Budget 2023 Should Focus on Falling Imports, Impact of Slowdown, Says Former FM Chidambaram

FM Nirmala Sitharaman to present the Union Budget 2023-24 in Parliament on February 1.

New Delhi: Senior Congress leader and former Union finance minister P Chidambaram on Monday said that the BJP-led central government in its upcoming budget should focus on addressing issues like the impact of the global slowdown on economic growth, falling exports, increase in the current account deficit (CAD) and mounting total government debt. He said that the Union Budget should also focus on the danger of falling consumption leading to lower standards of living due to high unemployment rate, layoffs and inflation. The Union budget is scheduled to be tabled on February 1.

In an interview to PTI, Chidambaram said that though he has high expectations from the Budget, he is also "prepared for great disappointment".

Excerpts from the interview:

Q: This will be the last budget of the Modi government before the 2024 general elections. What are your expectations from it?

A: I have great expectations but, going by past experience with the NDA's budgets, I am also prepared for great disappointment. Objectively, the budget for 2023-24 (the last full budget should address the current weaknesses of the economy. They are the impact of a global slowdown on economic growth in 2023-24; sluggish private investment; falling exports; increase in the current account deficit; mounting total government debt; and, above all, because of the high unemployment rate and layoffs and inflation, the danger of falling consumption leading to lower standards of living.

Q: Which are the areas you think the government should focus on in the budget?

A: The government should focus on controlling inflation and generating jobs. As an immediate relief to the people, the government should find ways to leave more money in the hands of the people (instead of appropriating the money through high taxes and cesses and high prices, e.G. On petrol, diesel, fertilizer, electricity, and high GST rates).

Q: People are worried about inflation due to a looming global economic slowdown and resurgence of Covid-19. Layoffs and slowdown in the USA and Europe are keeping the mood of the nation cautiously optimistic. Should there be a rise in the basic exemption limit in income tax? Your opinion.

A: I think the government should consider adjusting the income tax slabs for inflation. The current slabs were set some years ago, they deserve to be adjusted upwards for inflation. Automatically, the basic exemption limit will also be raised if it is adjusted for inflation.

Q: Should the budget be more focused on capital investment and infrastructure investment?

A: The answer is yes, but there is a caveat. Public investment in public goods (e.G. Roads, irrigation) is inevitable. On capital investment in the productive sectors (e.G. Power, fertilizer), private investment is better than public investment. Government investment takes a longer period than private investment to yield benefits. Government investment is also not as efficient as private investment. The government knows that private investment has been extremely sluggish in the last three years and the FM admitted as much in the winter session of Parliament. However, (the) government has not been able to identify the reasons for sluggish private investment or motivate the private sector to increase its investments. That is a failure.

Q: Do you expect a rejig in the tax slabs in the upcoming Union Budget of 2023?

A: I do not think the government will alter the existing tax slabs of 10, 20 and 30 per cent. However, I think (the) government may try to push the ?alternative no-exemption tax regime' that it introduced two years ago. In my view, the alternative regime is a clumsy regime. Whatever be the reason, there are few takers for the alternative regime. Nevertheless, the government may be tempted to sweeten the alternative regime to motivate people to opt for that regime.