Date: 03/01/2023
Relevance: GS-3: Government budgeting; Infrastructure; Issues relating to planning, mobilization of resources, growth, development and employment.
Key Phrases: Union Budget, Annual Financial Statement (AFS), Article 112, Fiscal policy, fiscal prudence, Acworth Committee, The PM Gati Shakti, The Unified Logistics Interface Platform (ULIP), The Fiscal Responsibility and Budget Management Act, 2003 (FRBM Act).
Context:
- As we move into a new budget session there is a need to look into the budgetary promises made by the government to assess success and failure of its policies and budgetary promises in the aftermath of the Pandemic.
The Union Budget and related provisions
- According to Article 112 of the Indian Constitution, the Union Budget of a year is referred to as the Annual Financial Statement (AFS).
- The budget is a consolidated financial statement prepared by the government on expected public expenditure and public revenue during a financial year.
- Besides the AFS, the Budget contains documents related to followings
- Demands for Grants.
- Receipts Budget.
- Appropriation Bill.
- Statement of the Strategy for Fiscal Policy (Under FRBM provisions).
- Statement of Fiscal Policy for the Medium Term.
- The Budget Division of the Department of Economic Affairs in the Ministry of Finance is the nodal body responsible for preparing the Budget.
- Modern India’s first ever Union budget was presented in February 1860 by Scotsman James Wilson who was the finance member of the Viceroy's Executive Council of India.
- In 1924 a separate Railway Budget was first introduced on the basis
of recommendations of the Acworth Committee.
- The practice of presenting a separate railway budget continued in India even after independence.
- In 2017 the railway budget was merged with the general budget.
How far is the progress made?
- A lot of progress has been made on each of these major announcements
reflecting two things-
- First pertains to a conscious effort at restoring the credibility of the annual Budget by announcing what can be delivered.
- Second pertains to a focused effort at effective delivery of what has already been announced.
- There has been a cleanup of the fiscal numbers during the pandemic which was long overdue as before 2014 successive ministers tried to understate the true deficit through off balance sheet borrowings.
- It is therefore evident that a lot has been done to restore the seriousness of the Budget exercise and make a departure from the past experience of unfulfilled promises.
Assessment of different sectors/ flagship programmes
- The PM Gati Shakti
- The objective was to build a platform that will help accelerate infrastructure development and alleviate delays due to different ministries responsible for managing various aspects of infrastructure development.
- The platform brings together 16 ministries and allows for integrated planning and coordinated implementation of infrastructure projects paving the way for rapid development of multi-modal connectivity across the country.
- The platform has been operational for some time and 766 out of 4,827 projects given in PM Gati Shakti National Infrastructure Pipeline have been mapped on the National Master Plan platform.
- Expansion of National Highways by 25000 km
- For the expansion purpose the government has already initiated the formulation of revised guidelines for declaring state roads as National Highways.
- This intends to notify new national highways once the policy has been finalized.
- It plans to raise ₹20,000 crore through monetisation of existing assets in the present financial year to support the augmentation of the existing national highways.
- The Unified Logistics Interface Platform (ULIP)
- The ULIP objectives were– efficient movement of goods through different modes, reducing logistics cost and time, assisting just-in-time inventory management, and in eliminating tedious documentation.
- The platform was to provide real time information to all stakeholders.
- The platform has subsequently been developed and it has integrated 29 digital systems of different ministries and agencies in an effort to give a fresh boost to India’s logistics sector.
- Kisan drones
- The Finance Ministry has been releasing the funds to State governments and concerned organizations for purchasing Kisan drones for use in the agricultural sector.
- Similarly, the Emergency Credit Line Guarantee Scheme (ECLGS) enhancement was approved by the cabinet in August 2022.
- PM Awas Yojana
- The Finance Ministry set a target of construction of 80 lakh houses under the PM Awas Yojana in the current financial year.
- Out of a total of 120.38 lakh sanctioned houses, construction has started in 104.12 lakh houses while 63.27 lakh houses were delivered or completed as on September 30.
The Fiscal Responsibility and Budget Management Act, 2003 (FRBM Act)
- The act was passed by the Parliament of India in August 2003.
- It aims to
- Institutionalize financial discipline in India
- Reduce India’s fiscal deficit
- Improve macroeconomic management and overall management of the public funds thus moving towards a balanced budget.
- Provisions of FRBM Act:
- Originally the act was mandated to
- Reduction of fiscal deficit to 3% of the GDP by 2008-09 which was to achieve a reduction of 0.3% of GDP per year.
- Revenue deficit to be reduced by 0.5% of the GDP per year with complete elimination by 2008-09.
- The revenue deficit and fiscal deficit may exceed the targets specified in the rules only on grounds of national security, calamity and other exceptional grounds.
- Originally the act was mandated to
- Amendment to the FRBM Act,2012:
- The amendment mandates the central government to put the
following documents before the Houses of Parliament along with the
Annual Financial Statement and Demands for Grants-
- Macro-Economic Framework Statement
- Medium Term Fiscal Policy Statement
- Fiscal Policy Strategy Statement
- The amendment mandates the central government to put the
following documents before the Houses of Parliament along with the
Annual Financial Statement and Demands for Grants-
- NK Singh Committee Recommendations:
- The committee which was setup in 2016 to review the FRBM Act
recommended:
- To target a fiscal deficit of 3% of the GDP in the years up to March 2020.
- Subsequently cut it to 2.8% in 2020-21 and 2.5% by 2023.
- The committee which was setup in 2016 to review the FRBM Act
recommended:
How has the government kept its promises?
- An improved efficiency and commitment
- A thorough assessment of major announcements (including aforementioned) reveals considerable progress on each one, has been made.
- It indicates an improved efficiency and commitment towards fulfilling what has been promised.
- Defining targets and tracking their progress
- The analysis indicates an approach of defining targets and tracking their progress over the course of the financial year on the lines of the private sector has been adopted by the Finance Ministry.
- This is a welcome change vis-a-vis the populist announcements such as the farm loan waivers of 2008.
- Prudent policies
- Prudent policies combined with an intent on execution have been widely adopted by the government to keep the sanctity of the treasury and the trust between the government and the citizens.
Conclusion
- The government has tried hard to execute its Budget 2022-23 announcements and has been able to achieve a fair amount of success.
- Based on the assessment of the previous budget it can be said that India’s annual budgeting exercise has moved towards the right direction and has become an instrument for delivery.
Source: The Hindu BL
Mains Question:
Q. Well framed budgetary policy with a focus on timely implementation coupled with Budgetary fiscal correction is the key to ensure a robust Indian economy in the post COVID-19 era, Discuss. (250 words).
