Underlying this re-prioritisation is a significant shift in the macro-fiscal stance of the Budget. The increase in capex is not driven by a simultaneous expansion in government spending. In FY21, pandemic pressures pushed the Union government to significantly expand spending from 13.4% GDP in FY20 to 17.73% in FY21. Since then, and well before the pandemic was firmly behind us, the effort has been to slowly contract this spending, reaching the current FY24 estimate of 14.92%.
As a result, the fiscal space for enhancing capex has been carved out through a massive cutback in revenue expenditure which accounts for the bulk of government consumption, including welfare) down from 87.5% of total expenditure in the FY20 Budget pre-pandemic) to 77.77% for FY24.
Significantly, the revenue deficit is projected to reduce from 4.1% GDP revised estimate) in FY23 to 2.9% GDP in FY24. In other words, the bulk of government borrowing, which had helped finance revenue expenditure, will now be deployed for investment.
But revenues have not risen enough to fund revenue expenditure. They have stagnated, and, therefore, the only way to increase capital expenditure has been to squeeze welfare spending. Given that the committed expenditure is almost half the total expenditure, welfare spending has faced the guillotine.
This story is from the February 02, 2023 edition of Hindustan Times.
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This story is from the February 02, 2023 edition of Hindustan Times.
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