American Baseball Star Yogi Berra who was also famous for saying things that were funny and yet weird, once said: 'When you come to a fork in the road, take it.' He confirmed this in a book whose title was “The Yogi Book: I Really Didn’t Say Everything I Said!
The best part is that this saying by the Yogi (not to be confused with UP Chief Minister Adityanath) is often relevant in strange contexts, such as the Union Budget for 2023-24 presented by Finance Minister Nirmala Sitharaman.
The lady has, in a way, taken the fork in her road by choosing to ride two horses—one for ambitious capital expenditure that is aimed at sustaining and reviving economic growth in the world's fastest-growing major economy and another to spend big time on a host of welfare schemes, aimed at pleasing voters at the bottom of the social pyramid, such as remote tribals, sugarcane farmers, poor women, unemployed youth, and other such categories.
You can call this a mix of growth gamble and constructive populism in what in effect, is the last big budget before the general elections due next year because the 2024 budget would in effect, be, too late to impress voters and may violate the electoral code of conduct.
The budget is also strong on details in discussing specific projects with an emphasis on the "last mile" (one of the seven guiding principles of the budget) in implementation. In that sense, the budget is less of a policy document and more of an action manual packed with to-do lists.
Amid Inflation, How Did the Govt Allocate Expenditure?
The real questions are: How did the minister manage, or will manage this surge in spending when there is an inflation overhang in the economy that is worrying the Reserve Bank of India and carry forward the promised fiscal consolidation that is required to impress investors and keep the macroeconomic scenario stable?
As it stands, like best-laid plans, this one faces headwinds of uncertainty, some from within India and some without, and the biggest one could be that the inflation monster is lurking in the woodwork and could be embarrassingly tough to contain if spending gets the better of prudence in the manner it is done.
Just a few days ago, I suggested that Ms Sitharaman needs to somehow eat the cake and have it too, and thought of early-bird incentives for foreign investors to boost capital expenditure, a big push for environmentally- sustainable projects and finding opportunity gaps in the financial system as banks were flush with funds after putting behind a crisis over a mountain of unpaid loans.
She has done that indeed, but with a twist. Instead of foreign investors, the state governments have been incentivised with an extension of 50-year-tenure interest-free loans provided the bulk of these loans are used for schemes or goals listed by the Centre.
Govt's Credits Bid: A Recipe for Growth's Success?
Agricultural credit at Rs 20 lakh crore is about 7.5% higher than the current year, and a Rs 9,000-crore credit guarantee increase for micro, small and medium enterprises (MSMEs) means an effect credit/spending increase of Rs 2 lakh crore. Top this with a Rs 10 lakh crore capital outlay involving a 33 percent surge from the current year, and you have an extravagant pump-up growth menu ready. This increased outlay would likely draw liberally from the banking system flush with funds after years of reform and disciplining.
Indications are, the bet is on credit to drive growth, which in turn, would drive tax revenues, and higher tax revenues in turn to help curb fiscal deficit in a virtuous cycle. The fiscal deficit in the current year is seen on target at 6.4 percent of the GDP, thanks much to robust GST collections in a year in which the economy is estimated to grow at 7 percent despite global headwinds.
If development spending (from agriculture to airports) is indeed one side of the spending menu, the social side has everything from a Rs 15,000-crore scheme for tribals to Rs 79,000 crore for housing under the PM Awas Yojana (up 66 percent) which is only one of the several Sanksritised alphabet soup brands under which Modi is charming the underprivileged.
Make no mistake, this is populism in an election year, though worked out constructively in an artisan-like manner that would hopefully create long-term assets and vital skills.
Double Trouble for Sitharaman's Budgetary Ambitions?
The real challenge in such a plan is that the last mile involves branch-level work in rural areas among banks and hard work from the lower end of the bureaucracy in district administration.
It is well and good to call this visionary but there is a double challenge: spending needs to be micromanaged to help the informal sector suffering from unemployment and higher food prices while ensuring that a sudden burst of expenditure does not cause an inflation spike that would force the RBI to raise interest rates further.
In that sense, the budget is less of an economic challenge and more of an administrative one, unless the poor are happy with fancy PM-linked scheme names under its 'Amrit Kaal' ambitions or rhetorical speeches on welfare for the poor.
Can India Roll the Economic Dice & Score Top Spot?
"Green growth" which clubs everything from solar energy and green hydrogen to environmentally safer fertilisers, is clearly a gamechanger trying to ride on a tectonic global shift in investment priorities—and Digital India may be more of the same but one in which there is more to come. Both have been accorded priority, in line with the nationalist ambitions of the BJP which sees India as a technological superpower.
If pulled off carefully in a top-down push, there is enough and more for India to be truly a beacon of hope in a struggling global economy. But events of the past three years such as the unexpected Covid-19 pandemic and Russia's Ukraine war should make the government realise that Black Swan events, as such things are now fashionably called, may hold unpleasant surprises. For instance, a rebound in China's Covid-scarred economy might mean higher oil/commodity prices that may make inflation management difficult. Persisting concerns over inflation in the West or the Ukraine war might hurt exports.
This is why we need to once more invoke Yogi Berra who asked us to take that fork in the road. He is actually often wrongly credited for another quote that turns out to be a variation on an old Danish saying. “Prediction is hazardous, especially about the future."
If Ms Sitharaman gets the fork on her road right by riding a drone that can straddle divergent paths, we may well imagine her in a cartoon that reminds us of Harry Potter riding a broom. Romantic growth stories can be delicious. However, they come with ifs and buts.
(The writer is a senior journalist and commentator who has worked for Reuters, Economic Times, Business Standard, and Hindustan Times. He can be reached on Twitter @madversity)