Unpacking Growth
2022-23 budget is heralded as growth supportive budget which will primarily be driven by public sector.
Issues:
- The need of the hour is not just to focus on growth but also employment which is not provided adequately by public or private sector.
- The bulk of employment is created by SME’s which have been battered due to demonetization, pandemic and issues of GST implementation.
- The budget only extends ECLGS for a year without any concrete measures.
- It is not enough for SME to start investing more.
- Growth via public spending is high cost and not sustainable. EG: government’s debt over last 5 years has increased to 90% of GDP.
- The rise in debt increases interest rates and makes the task of servicing government debt further problematic.
- There as also assumptions that it can further lead to crowding out of private investment.
- If the private sector is to revive it needs to borrow more which will decline due to increased interest rates.
- This means that RBI will be forced to add more liquidity when it should actually be reducing the high amount of capital already in the economy- it can increase inflation to a great extent.
There is a need to balance public and private sector growth, especially MSME, in order to regulate macroeconomic indicators.
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