Date: 27/01/2023

Relevance: GS-3: Indian Economy and issues relating to planning, Government Budgeting

Key Phrases: Union Budget, socio-economic empowerment, MSME, self-employment, food processing, cooperative pooling models, Pradhan Mantri Jan Arogya Yojana, Tax relaxation.

Why in News?

• Union Budget 2023 is coming soon – it is that time of the year again when businesses and commoners listen keenly to every word of the Finance Minister on how the Govt. will allocate funds and amend rules across various sectors.
• Markets usually track the Union Budget on fiscal deficit target, disinvestment target, government’s spending plans and delivery over previous commitments.
• With this being the last full Budget before the next general elections (with nine States going to polls this calendar year), the focus areas would be socio-economic empowerment, especially amongst women, rural, MSME.

What is Expected from the upcoming budget?

• W- Empowering women to lead:
  • The overall public health with particular focus on sexual and reproductive health would need higher budgetary allocation.
  • This could provide for better outcomes in women empowerment, girl child education and career progress, safer fertility programs, women health & safety.
  • The Budget could see some announcements to encourage women entrepreneurship as well as asset ownership by women for their financial security.
• A - Agriculture:
  • Focus is required to improve crop yield efficiency and supply chain both to benefit farmers thereby improving the productivity of the agriculture sector.
  • Diversification of agri-business can occur in allied areas such as food processing, floriculture, horticulture, livestock production, dairy etc. where enhancement of ease-of-doing-business will make it easier for existing players and new investors both to avail scheme benefits.
  • Budget should incentivise the creation of large storage facilities, cold storage, processing and distribution units to help add value to agriculture products.
• R - Rural:
  • Rural India needs to be trained for the MSME sector, for self-employment and as service integrators in the production process.
  • Tweaking MNREGA for enhanced asset creation with special focus on groundwater recharge by re-activating ponds will ensure local self-reliance.
  • Reforms are essential in the land holding patterns and cooperative pooling models given the diminishing land holding can be considered.
• M - MSME:
  • India has 63 million MSMEs which employ 40 per cent of India’s non-farm workforce, contributing to nearly 25 per cent of India’s services output and 33 per cent of its manufacturing output.
  • It provides employment to over 11 crore Indians and contributing over 29 per cent to the GDP.
  • MSMEs are also large consumers of goods and services, which is crucial for capacity utilisation and private sector capex.
  • MSMEs are also linked to the growth of smaller Tier towns and rural India, and hence can support the government’s initiatives for increasing farm productivity and doubling farmers income.
  • The issues of delayed payments to MSME, even by the state owned entities needs a quick fix. MSMEs need to be made more export oriented. Advisory inputs can be provided to potential promoters to tap the global market.
  • While credit access to MSMEs has improved, it needs speedy access and product differentiation.
• T - Taxation - the touchy one:
  • India has very few income tax payers, as proportion of its population.
  • With digital India framework, and linkages of various investment classes/spending avenues to PAN, there is now more data points available with the government to look at various analytics-based outcomes which can help it design newer tax slabs (and rates), and to bring in newer taxpayers into the fold.
• H - Healthcare:
  • Covid taught us the importance of preventive healthcare.
  • This learning would stand us in good stead if only we can invest more into our primary and preventive healthcare facilities.
  • Subsequently linking each of those to the Ayushmann Bharat Digital Mission, and Pradhan Mantri Jan Arogya Yojana would help in reaching healthcare access to unserved.

Conclusion:

• Budget 2023 is likely to focus on capital expenditure as a growth driver and give an impetus to manufacturing.
• The finance minister will try to boost capital expenditure from the current 2.9% GDP to nearly 3.5%. Startups, small businesses, and MSMEs can expect better credit access. Promoting growth and generating more employment may remain the key focus.
• Tax relaxation and regulations that improve the ease of doing business will likely hold priority.

Source: The Hindu BL

Mains Question:

Q. Discuss the potential of budget 2023-24 to give focus on capital expenditure as a growth driver and give an impetus to manufacturing.(250 Words).