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(Co-authored with Divy Rangan and Balamuraly B.)
Despite the global economic headwinds and geopolitical uncertainties, the fiscal arithmetic looks conservative.
The predominant focus of the Union Budget 2023 was to adhere to the path of fiscal consolidation. Despite the global economic headwinds and geopolitical uncertainties, the fiscal arithmetic looks conservative, with a fiscal deficit pegged to 5.9 percent of GDP in 2023-24 and adhering to the fiscal glide path towards 4.5 percent by 2025-26. The nominal GDP is reasonably pegged to grow by 10.5 percent. The capital investment outlay has been increased by 33 percent to Rs 10 lakh crore, equivalent to 4.5 percent of GDP. 
Within capex, the emphasis on railways infrastructure and creating Urban Infrastructure Development Fund (UIDF) are welcome moves, which can strengthen the economic growth recovery and improve the employment potential in urban India. The frontloading of Rs 1.2 lakh crore capex fund transfer to states is a significant decision to support the capital infrastructure investment at the state level. Lessening the volatility in the intergovernmental fiscal transfers is crucial for deciding the state-level fiscal space. Extending the 50-year interest-free loan to state governments by 
one more year for capex is welcome. However, the efficacy of “fiscal rules” at the state level – by adhering to numeric threshold ratios of fiscal deficit to gross state domestic product (GSDP) at 3.5 percent – is linked to structural reforms. This extra-borrowing power for states (0.5 percent of GSDP) is linked to power sector reforms. There are wide inter-state differentials in the attainments of financial and operational parameters of power sector efficiency. 
Budget Arithmetic
The financing of fiscal deficit is predominantly through market borrowing, pegged at Rs 12 lakh crore for 2023-24. The fiscal marksmanship (a reference to the minimal deviation between the budget estimates (BE) and revised estimates (RE) and Actuals) looks reasonable except for the disinvestment target over the years. 
The disinvestment target set for this year is realistic in 2023-24 at Rs 61,000 crore. The disinvestment proceeds, pegged at Rs 65,000 crore in 2022-23 BE, were lowered to Rs 60,000 crore in the RE for 2022-23. However, there was no mention of disinvestment or asset monetisation in the 2023 Union Budget. The RE for total receipts, other than borrowings, is pegged at Rs 24.3 lakh crore, with net tax receipts of 20.9 lakh crore. The size of the budget, in absolute terms, is estimated at Rs 41.9 lakh crore, with capital expenditure of Rs 7.3 lakh crore. The revenue deficit to GDP ratio is 2.9 percent in 2023-24 BE, as against 4.1 percent in 2022-23 RE. The revenue deficit to fiscal deficit ratio is 48.68 percent in 2023-24 BE. The primary deficit, which is the difference between fiscal deficit and interest payments, is pegged at 2.3 percent in 2023-24 BE. This ratio leads us to take a look at the current fiscal policy stance. It is crucial to understand the available discretionary fiscal space devoid of debt servicing burden. 
The revenue expenditure for MNREGA has seen a sharp decline, though it is argued that these public expenditures are entitlementsbased spending and will be increased based on demand. However, the under-allocating of funds for MNREGA can affect the programme cycle at the implementation level and delays in wage payments. Ensuring food security by providing free food grains to all Antyodaya and priority households will continue till December 31, 2023, with the entire expenditure of about Rs 2 lakh crore being borne by the central government. This is a welcome move, especially when the mounting inflation hurts the poor the most. 
The tax side policies per se have expanded the disposable income in the hands of people who are working in the organised sector, which is less than 4 percent of the Indian population. The rebate limit in the new tax regime has been increased to Rs 7 lakh. The tax structure in the new personal tax regime has been changed by reducing the number of slabs to five and increasing the tax exemption limit to Rs 3 lakh. 
In the sectoral demand for grants, there is a four-fold increase in the demand for grants for the Department of Petroleum and Natural Gas to Rs 41,007.72 crore from Rs 8,939.86 in BE 2022-23. Of this massive increase in the demand for grants for the Department of Petroleum and Natural Gas, Rs 30,000 crore is capital outlay to support state-run oil marketing companies such as the IOC, BPCL and HPCL, and Rs 5,000 crore for the Indian Strategic Petroleum Reserve Limited (ISPRL)to ensure the availability of strategic petroleum reserves. Against the backdrop of COP27, we hope India’s first National Adaptation Communication will have the details of the government’s “greening of fiscal policy” including the measures announced in this Union Budget. However, there is a conspicuous absence of a climate-responsive budgeting statement in Union Budget 2023-24 and climate bonds. The just transition strategies are aware of energy poverty issues in the context of emerging economies. The budget has also given due focus on energy with an almost three-fold increase in the demand for grants for the Department of New and Renewable Energy from Rs 6,900.68 crore (BE 2022-23) to Rs 17,729.46 (BE 2023-24) crore. There are allocations towards the adoption of natural farming, and towards a circular  economy with an outlay of Rs 10,000 crore for setting up 200 biogas plants. 
Catch all the LIVE updates on Budget 2023
The Union Budget 2023 is termed as a blueprint for India @100, with a “leave no behind” objective by making it inclusive for women, youth and socio-economic groups. The digital infrastructure in public finance has helped India over the years in financial inclusion and to reduce the “ghost  beneficiaries” of India’s flagship programmes for the poor. Credit infusion for women entrepreneurs and the formation of self-help groups to strengthen financial inclusion are welcome moves. Strengthening long-term public financial management tools like gender budgeting is crucial for incentivising the calculus of the voting mandate of women. The political economy of gender budgeting as a potential tool for gaining women voters' mandate therefore cannot be undermined, especially in the last full budget before elections. 
This article was first published in Money Control, February 02, 2023.
(Balamuraly B also contributed to this article).
Lekha Chakraborty is Professor, NIPFP and Research Associate of Levy Economics Institute of Bard College, New York and Member, Governing Board of International Institute of Public Finance (IIPF) Munich; and Divy Rangan is Associate, Public Finance Management, Janaagraha and Balamuraly B. is researcher at NIPFP.
The views expressed in the post are those of the authors only. No responsibility for them should be attributed to NIPFP.


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