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Show commitment to equity in the Budget
- The Budget is the Government’s blueprint on expenditure, taxes it plans to levy, and other transactions which affect the economy and lives of citizens.
- There are three major components of budget—expenditure, receipts and deficit indicators.
- Total expenditure can be divided into capital and revenue expenditure.
- Capital expenditure is incurred with the purpose of increasing assets of a durable nature or of reducing recurring liabilities.
- Revenue expenditure involves any expenditure that does not add to assets or reduce liabilities.
- Expenditure on the payment of wages and salaries, subsidies or interest payments would be typically classified as revenue expenditure.
- Expenditure is also classified into
- General services
- Economic services- Expenditure on transport, communication, rural development, agricultural and allied sectors.
- Social services- Expenditure on education or health is categorised as social services.
- Grants-in-aid and contribution
- The sum of expenditure on economic and social services together form the development expenditure.
- The receipts of the Government have three components —revenue receipts, non-debt capital receipts and debt-creating capital receipts.
- Revenue receipts involve receipts that are not associated with increase in liabilities and comprise revenue from taxes and non-tax sources.
- Non-debt receipts are part of capital receipts that do not generate additional liabilities.
- Recovery of loans and proceeds from disinvestments would be regarded as non-debt receipts.
- Debt-creating capital receipts are ones that involves higher liabilities and future payment commitments of the Government.
- It is the difference between total expenditure and the sum of revenue receipts and non-debt receipts.
- It indicates how much the Government is spending in net terms.
- Primary deficit is the difference between fiscal deficit and interest payments.
- Revenue deficit is derived by deducting capital expenditure from fiscal deficits.
- It has an implication for aggregate demand of an economy.
- All Government expenditure generates aggregate demand in the economy since it involves purchase of private goods and services by the Government sector.
- All tax and non-tax revenue reduces net income of the private sector and thereby leads to reduction in private and aggregate demand.
- Except for exceptional circumstances, the GDP, revenue receipt and expenditure typically show a tendency to rise over time.
- The trend in expenditures and revenue is analysed either by the GDP or as growth rates after accounting for the inflation rate.
- Reduction in expenditure GDP ratio or increase in revenue receipt-GDP ratio indicates the Government’s policy to reduce aggregate demand and vice-versa.
- These rules provide specific policy targets on the basis of which fiscal policy is formed.
- India’s present fiscal rule is guided by the recommendations of the N.K. Singh Committee Report.
- Allowing for some deviations under exceptional times, it has three policy targets:
- Maintaining a specific level of debt-GDP ratio (stock target),
- Fiscal deficit-GDP ratio (flow target) and
- Revenue deficit-GDP ratio (composition target).
- Allowing for some deviations under exceptional times, it has three policy targets:
- In the present institutional framework in India, primarily the expenditure which is adjusted to meet the fiscal rules at given tax-ratios.
- In terms of inequality, Articles 38 and 39 of Directive Principles of State Policy mandate a policy path:
- Article 38(1) states: The State shall strive to promote the welfare of the people by securing and protecting as effectively as it may a social order in which justice, social, economic and political, shall inform all the institutions of the national life.
- Article 39 (c) states: The State shall direct its policy towards securing that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment.
Challenges
Lack of support for implementing right-based laws
- The leaders are advocating a duty-based approach instead of a right-based approach.
- The Prime Minister advocated that people should concentrate on their duties and stop demanding their rights.
- The outburst against rights explains the lack of support for the implementation of rights-based laws.
- This acts as barrier in ensuring that basic rights are meted out to the deserving.
- India is the only country whose health budget has declined by a 10% during the pandemic.
- Social security expenditure has declined to 0.6% of the Union Budget in 2022.
- The budget allocations are inefficient in the country:
- People are deprived of the most basic services and entitlements and are unable to survive.
- Social security pensions, for the elderly, for the disabled, and widows have been frozen at ₹200-₹300 a month for almost 15 years.
- However, on the other hand, the policymakers have increased their own salaries and pensions.
- The portal to answer the grievances and appeals is closed with no more entries allowed.
- The priority list of households under the National Food Security Act (NFSA) has been frozen in absolute numbers.
- The budget cuts and lack of basic infrastructure for online learning has affected the poor during the pandemic.
- The teenagers from poor households have joined the workforce, without completing their formal education.
- This has resulted in institutionalisation of endemic multidimensional poverty.
- The government introduced various enactments and programmes to save millions of Indians from hunger and premature death. It includes
- National Food Security Act (NFSA)
- Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)
- But the programmes such as the food security Act did not receive the quantum of allocations needed, even though food grain stocks are more than 90 million tons.
- Also, there was an insufficient allocation of grant for the MGNREGA programme.
- Social security pensioners continue to face hunger, insult, sickness and death.
- The union budget should be used as an opportunity to address inequality.
- A rights-based policy framework should be followed by the Indian state to protect the poor and the marginalised.
- Introduction of a wealth tax can generate an estimated ₹11 lakh crore per annum, to support basic social sector entitlements.
- The budget should introduce a 2% wealth tax and a 33% inheritance tax on the top 1% of our population.
- Reducing inequality should be the high priority in a country like India.
- An analysis of the basic social service shows that inequality is affecting the survival of the poor.
- Therefore, the policy should be shifted from a billionaire favouring approach in order to provide basic amenities to the poor.
POSTED ON 02-02-2022 BY ADMIN
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