Union Budget 2022-23: Poll-neutral but political subtext

The absence of an overt sales pitch to the five poll-bound states in the 2022-23 Budget saw Finance Minister Nirmala Sitharaman’s speech being heard in the Lok Sabha with minimal interruptions from the Opposition. The Bharatiya Janata Party (BJP) has made the “double engine ki sarkar (the same government in the centre and the state)” a cause célèbre and potent campaign allurement. The Budget avoided the temptation of reaching out only to the poll-bound states and its outreach, on the face of it, seemed to be election-neutral. However, the opposition Congress said the government was selling a fantasy and should consider hard economic facts.

Prime Minister Narendra Modi emphasised after the Budget that the Parvat Mala programme to develop hill states hills holds great promise for Uttarakhand (where the Assembly election will be held on February 14). But while no specific state-oriented sops were rolled out, a strong thread of political wellness ran through the Budget. Announcements like ending the discrimination between state and central government employees in relation to tax breaks on employers’ contribution to their National Pension System (NPS) are aimed at state government employees across India. Earlier, state government employees could claim only 10 per cent of their basic salary and DA as a tax break compared to 14 per cent allowed to central government employees. They will now be on a par. State government employees are a powerful political grouping in all states.

Similarly, no opposition chief minister can seriously afford to criticise the step to increase long-term capex loans to states from Rs 10,000 crore in the BE to Rs 15,000 crore in the RE and further to Rs 1 trillion in 2022-23. Although these loans are to be utilised against specific schemes (those related to the PM Gati Shakti, supplemental funding for priority segments of PM Gram Sadak Yojana, including support for states’ share, digitisation of the economy, including digital payments, and reforms related to building byelaws, town planning schemes, transit-oriented development, and transferable development rights), these can be tweaked as per the requirements of state governments. Similarly, tax break to cooperatives (alternate minimum tax being paid by cooperatives has been brought down from 18.5 per cent to 15 per cent; surcharge has been cut from 12 per cent to 7 per cent for smaller cooperatives with a total income of between Rs 1 crore and Rs 10 crore) is an investment that seems election neutral but keeping the future in mind — the Assembly polls are due in Gujarat later this year where cooperatives are a powerful political force.

However, how the government deals subsidies is another matter. Currently, allocations are until March 2022 and these must be paid out before that. But there is a secular decline in subsidy allocations. Here, states are clearly in retreat. For 2022-23, the Budget said total subsidies are estimated to further decline to Rs 3,17,866 crore, from Rs 4,33,108 crore in the current fiscal year — of which, fertiliser subsidy is estimated to decline by 25 per cent to Rs 1,05,222 crore during the 2022-23 fiscal year, from Rs 1,40,122 crore this year, while food subsidy is estimated to decline by 28 per cent to Rs 2,06,831 crore from Rs 2,86,469 crore. The Revised Estimates for outlays for hugely popular employment programmes like the Mahatma Gandhi National Rural Employment Guarantees Act (MGNREGA) have also come down. This can only mean that the government expects private investment — especially in the capex area — to pick up the slack and provide the momentum for a supply-driven budget.

Congress leader P Chidambaram homed in on this and said the finance minister’s Budget speech on was the most capitalist speech to be ever read by any Finance Minister. “India’s economy has not recovered to the pre-pandemic year of 2019-20. In the last two years, million jobs were lost, some perhaps forever. Approximately 1.6 million MSMEs closed down. In the two pandemic years, 82 per cent of households suffered a loss of income. Per capita income declined from Rs 1,08,645 in 2019-20 to Rs 1,07,802 in 2021-22 or even less. Per capita expenditure has declined from Rs 62,056 in 2019-20 to Rs 59,043 in 2021-22,” Chidambaram said.

He said he was “astonished” and “shocked” that the finance minister was outlining a plan for the next 25 years. “The government seems to believe that the present does not need any attention and the public can be asked to wait patiently until Amrit Kaal dawns,” Chidambaram said adding that “this is mocking the people of India”.

Although Chidambaram said the government’s decision to tax income from virtual currency will be irrelevant to 99.9 per cent of the people of India, many believe the tax — which could force many engaged in cryptotrading to shift to the government-run digital currency as and when it is launched — could have a negative impact on millennials who consider crypto trading an important source of income.

Congress leader Rahul Gandhi commented the Union Budget does not have anything for “salaried class, middle class, the poor and deprived, youth, farmers, and MSMEs.” Sitharaman’s riposte was that he hadn’t done his homework and all the sectors mentioned by him had been addressed in the Budget. “Deaths of cotton farmers are still happening in Punjab. Let him first take care of Maharashtra, Punjab and Chhattisgarh, and then talk,” she added.