(Financial Express) The first Budget of the new government may unveil an income-support scheme for the deprived families on the lines of PM-Kisan and give an additional boost to micro, small and medium enterprises (MSMEs) by streamlining schemes to support job creation, sources said.
Also on the anvil is an increase in capital expenditure to a higher level than proposed in the interim Budget, which sent a message of gradual slowing of public capex pace and of letting the private corporate sector to do the heavy lifting. On a higher base after increasing capex by over 30% in the past three years, the Centre provided an outlay of Rs 11.11 lakh crore, an increase of around 11% over the FY24 Budget Estimate and 16.9% over the FY24 revised estimate. While the outlay was then considered to be enough as private capex was expected to pick up, investments by Corporate India have not been broad-based even though capacity utilisation has reached the trigger threshold of 75%.
Recently, Sanjiv Puri, chairman of managing director of ITC Ltd and Confederation of Indian Industry president, suggested that the government raise budget capex by 25% on year in FY25, given the windfall dividend of Rs 2.1 trillion from the Reserve Bank of India, and strong tax receipts. Such a spending on asset creation, coupled with an expected pick-up in private investments, would help in accomplishing 8% real GDP for the second straight year, he said.
“The government’s capex will likely remain elevated even in the coming years to keep up the tempo in economic activity and jobs creation,” an official said, adding that the allocations for this year were likely to be enhanced further. The higher-than-expected surplus transfer by RBI could let the Centre reduce its market borrowings and fiscal deficit in FY25 or pump in more money into various schemes and for capex. It could potentially spend around Rs 65,000 crore or half of the extra receipts from RBI as additional capital expenditure over and above the allocations in the interim budget. Analysts expect the additional capex would be through interest-free capex loans to states, as projects across the states would have a better outcome than centralised projects.
Preliminary discussions suggest that the Centre may look at steps to counter the poll manifesto (Nyay Patra) of the principal opposition party Congress, which included large-scale income transfers. The Congress promised Rs 1,00,000 to to the oldest woman in each poor family annually. However, the cost of such a basic income scheme would be astoundingly high and won’t be sustainable. If 107.4 million poor and vulnerable families (identified on the deprivation and occupational criteria of the Socio-Economic Caste Census 2011 or SECC 2011) are taken into account, the scheme would cost the exchequer Rs 10.74 lakh crore or a quarter of the Union budget size in FY24.
The Modi government, however, could convert the PM-KISAN programme to a sort of Universal Basic Income (UBI) scheme that includes other weaker sections such as farm labourers, construction workers and non-farm labourer families. The amount can be paid to women heads of such families, another official said. Currently, poor families are getting free ration under the Pradhan Mantri Garib Kalyan Yojana and free health care under the PM-Jan Arogya Yojana. So, the government will take a call on such a basic income proposal after weighing in pros and cons, the sources said. Under PM-KISAN launched in February 2019, Rs 6000 is annually transferred to each farmer’s direct benefit transfer (DBT)-linked bank account in three equal instalments, irrespective of their land holdings. The annual outgo is around Rs 68,000 crore under the scheme which roughly benefits 111 million.
To boost job creation, the Centre may take new measures including certain incentives to manufacturers for their domestic procurement from MSMEs under production-linked incentive (PLI) schemes. The government will also likely streamline all MSME subsidy and credit-linked schemes to rationalise them by merging some to ensure their maximum reach and claims are hassle-free. The 64 million-strong MSMEs are the backbone of the Indian economy. MSMEs account for over 110 million jobs or 23% of the country’s labour force, making it the second-largest employer in India after agriculture. They contribute 27% of India’s GDP, account for 38.4% of the total manufacturing output and contribute 45% of the country’s total exports.