Union Budget 2023 may not include any populist measures : Analysis

Ahmedabad (Gujarat) : Nirmala Sitharaman’s Budget 2023, which will be a major factor in the upcoming Lok Sabha election in 2024, may not include any populist measures. Live Mint, the sister publication of HT, conducted an analysis showing that there is no historical pattern of populist pre-election budget releases.

Only two out of every four full-year budgets presented before general elections in the last 20 years allocated a larger portion of their budget to rural areas than they did to defence or infrastructure. There was only one budget before the election in which spending on social programmes increased. However, a budget centred on welfarism was released in 2008 by the first United Progressive Alliance (UPA) government.

Defense spending under the first NDA administration dropped from an average of 18% of the budget between 2000 and 2003 to 15.2% in 2003–04. The same pattern was also observed in funding for rural and welfare programmes, while infrastructure budgets edged up.

Spending on defence and infrastructure decreased under the UPA-I, while spending on welfare programmes rose slightly. In 2008-09, rural spending reached 16.2% of total government spending, up from 9.2% in 2005-08.

The UPA-investment II’s of 10% in the rural sector in 2013 was well below the average of 12.4% from 2010-2013. Total spending on social programmes was stable.

Out of all the budgets considered for this report, only NDA-2018 II’s budget showed a rise in defence spending. Infrastructural spending increased by 7.5% in comparison to the average of 6% from 2015 to 2018. There was a slight uptick in rural disbursements.

A decade of data, according to Equirus economist Anitha Rangan, supports the idea that “structural reforms” rather than open populism should be the focus of governments. One possible explanation for this sway is the realisation that appealing to the masses by announcing a populist budget in order to win support might not always lead to sound financial policy.

The fact that most programmes, like the Pradhan Mantri Ayushman Bharat Health Infrastructure Mission, are only announced for a few years at a time also helps a full-year budget avoid looking too populist. Governments can make extra-budgetary spending decisions driven by populist sentiment as well.

While there has always been a strong emphasis on the rural economy, recent trends in rural-urban migration and the rising importance of the services sector to overall economic growth have necessitated speedy action to address infrastructure gaps. Rangan claims that the report shows the NDA regime is more concerned with infra-capex, while the UPA governments are more sympathetic to social expenditures.

Emkay Global Financial Services’ lead economist Madhavi Arora told Live Mint that the government’s commitment to fiscal consolidation, high borrowings, expected moderation in tax revenue, and high levels of committed expenditure leave no room for populism in the upcoming budget.

Budget 2023 aims to fortify the rural sector, which is still recovering from the effects of Covid-19.