Budget to increase inflation with growth: Expert View – Government has brought a risk-taking budget, not wooing the public; Know everything in 6 questions

The general public had high hopes from the Budget 2022-23 of Finance Minister Nirmala Sitharaman. It was believed that the government can make many enticing announcements in the budget keeping in mind the assembly elections in five states. However, it is now being said that the expectations of the common man have not been met, but what the experts think about this budget is very important.

Economist Swaminathan Iyer has called it an inflation-increasing budget. He has said that instead of wooing the public, the government has come up with a risk-taking budget. Although the government’s target is to boost growth, but for this it is ready to take the risk of increasing inflation. Iyer is the consulting editor of business news channel ET NOW.

Let us see in 6 questions that what is his view regarding this budget overall.

1. Is it a populist or an election budget?
Iyer said, this is not a populist, that is, a budget brought to please the common man. It is a risk-taking budget, with emphasis on investing. It is not the budget that I or others might have expected that it would be a budget to make things cheap.

2. Is this an inflation-promoting budget?
According to Iyer, the government has decided that it is ready to take the risk of rising inflation, that is, inflation in the market. We are not trying to reduce fiscal consolidation, that is, fiscal deficit, in this budget. We are not worrying about this. On the contrary, we are going to focus on investment, which will be 35% of the capital expenditure.

3. Digital Rupee will come, but will it be profitable?
In the budget, the government has announced the launch of its digital rupee, but Iyer is not too excited about it yet. He said, Digital Rupee is a new idea. It is not clear what it will be like, what kind of payment system it will have, what kind of tax will be imposed on it. All this has to be clarified, which will be a whole new thing. We just need to know a little more about it.

4. Growth-promoting budget, but how will it happen?
Iyer said, this budget is going to boost growth. The vision of the government is forward looking. The government itself will take charge of promoting investment and will use the private sector for this. This work will be done through joint ventures of the government and the private sector. Income from tax collection will mainly invest in infrastructure, in which the main focus will be on railways. Startups will be promoted, digitization will be promoted.

5. Talk of disinvestment of government assets, but how successful is it?
Iyer expressed disappointment over the claims of disinvestment of government assets, ie selling stake in it to the private sector. The pace of privatization has been very slow in the current financial year, he said. The fact is that the government was auctioning 150 railway trains, passenger routes and no one even came to bid. In such a situation, the attempt to raise revenue in this manner has proved to be a massive failure, but nothing was said about this failure in the budget.

6. Now look at RBI, how can the new credit policy be?
After the budget, all eyes are now on the Reserve Bank of India (RBI), which is to present its credit policy this week. Iyer believes that the decision of Finance Minister Nirmala Sitharaman to take risk will be supported by the RBI. He said, on one hand RBI has been very helpful in growth, on the other hand it can be said that it is not so. However, during the time of Shaktikanta Das (current RBI governor), the central bank has been a growth-supportive RBI rather than an inflation-fighting RBI.

Inflation is increasing in the country. The wholesale price (retail price) has gone up by 14%, which means we are going to be in a very high inflation situation in the next 1 or 2 years. Inflation is fast all over the world. It has touched a new high in America. Federal Bank (USA) had earlier projected interest rates to rise three times in a year. Now people are talking about increasing it 4 or 5 times. What will RBI do in such a situation?

Iyer said, according to me, RBI will also become a risk-taker like Nirmala Sitharaman. Both would say that we will take the risk of rising inflation to achieve growth. Our fiscal deficit is around 6.5% and in such a situation the monetary policy should be very tight. I don’t think that is going to happen. RBI will be the risk taker. If they try to bring in a very tight monetary policy, it will actually be more harmful to the economy than helping to contain inflation.