways and sinking of Halflong rail stations. Himachal has demanded over Rs 5000 crore to mitigate the damages. 

While periodic renovation of buildings is necessary, rebuilding for the sake of it without a discussion with the people or other stakeholders necessarily does not mean that it would achieve the stated objective. The supposed rail upgradation to Vande Bharat and ignoring the usual trains again made the Railways go back to basics and restore the number of general coaches and improve upkeep of ordinary sleeper bogeys. The Railways are also realising that dynamic fare disrupts the lives of average travellers and creates a myth about higher earnings. 

The Budget notes that revenue expenditure is estimated to grow by 1.2 percent at Rs. 35.02 lakh crore in 2023-24 over Rs. 34.59 lakh crore. Major components of revenue expenditure include interest payments, defence revenue expenditure, and transfers to States in the form of Finance Commission grants, centrally sponsored schemes, etc. Grants to Central autonomous bodies are a substantial part of the Central sector schemes. 

Sitharaman says India’s national debt has increased from $1595 billion in 2018 to $3288 billion in 2023 and projected to rise to $4816 billion by 2028. Outstanding government debt and other liabilities are rising to Rs 169.46 lakh crore in March 2024 from Rs 152.69 lakh crore in March 2023. Though this is considered manageable, its servicing costs are high. The government needs to review various projects for their utility. Interest payments are estimated to be Rs 10.80 lakh crore, 30.8 percent of the total revenue expenditure. The fiscal policy statement highlighted the total expenditure as Rs. 45.03 lakh crore in 2023-24; increase of 7.5 percent over 2022-23. The states are to get about Rs 10.21 lakh crore. 

Despite India growing at a better pace than Pakistan and Sri Lanka, neighbouring Bangladesh and Vietnam have overtaken it!---INFA 

(Copyright, India News & Feature Alliance)