The budget session, recession fear and how the government should tackle it

The Parliament’s budget for 2023 will start from January 31^st and will continue till April 6^.

This Union Budget 2023-24 may be the last full before the 2024 Lok Sabha elections, which are re-elected every five years to elect 543 members. The election for the new set of members to the House of the Common People, i.e. the Lok Sabha which is the lower house of India’s bicameral Parliament will be elected by the citizens of the country from a selected number of candidates who represent their parliamentary constituency. 

 

The Finance Minister who is currently, Nirmala Sitharaman will present the Union Budget on February 1^st. On this day the ‘Budget Speech’ will be read out which highlights the salient points of the entire budget. The budget session which began on Tuesday began with an address by President Droupadi Murmu to the joint sitting of two Houses of Parliament. An Economic Survey was also tabled in the Parliament ahead of the Union Budget. The session will take place in two parts with the first part concluding on February 13 and the second part beginning on March 13^th and concluding on April 6^th.

 

On January 16th, Union Minister – Narayan Rane told the G20 meeting on the Infrastructure Working Group (IWG) in Pune that a global recession is likely to hit  India after June 2023, mainly due to the global GDP contraction, i.e. when the real gross domestic product growth slows and unemployment rises. 

                            

India is expected to witness GDP Growth of 6.0 % to 6.8% in 2023-24, which relies a lot on the trajectory of economic and political developments globally. Despite India being the fastest-growing major economy and the fifth-largest economy in the world (in 2022) the grim realities of recession are hitting home. It is important to note that the global recession is a big factor responsible for the threat of recession in India, but it is also due to many internal factors such as import barriers, loss of jobs and businesses, distress migration as well as the twin shocks of demonetisation and GST, the game changers of the Indian Economy.  

 

There are three key indicators that India must watch for.  First is foreign portfolio investors, exports and the job crisis. Not only is the foreign investment on the flee, the trade deficit is ballooning but also unemployment is on the rise. With the prospects of the US interest rates increasing and the Rupee further weakening, a slowdown in FDI is likely.     

 

The import barriers (tariff hikes) which began in 2014 and were embedded in the AatmaNirbhar Bharat scheme of 2020 have slowed down both imports and exports.

 

The job crisis is a huge hurdle with the unemployment rate reaching a 16-month high of 8.3 % in December 2022. The Reserve bank of India (RBI) needs to keep in step with the Fed in raising rates, falling commodity prices will cool inflation, lower the trade deficit, bolster the Rupee and ease the pressure on the RBI to tighten monetary policy and raise interest rates.