No elixir for rural India: Union Budget 2023-24 has very little to offer the rural population; here’s why

The last full budget before the incumbent party seeks re-election in May 2024 should have targeted India’s suffering rural folk to enable them to earn more and boost private consumption to achieve higher economic growth; it did neither

By Bhagirath, Himanshu Nitnaware, Shagun
Published: Monday 27 February 2023

Illustration: Yogendra AnandIllustration: Yogendra Anand / CSE

“I present the Budget for 2023-24. This is the first Budget in Amrit Kaal.” Going by the norms of presenting the Union Budget — a constitutional exercise — this first line of Finance Minister Nirmala Sitharaman was a departure from the tradition as it talked of transforming the country’s annual financial statement into a futuristic vision document. This practice has started only last year.

On February 1, 2022, Sitharaman introduced the Amrit Kaal (era of elixir) in her budget speech and defined it as the next 25 years of development to mark the country’s 100th independence year in 2047. She qualified the budget for 2022-23 as the one seeking “to lay the foundation and give a blueprint to steer the economy” during this era.

In the budget, she claimed to roll out the first set of development tenets for this “era”. “This vision (of Amrit Kaal) focuses on three things: first, facilitating ample opportunities for citizens, especially the youth, to fulfil their aspirations; second, providing strong impetus to growth and job creation; and third, strengthening macro-economic stability.”

The budget 2023-24’s context makes it a defining one — it is the last full budget before the ruling National Democratic Alliance seeks re-election in May 2024, and being the first budget of the post-COVID period, expectations were that it will lay out a blueprint for accelerating the Indian growth story as opposed to merely responding to the setbacks produced by the pandemic.

This also means the crisis time in economic terms is over, and the budget should now reflect the intention to build on pre-pandemic economic indicators.

But how was the economic situation before the pandemic? To put it simply, India was in a state of severe distress. Himanshu, who teaches economics at the Jawaharlal Nehru University, Delhi, terms the period from 2016-17 to 2019-20 as the “Great Indian Slowdown” phase.

The overall economy slowed down; a deep agrarian distress set in, and in general, private consumption expenditure — which accounts for nearly 60 per cent of the gross domestic product — reduced, pulling down the overall economy. The pandemic further accelerated this slide.

“Per capita incomes in real terms in 2021-2022 are still below the 2018-2019 levels, and the overall growth between 2016-2017 and 2021-2022 is at its lowest level of 3.7 per cent for any five-year period in the last four decades,” writes Himanshu in a column in the Indian Express.

So, the majority of the rural population is undergoing a severe economic downturn and the Union Budget 2023-24 should have targeted this section to not just enable them to earn more but also boost private consumption to achieve higher economic growth. It did not offer a great deal to achieve this.

The budget, instead, saw severe cuts in the allocations made to subsidy schemes, with some crucial schemes receiving only token amounts.

The food subsidy saw a 31 per cent cut in this budget. It now has an allocation of Rs 197,350 crore, from Rs 287,194 crore last year.

Fertiliser subsidy saw a 22 per cent cut from last year and now have an allocation of Rs 175,099 crore. Subsidies on liquified petroleum gas (LPG) for the poor have been reduced by 75 per cent to Rs 2,257 crore now.

In addition to the subsidies given on food, fertiliser and petroleum products, the government also provides interest subsidies through 15 other schemes. The budget of these schemes has been reduced cumulatively by almost Rs 10,000 crore.

In the revised estimate for 2022-23, an allocation of Rs 37,536 crore was made for these subsidy schemes, which has been reduced to Rs 27,564 crore in the current budget.

For example, the budget for the Credit Linked Subsidy Scheme, which provides low-interest loans to economically weaker sections for purchasing a house, has been reduced from Rs 11,222 crore (revised estimate 2022-23) to just Rs 1 lakh.

The same fate has been dealt to 14 other government subsidy schemes. Their cumulative allocation has been reduced to Rs 812 crore from Rs 2,958 crore during the revised estimate of 2022-23.

The budget for the procurement of cotton by Cotton Corporation under Price Support Scheme has been reduced to Rs 1 lakh from Rs 782 crore in 2022-23. The Market Intervention Scheme and Price Support Scheme received Rs 1 lakh, as opposed to Rs 1,500 crore in the previous budget.

At a time when unemployment is at its peak, the allocation for the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) has been reduced from Rs 89,400 in 2022-23 to Rs 60,000 crore, the lowest in the past two years.

“The low budget allocation could be the first year of killing a scheme that serves as a lifeline for millions of poor people,” says Nikhil Dey, a social activist with the NREGA Sangharsh Morcha, a group that works for rural development and economically disadvantaged sections.

Over the past five years, about 21 per cent of the annual budget of MGNREGA is spent on clearing the pending dues from previous years.

In 2022-23, the pending dues were estimated at Rs 16,070 crore until January 2023. “Considering the expenditure trend, the estimated dues would increase to Rs 25,800 crore by the end of the fiscal year,” Dey says.

Only three sectors that benefit the rural population have seen increased allocations. These are rural housing, water supply and livestock.

The allocation for the Pradhan Mantri Awas Yojana has been increased from Rs 48,000 crore in 2022-23 to Rs 79,590 crore. For the Jal Jeevan Mission, which aims to provide direct water supply to every household, the fund allocation increased from Rs 60,000 crore to Rs 70,000 crore, respectively.

The animal husbandry sector has received Rs 4,327.85 crore, which is almost 40 per cent more than the last budget. A significant part of the allocation ( Rs 2,349.71 crore) is for improving livestock health and disease control.

This makes sense, as India for the past three years has been reeling under the effects of two deadly livestock diseases — lumpy skin disease and African swine fever.

This was first published in the February 16-28, 2023 print edition of Down To Earth

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