Government Budgets

[op-ed snap] Allocations are key


From UPSC perspective, the following things are important :

Prelims level : Nothing much

Mains level : What are the priority areas in economy now

The budget must focus on the priority areas for the budget allocations. It is expected to provide funds and an assurance that the allocations would be rule-based.

  1. Rural distress needs to be allocated to funds.
    1. Drinking water
    2. Improving the efficiency of existing irrigation systems
    3. Rural finance — including temporary waiver of loan repayments — 
  2. Job creation
    1. It will depend on the revival of industrial production, continuing growth of exports and an agricultural revival. 
    2. Most policies have a lag of around four to six months.
    3. In the short run, the money will be needed for the MGNREGA. 
    4. The budget should concretely raise public investment to revive private investment to reverse the declining growth rate in every quarter.
  3. Fiscal Deficit
    1. The fiscal deficit is a real issue and leads to pressures on the bank rate and exchange rates. 
    2. The need is to raise resources by taxation and not cutting consumption by the government and non-government sectors. 
  4. Banking sector
    1. The cleanup of the banking and NBFC sectors should be immediate and it needs funds.
    2. Though these are outside the budget, they determine the fiscal deficit.
  5. Raise government investment at the central, state and parastatal level.
  6. The economy is suffering from a decline in investment ratios. This is reflected in the declining growth rate, which is below the potential of 8%. 
  7. The last round of the NSS data shows that girl child dropped out of school more than earlier. If she goes to college, marries late, the first child comes later the real demographic dividend starts.

Case study and way ahead

  1. Gujarat’s experience shows that a high manufacturing physical output growth rate reduces the workforce dependent on agriculture.
  2. The allocation for Self Help Groups with a trust fund is a clear solution.
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