Introduction
A Noteworthy Interim Budget Presentation
On February 1, the Union Finance Minister unveiled the fifth budget of Modi Government 2.0. Despite being an interim budget, the enthusiasm displayed by the ruling party MPs indicated its significance. Over the years, the gap between interim and full budgets has progressively narrowed, suggesting that economic allocations in the interim budget might hold true in the forthcoming full budget presentation.
Political and Economic Factors Influencing Budget Allocations Two factors contribute to the hypothesis mentioned above – political and economic. The Bharatiya Janata Party’s confidence, bolstered by recent assembly election victories, hints at a similar approach in the upcoming union elections. Additionally, international pressure, particularly from the International Monetary Fund, urging India to curb escalating debts, may influence the government to adhere to the interim budget allocations during the full budget presentation.
Comparative Analysis of Financial Performance: A Closer Look
Examining Table 1 reveals a significant increase in the contribution of direct taxes to the Central Government’s revenue receipts over the past five years. However, concerns arise regarding the economic divide, as studies indicate a decline in corporate tax share and a rise in personal income tax. The persistently regressive nature of indirect taxes, despite an increase in direct taxes, raises questions about the government’s approach to economic equity. Despite a substantial rise in revenue receipts to over Rs. 30 lakh crore in 2024-25, no relief has been extended to taxpayers in the interim budget.
Given the government’s mounting debt burden, pressure exists to reduce borrowings. However, the data contradicts this expectation, showing continuous borrowing even during high-revenue years. The government’s borrowing, expected to reach ` 190 lakh crore by March 2025, necessitates a closer examination of its fiscal policies.
Interest payments, amounting to Rs. 11.90 lakh crore in 2024-25, constitute nearly 25% of the total budget. This sizable allocation raises concerns about the impact on public welfare, as it leaves less room for essential expenditures. The government’s consideration of disinvestment or privatization, as hinted in the interim budget, raises questions about societal inequality.
Conclusion: Excessive Borrowing as a Root Cause
This analysis points to excessive government borrowing as a primary cause of public woes. The ongoing accumulation of debts, coupled with a reluctance to invest in capital expenditures, may perpetuate the challenges faced by the common man. The intersection of economic policies and fiscal decisions requires careful consideration to ensure sustainable and equitable development.
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