The Deficit-Growth Dilemma
Budget 2022-23 comes at a crucial time when the economy is on the brink of recovery. The revised estimate of GDP growth is 9.2% which takes the economy at a pre-pandemic level. The negative side is that this is a setback of two years. To pull up the economy and set a strong growth momentum the government adopted various free-market reforms. It has also stepped up spending in the current and previous fiscal with a special boost to capital expenditure. Understandably, the government has also breached the Fiscal Responsibility and Budget Management Act (FRBM) limit of 3% of the GDP and will continue to do so for the next fiscals. There are a few downsides to this. The Budget estimate for capital expenditure for 2022-23 is INR 7.5 lakh crores, a 35% increase over the current year. Even the revised estimate for the current year is over INR 6 lakh crores which is higher than budget estimates. This is impressive and is intended to crowd in private investment which will create jobs, whi...