India needs a Budget for its young
23, Feb 2023
Prelims level : Economy Mains level : GS-III Economics - Government Budgeting.
Why in News?
- India accounted for 20.6% of the global population of 15 to 29-year-olds in the year 2020. This implies that in the coming years, one out of every five workers in the world could be an Indian.
Key Proposals in Budget 2023-24:
- There is a considerable increase in capital expenditure. It is expected to be 3.2 lakh crore higher than the revised estimate of 2022-23.
- The government’s expenditure will fall for various social sector schemes and subsidies. For instance, food subsidies will reduce by ₹0.9 trillion, fertilizer subsidies by ₹0.5 trillion, and Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) by ₹0.3 trillion. There are marginal increases in the budget allocations for health, education, agriculture, and the Angwandi scheme.
- For detailed information on the Budget, read here: Union Budget 2023 Summary
- An increase in capital expenditure is important to reinvigorate the economy. Investment as a proportion of income or GDP rose constantly during the mid-2000s and peaked at 42% in 2007 (even better than China).
- It further increased the economic growth in India which lasted till early 2010.
- However, the global financial crisis in 2007-08 had been a turning point. On one hand, China increased its domestic investment whereas India restrained its expenditures (due to fear of the rising fiscal deficits).
- As a result, public expenditures nosedived and private investors lost confidence. Investment as a proportion of GDP fell from 33.8% in 2013-14 to 27.3% in 2020-21.
- Though subsidies and social sector spending are considered to be ‘wasteful’ for economic growth, the reduction in these segments worsens the existing social inequalities and dampens the long-term growth prospects.
- There are serious issues of unaffordable education (both basic and higher education), and lack of employment opportunities. For example, in 2022, only 2.6% of the around 1.9 million appeared candidates for the National Eligibility cum Entrance Test (NEET) could secure admission to a government college.
- Apprehensions about the fiscal deficit and government debt can be counterproductive for a country like India which possesses huge reserves of untapped human resources.
- It should be noted that only 4.2% of GDP in 2022 is owed to external agencies.
- Moreover, it is largely held by domestic financial institutions like public sector banks, insurance companies, and provident funds.
- Notably, public expenditures on the social sectors are an investment for the future, particularly for the young population. For instance, the income a woman receives through MGNREGA can ensure education and nutrition for her children.
- Increased government expenditure on sectors like health and education can provide a boost to both the supply and the demand fronts in a knowledge-driven economy.
- Increased government borrowing to strengthen human resources that generate new jobs and incomes would set off a virtuous cycle. For instance, higher incomes and higher levels of development will also lead to fresh savings that will help to pay off debts.
- The share of the population aged 30 years and above in India will rise to 58.6% in 2040 (from 37.5% in 2000). It is important to increase government expenditures to provide food security, health, and education as it will inspire millions of India’s youngsters to grow into bright stars that illuminate the world.