The run-up to this year’s Budget was marked by a curious lack of media hype. The Finance Minister Nirmala Sitharaman’s Budget speech itself barely lasted for 100 minutes. There were no rhetorical flourishes, no customary quotes from Thiruvalluvar or Subramania Bharati. The atmosphere in the Parliament also was rather sombre, with both the Treasury Benches and the Opposition hardly making any noise.

After the Budget speech was over, for a few minutes the TV anchors were left scratching their heads as they didn’t quite know what to make of it. The stock markets too reflected this confusion as stock indices first rose, then dropped and then rose again to end slightly on the positive territory.

Perhaps the expectations from this year’s Budget too were not high. There was some pre-Budget noise over election-related sops, given the upcoming Assembly election including the all-important Uttar Pradesh.

But there were no election-related announcements or freebies, which was much appreciated by sections of the media and the analyst community. This was a work(wo)man-like Budget where it seemed the government was trying hard to keep the hype on it down.

The capex push

So what was the one big takeaway from this year’s Budget? It was obviously the thrust given to capital expenditure. The government has decided to spend big on infrastructure projects and hopes to “crowd-in” private investments through a “multiplier” effect.

There has been an increase in capex spend to ₹7.5 lakh crore next fiscal year (2022-23) from ₹6.03 lakh crore in the revised estimates of this fiscal year. Though there is some quibble over the numbers, the jump is still a big one.

The government’s thinking seems to be that since private investments are still anaemic, the government needs to the heavy-lifting in investments, with the fond hope that the private investments will follow.

The country’s private investments have been in a slump over the last few years. During the boom years between 2004 and 2011, when the country was consistently clocking 8+ per cent growth, private investments were at an all-time high – it was 35 per cent of GDP in 2007. This figure is now down to around 31 per cent.

The Modi government, to its credit, has been trying hard over the years to lift private investments. It first came up with the ‘Make in India’ scheme in 2015, where it wooed foreign investments to make India a global manufacturing hub.

Then it tried very hard (and succeeded) in raising India’s ranking in the World Bank’s ‘Ease of Doing Business’ (incidentally the World Bank has suspended the rankings for now). Then, the Finance Minister in 2019 slashed corporate tax rates, making India’s rates among the lowest in the world.

Then during the pandemic, the government came up with the production-linked incentive (PLI) scheme, to boost domestic manufacturing and making a push for self-reliance (Atmanirbhar Bharat).

But all these measures have not quite managed to lift private investments for a variety of reasons. One the aggregate demand remained tepid for the last few years. The corporate sector, which was functioning at low capacity, used excess capacity to ramp up production, instead of investing in new capacities. It also used the years preceding the pandemic to clean its books and pare down debt.

It is in this context that the government has now decided to stump up some money in investments in big infrastructure projects, hoping that it would spur demand and production of steel, cement and other goods. The construction activities are also expected to lead to more jobs being created.

So the government has pinned its hopes on PM Gati Shakti, a massive integrated logistics infrastructure programme.

The pain points

Though the government has been selling a ‘V-shaped’ post-pandemic recovery, the general consensus is that the recovery has been ‘K-shaped’. That is some sectors are recovering and doing very well but some others have slumped during the pandemic. The country is going through a massive jobs crisis at the moment. Youth joblessness is at an all-time high. The recent violence in UP and Bihar over railway jobs is proof of that.

Those who expected some measures in the Budget to alleviate the jobs crisis have been left disappointed. The Budget also refrained from giving any immediate cash transfers to the poor. The MGNREGA, the huge rural jobs guarantee scheme, has seen its Budget slashed to ₹73,000 crore this year. And this was at a time when States were already starved of funds and wage payments were being delayed.

This scheme has been a lifeline for the rural poor during pandemic times. Despite expectations, there were no indications of a starting a similar job guarantee scheme in the urban areas.

The allocations for social sectors —health, education, nutrition — have either remained stagnant or declined marginally. Even the health sector’s allocation has only gone up marginally. The government clearly feels that the worst of the pandemic is behind us, a rather dangerous assumption to make in the current times.

This neglect of social sector has predictably led to howls of protests, especially from organisations like Jan Sarokar — an umbrella body of NGOs working in the area of development.

The fact that the number of billionaires went up during the pandemic when millions had to live with income and job losses, has evoked a fair bit of comment in the media. But those expecting a wealth and inheritance tax in the Budget were again left disappointed. A government that abolished the wealth tax a few years ago was unlikely to impose it again.

The government in this Budget has pinned its hope on an investment-led recovery and eschewed direct cash transfers and welfare benefits for the poor. If this strategy does not take off, it can always go back to a dose of ‘welfarism’ in next year’s Budget, which will be closer to the 2024 general elections.

But for now let’s hope, for the sake of the country, this strategy pays off.