Modi’s Top priority sectors: Budget analysis of the last five years

The government has reduced Fuel subsidies while it has a consistent focus on Defence, Infrastructure Development, Agriculture, and rural development. When the Modi government was set to present Union Budget FY 2023-24 on February 1, 2023. This was the last full budget before the General elections in 2024. Many would anticipate this pre-election budget to be less focused on Fiscal discipline and expect the government to emphasise more on giving relief and freebies to the voters. However, the track record of the Modi government shows a starkly different picture. The government has reduced Fuel subsidies while it has a consistent focus on Defence, Infrastructure Development, Agriculture, and rural development. This is visible from government spending on these sectors in the last five years.

Highest Government expenditure on Major Sector: 

As per the Budgeted estimates for FY 2022-23 the major focus of the Modi government seems to be on the Defence sector with a Total allocation of Rs. 3.85 lakh crore. It is followed by the Transport sector with a budgeted expenditure of Rs 3.51 lakh crore. Rural Development with government expense amounting to Rs 2.06 lakh crore, Agriculture and Allied Activities with expenditure to the tune of Rs 1.52 lakh crore, and Education sector with a total allocation of Rs 1.04 lakh crore in the last budget.

Subsidies:

While the overall subsidy bill has increased 66 per cent in five years from Rs 1.91 lakh crore in FY 18 to Rs 3.18 lakh crore, Fuel subsidies have actually gone down 76 per cent from Rs 24,460 crore in 2017-18 to Rs 5,813 crore in 2022-23. The increase in subsidy bill is majorly impacted by higher food subsidy that has recorded 106 per cent growth from Rs 1.01 lakh crore to 2.07 lakh crore in five years. Followed by Fertiliser subsidies that have also jumped 58 per cent from Rs 66,468 crore to Rs 1.05 lakh crore in the same duration.

Sectors with the highest increase in Budget allocation in the last five years:

In the last five years, some sectors have witnessed a major push by the government. IT and Telecom sector has gained the maximum attention as this sector has seen the steepest increase of 373 per cent in government funding during the past five years. The allocation of the IT and Telecom sector has increased from Rs 16,899 crore in FY 18 to Rs 79,887 crore in FY 23 Budget estimates. The second fastest-growing sector is the Transport sector which has recorded a 219 per cent increase in Funds. As the funds rose from Rs 1.10 lakh crore in FY 18 to Rs 3.52 lakh crore in FY 23. Followed by Agriculture and Allied Activities as the budget has increased 188 per cent from Rs 52,628 crore to Rs 1,52 lakh crore in five years. Commerce and Industry are at the fourth spot registering an increase of 121 per cent from Rs 24,087 crore to Rs 53,116 crore and the fifth most favoured sector is Urban Development which has witnessed a 91 per cent growth in funds from Rs 40,061 crore to Rs 76,549 crore.

Emkay Global Financial Services states on India Budget Preview “The Centre’s Capex to GDP ratio will likely rise to 2.9%, almost 1.5 points higher than the pre-pandemic ratio. Capex’s focus in FY24 will be specifically on roads, railways, housing, and rural/urban infrastructure. However, public sector CAPEX still needs to grow higher. The Centre may also extend incentives to states as part of the Centre-States convergence in CAPEX. Revex/GDP will also rise to 12.9% vs. 12.6% in FY23E and the focus will likely be on welfare, rural, and MSMEs. Savings from lower subsidy allocations may be redistributed in other sectors.”

HSBC Global Research in a report on India Budget Preview states “2023 is a pre-election year, and these years are generally associated with low privatization receipts and expenditure pressures. While Capex spending is now 1.1% of GDP higher than in the pre-pandemic period. Lowering the fiscal deficit without cutting Capex will require extra effort. The good news is that the government is making an effort to consolidate. Steps like the recently restructured food subsidy scheme, and innovations like the Single Nodal Agency dashboard (which cuts down the interest bill on funds transferred to states), will likely help lower the deficit”.

Fiscal prudence is the word to describe the government’s approach while navigating the economy through the Crest and trough of the economic cycle in the last few years. In the last five years, there were many major events such as the General election, state elections, the Covid shutdown, spike in crude and global inflation. Despite these headwinds, India is still one of the fastest-growing major economies and is still on track of becoming a major economic power. While the government improving infrastructure and defence preparedness it is also taking care of marginalised sections of society by providing food security and rural housing and infra.

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Business journalist at Buzindex. I have five year’s experience in equity research, and two years of experience in news scanning and writing. I love to play with data and write reader-friendly articles based on the analysis. I like to analyse stock markets, economy, and geopolitics. My other hobbies are playing cricket, reading, and watching movies. I did my graduation from CCSU. Anyone can easily get in touch with me through social media platforms.

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