With the next Budget announcement due in just a little over six months, the government has little room to manoeuvre on its spending at this fiscal juncture. Additionally, given its adherence to its previously stated fiscal consolidation path, we had not anticipated any significant changes from the Interim Budget announced in February (please refer to SKI’s detailed analysis here).
There were four key takeaways for us:
Allocations were broadly in line with the Interim Budget and represented a modest increase from last-year levels: For example, the government has allocated ₹90,958 crores to the agricultural sector, a 13% overall increase from the 2023-24 Budget Estimate allocation and almost the same as that in the Interim Budget. Agriculture and allied sectors witnessed a 5% increase in the Budget Estimate from last year’s Revised Estimates with a total provision of ₹1.52 lakh crores, about 2% more than in the Interim Budget. One significant change, however, has been the shift in government focus and efforts from schooling to skilling and employability.
India is wisely focused on using its Digital Public Infrastructure (DPI): Given smartphone penetration, the Aadhaar footprint, the success of UPI and the geographical and political complexity of the country, DPI can be a powerful tool to address social issues. The Digital Crop Survey for Kharif has been launched to be set up in around 400 districts and will cover over 6 crore farmers. The government intends to develop MSME credit assessment models using digital footprints, backed by about 84 crore UPI transactions in FY23. Additionally, it aims to modernise several municipal services.
There is a focus on climate-related action: The government intends to develop a taxonomy for climate finance. There have been announcements on natural farming with certification and branding to support 10,000 bio-input resource centres and the release of 109 high-yield and climate-resilient crop varieties. However, the allocation to Natural Farming is relatively small at ₹365 crores and has even been brought down from the ₹459 crores announced in the Interim Budget.
While our country’s fiscal constraints are real, expenditure on social sectors continues to be woefully short: While state Budgets incorporate such spending as well, Budgetary spending needs to be significantly higher for such sectors. Provisions for Health continue to remain unchanged between 1-2% of the overall Budget. As per the WHO Global Health Expenditure database, it forms 3% of GDP versus 10-16% in the case of developed countries. Education spending of under 3% of GDP continues to still be well below the targeted 6%. At the very least, as always, we hope that actual spending is well-directed and does not fall short of the budgeted numbers.
Our area experts summarised the budget thus:
