Budget aims to create jobs and growth

The thrust has been to nurture economic development with sustainable and wide-scale employment. To that extent, the budget has crafted a growth plan which is driven by investment policy levers. In an ambitious expansion plan, Rs 7.5 trillion as capital expenditure and Rs 10.7 trillion as effective capex have been earmarked to facilitate a virtuous cycle of jobs and growth.

Amid an economic environment where uncertainties still linger, the private expenditure component of GDP usually dithers. There is a need for an enabling milieu. It was therefore imperative that the government steps in and front-loads the economy through public expenditure. But an economy has a limited reservoir of policy resources hence public expenditure needs keen judgement, this budget demonstrates that.

A sizeable 35.4 per cent increase in capital expenditure compared to a mere 1 per cent increase in revenue expenditure marks a structural transformation in the expenditure approach. This increased devotion to capex is pertinent because of its multiplier effect and the facilitation of an environment that crowds in private investment. Studies analysing fiscal policy impacts conclude that Rs 100 spent on capex translate into Rs 245 of increased economic activity. Moreover, since the gains from capital expenditure are not just limited to one fiscal, over longer horizons, the cumulative incremental return is Rs 480. With this understanding, the budget strives to initiate a dynamic growth engine that shall sustain itself.

To catalyse overall investment, the budget has also incentivised state governments to spend on capex. It will extend Rs 1 lakh crore as 50-year interest-free loans to states besides their normal borrowings. States have also been granted a respite to raise their fiscal deficit to 4 per cent instead of the FRBM mandated 3 per cent.

Leveraging these investment expenditures, the budget’s outline seeks to enhance India’s infrastructural base across the economic, social and digital dimensions because jobs creation is not done in silos.

Economic infrastructure will be fostered through synergies reaped from the multi-modal approach of PM Gati Shakti pertaining to India’s seven growth engines: Roads, railways, airports, ports, mass transport, waterways and logistics infrastructure. Such an integrated approach to world-class infrastructure building shall create industry clusters and corridors thereby boosting productivity. Furthermore, works in these sectors are labour-intensive endeavours, thus budgetary allocations towards their expansion will generate mass employment.

Social infrastructure is enhanced through improved housing, drinking water and education. The budget ensures this through Rs 60,000 crore to provide 3.8 crore households with access to tap water, Rs 48,000 crore to complete 80 lakh houses and Rs 39,553 crore to improve learning outcomes. Such projects along with the Rs 19,000 crore PM Gramin Sadak will not only improve infrastructure but also boost India’s rural economy.

Stimulating the digital infrastructure was a profound milestone for this budget. It is critical to ensure that India develops its technological ability and stands at the vanguard of this rapidly digitalising post-pandemic world. Efforts towards establishing a digital ecosystem for the economy is evinced by the projects being pioneered: The rollout of 5G, a national digital health ecosystem, a flagship digital university, e-passports, kisan drones, digital banks, 200 TV channels for supplementary education and broadband coverage to villages through Bharat-Net project.

The introduction of Central Bank Digital Currency is a testament to the digital readiness and will provide a further fillip to India’s digital transaction economy. The RBI’s Digital Payments Index has demonstrated significant growth, rising three times from March 2018 to September 2021. CBDC shall reduce cash management costs and boost efficiencies in payments settlement, cross-border transactions and direct benefit transfers.

To ensure the realisation of envisaged objectives, the budget also has some essential enablers and careful reforms ingrained.

The most significant enabler for reviving investment and generating jobs in manufacturing will be the production-linked incentive schemes across 14 critical sectors. Achieving the Atmanirbhar Bharat vision, PLIs shall foster India’s manufacturing prowess and generate 6o lakh jobs and additional production worth Rs 30 lakh crore in the next five years. Supporting over 130 lakh MSMEs and by extension the numerous jobs created by them, the ECLGS lifeline has been extended alongside the facilitation of Rs 2 lakh crore additional credit through CGTMSE.

An essential enabler for investment growth is efficient capital mobilisation. In 2021, startup investments by venture capital and private equity exceeded Rs 5.5 lakh crore and India witnessed historically high IPOs. Forty-four start-ups achieved unicorn status in 2021 alone, the third-highest in the world, leading to a total tally of 83 unicorns valued at $ 277.8 billion. Encouraging this fledgling ecosystem, the budget has provided startups with tax incentives to nudge further investments.

2022-23 will herald a new era amid the rise of Web 3.0 and Metaverse. Animation, visual effects and gaming will be the new-age employment sector for youths, and the budget taps its potential by promoting this sector and related skills. Process reforms like One Nation One Registration, reduction of unnecessary compliances, e-billing for procurements, a single portal for all green clearances enhance transparency in the conduct of economic activity, shall fuel investment confidence.

Propping up the economy without an increase in taxation is an achievement and reflects fiscal fortitude and consistency despite challenges. The Union budget has demonstrated an earnest commitment towards supply-side reforms, leading demand with capex and creating jobs sustained by growth, laying the brickwork for India’s Amrit Kal.

(The writer is a Rajya Sabha MP and former Deputy Chief Minister of Bihar)