Supplementary grants to shield the poor: FM

The minister, who defended India’s calibrated and prudent approach during the pandemic added that India would meet its budgeted fiscal deficit target of 6.4% this year

Union finance minister Nirmala Sitharaman on Wednesday said the government sought Parliament’s approval for extra amount of ₹4.36 lakh crore in 2022-23 mainly to fund incremental food, fertiliser and fuel subsidies to shield the poor and farmers from the adverse impact of current geopolitical developments and assured that she would continue her calibrated approach to balance inflation and economic growth amid global headwinds.

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The minister, who defended India’s calibrated and prudent approach during the pandemic — contrasting it with the approach of other countries — added that India would meet its budgeted fiscal deficit target of 6.4% this year.

Replying in the Rajya Sabha on concerns raised by several members regarding the government’s demand for a “big” amount, Sitharaman said the money was needed due to unexpected geopolitical developments that was not “anticipated in January” when the Budget for FY23 was prepared for “the 1st February presentation”. Her reference is to the Russian invasion of Ukraine which has roiled oil markets and global supply chains, resulting in inflation.

The supplementary demands for grants involve a total cash outgo of ₹3,25,756 crore even as the gross additional expenditure is estimated at ₹4,35,938 crore. The balance is to be met through savings by ministries. It also has a separate demand pertaining to excess expenditure in 2019-20 for ₹32,637 crore. While introducing the two Bills in the Lok Sabha on December 12, Sitharaman said, “We are also coming up with the Excess Grant Demand which pertains to 2019-20 for three Appropriations which had to happen. This is completely on the recommendation of the Public Accounts Committee (PAC). That comes to a total of ₹32,637 crore.”

Referring to the supplementary demands for grants of the UPA regime after the global financial crisis in 2008, she said the then government resorted to two supplementary demands, which together constituted 20% of the Budget estimates that year. In comparison to that this is “just the first one, only 8% of the BE” [budget estimates], she added.

The debate on the demands was initiated by Congress leader and former finance minister P Chidambaram on Monday and it continued for two days and involved about 40 members of Parliament (MPs).

MPs, mainly belonging to opposition parties, raised various issues, including the need for making a more realistic budget to avoid supplementary demands. They also raised questions pertaining to inflation, growth and poverty. Initiating the debate immediately after FM introduced the Bills on Monday, Chidambaram raised five issues related to the economy

Chidambaram questioned the government’s rationale for assuming 11.1% nominal growth in gross domestic product in the Budget for 2022-23, how the additional expenditure would be funded, reasons for shrinking proportion of corporates’ share in the gross tax revenue, how the government planned to double India’s GDP in 10 years, and details of the government’s plan to boost growth amid slowing private investment, private consumption and exports.

Replying to Chidambaram’s query on doubling GDP, Sitharaman said: “The former finance minister raised this question about doubling the real GDP. He observed that from 1991 it took 12 years to double the GDP, i.e, ( ₹) 25 lakh crores to ( ₹) 50 lakh crore, and then probably another 10 years… from 50 to ( ₹) 99 lakh crores...” The trend, she pointed out, suggested that it would be possible to double the GDP, given that it is the ninth year (of the current government).

Sitharaman sounded confident about robustness of Indian economy despite the hit it suffered during the pandemic. “But, these 10 years will also have to be looked at — particularly last five years — from the point of view of Covid as well, wherein, one full year we had to get into a negative terrain… So, despite that, I can only say that we are somewhere very close to doubling it (GDP). We still have one-and-a-half-years to go for completing 10 years; (that) is something to which I wanted to draw your attention.”

She said that the nominal GDP growth projection of 11.1% was made in January 2022 even as the government was preparing for the Budget of February, 2022. At that time, there was a consensus around the world that the worst of the pandemic was over, she added.

While the geopolitical crisis that broke in February has altered those numbers, India, both IMF and the World Bank have projected, will remain the fastest growing major economy in the world in 2022-23 and 2023-24. The Reserve Bank of India expects India to grow by 6.8% this financial year.

Citing the latest data in reply to Chidambaram’s queries, Sitharaman said, “Actually positive growth is happening”. She also assured the house that the government was “keeping a close eye on inflation…” She said the spike in inflation was “purely extraneous” mainly because of the fuel or fertilizer prices. India’s retail inflation fell to an 11-month low of 5.88% in November, which is within the tolerance band of its central bank.

Sitharaman said that while many members alleged that the government was working for corporates , and not the common man, many government schemes such as Jan Dhan, rural roads, Prime Minister Garib Kalyan Ann Yojana, which provides free ration to 800 million poor people, and the fertiliser and fuel subsidies are for the poor and not for corporates.

The minister also pointed out that companies are also contributing in growth and the private sector is investing, encouraged by the government’s policies such as the production-linked incentive (PLI) schemes.

Sitharaman said the government has resources to fund development projects and there is enough revenue buoyancy to meet the fiscal deficit target in FY23.

Most analysts expect India to meet its budgeted fiscal deficit target because of higher-than-expected tax revenue. “GoI’s [Government of India’s] gross tax revenues (GTR) grew by 17.6% during 1HFY23, with growth in direct taxes at 23.5% and that in indirect taxes at 11.8%,” according to EY India’s Economic Watch of November 29.

Latest official data released by the finance ministry on Sunday reported about 26% jump in gross direct tax collections at ₹13.64 lakh crore on an annualised basis till December 17 in the current financial year.

After the minister’s reply, the Rajya Sabha returned the two Appropriation Bills, which are Money Bills, to the Lok Sabha.

A Money Bill is only introduced in Lok Sabha. The Rajya Sabha is required to return a Money Bill passed and transmitted by Lok Sabha within a period of 14 days from the date of its receipt. Rajya Sabha may return a Money Bill transmitted to it with or without recommendations. It is open to Lok Sabha to accept or reject all or any of the recommendations of Rajya Sabha. However, if Rajya Sabha does not return a Money Bill within the prescribed period of 14 days, the Bill is deemed to have been passed by both Houses of Parliament at the expiry of the said period of 14 days in the form in which it was passed by Lok Sabha.

Sitharaman said the government’s calibrated approach has helped the Indian economy whereas the cash stimulus offered by many countries has ultimately led to high inflation and a slowdown in their economies. “Borrow and spend, and even print money to reboot the economy was the suggestion by a former finance minister and others during Covid. As we close 2022, we should look at the negative effect of this in other countries, which have gone into recession,” she said.