The Budget 2022-23, announced by Finance Minister Nirmala Sitharaman on 1 February, took a positive and rather liberal view on India’s fiscal deficit. In light of the pandemic, the government had loosened its purse strings and pumped money into the economy to offset stalled economic activity due to Covid-19 induced lockdowns. The three government stimuli under Atmanirbhar Bharat cost the government INR 29.87 lakh crore and were instrumental in helping millions of Indians tide over trying times, both for businesses and livelihoods. As economic activity now resumes pace in the aftermath of the Omicron wave, the positive outcomes of government spending are visible: India will record a growth of 9.2 per cent this fiscal year. GST collections in January 2022, at INR 1,40,986 crore, surpassed all historical GST collections and indicate the upward trend in India’s economic growth and recovery.
The high fiscal budget, at 6.9 per cent of the GDP, maintained by the government this fiscal year is targeted towards infrastructure development under extensive government schemes. The visionary PM Gati Shakti master plan is an INR 100-lakh crore project in holistic infrastructure development across the country. It maps the road toward Amrit Kal—the 25 years leading up to India’s century of independence. To continue support for the vision of India@100, the government will maintain a fiscal deficit of 6.4 per cent of GDP for 2022-23 at a total of INR 3.94 lakh crore.
This spending will complement the increasing inflow of private capital in crucial sectors of the Indian economy. As the FM stated, public expenditure will serve to maximise the impact and potential of private capital that is still gaining a foothold in the Indian economy. This public expenditure will lead the transition to a green economy, a growing focus for India and the world. The government aims to issue sovereign green bonds, the capital from which will be mobilised towards green infrastructure, and deployed in public sector projects that will reduce the carbon intensity of the economy. This will help India reduce the carbon intensity of its economy by 45 per cent by 2030, a goal shared by Prime Minister Modi at the COP26 in Glasgow last November.
While high fiscal deficits are generally viewed negatively in the long term, India’s high public expenditure is in fact the promise of tremendous growth over the next few decades. It has buoyed the national economy through the difficult health crisis and now will help India establish ambitious development projects designed for a country looking to the future. The interdependent model of public and private partnership is indeed the future of a New India.
This article was authored by Aarushi Aggarwal.