30 July 2024 : Indian Express Editorial Analysis

1. Clear goals, hazy roadmaps

(Source: Indian Express; Section: The Ideas Page; Page: 11)

Topic: GS3– Indian Economy – Government Budgeting

Context:

The article critically examines the details of the final Budget, highlighting its objectives and action plans while pointing out the vague implementation roadmaps.

Objectives and Action Plans

• The Budget lays out its objectives and action plans in detail, aiming to foster economic growth and development.
• While the objectives are clearly defined, the roadmaps to achieve them, as outlined in the Finance Minister’s speech, remain vague.
• The impact of the Budget will largely depend on the effectiveness of project implementation, especially given the emphasis on expenditures.

Comparison with the Interim Budget

• The final Budget shows marginal differences from the Interim Budget in terms of expenditures.
• On the revenue side, however, the increased dividends from the Reserve Bank of India (RBI) have made a relatively larger impact.
• The government’s gross and net tax revenues show limited changes, with an estimated gross tax revenue of Rs 38.4 lakh crore, assuming a gross tax buoyancy of 1.03 and a nominal GDP growth of 10.5 percent.
• The Economic Survey projects a realistic real GDP growth of 6.5 to 7 percent, considering the previous year’s high growth of 8.2 percent.

Revenue and Expenditure Analysis

• The final Budget increases the provision of tax devolution to the states by Rs 27,428 crore compared to the Interim Budget.
• The Government of India’s net tax revenues stand at Rs 25.83 lakh crore. Along with estimated non-tax revenues of Rs 5.46 lakh crore, total net revenue receipts amount to Rs 31.29 lakh crore.
• With a small provision for non-debt capital receipts and a fiscal deficit of Rs 16.13 lakh crore, the government’s total expenditure is budgeted at Rs 48.20 lakh crore.
• This reflects an additional expenditure of Rs 54,744 crore, all allocated for increasing revenue expenditures.
• The overall expenditure is divided in a ratio of 77:23 between revenue and capital expenditures, with revenue expenditure growth increasing marginally from 4.6 percent in the Interim Budget to 6.2 percent in the final Budget over the provisional actuals of 2023-24.

Fiscal Consolidation

• The Budget’s total additional non-debt receipts, compared to the Interim Budget, amount to Rs 1.27 lakh crore, facilitated by a sharp increase in RBI transfers.
• Approximately Rs 72,000 crore of these additional revenue receipts were used to reduce the fiscal deficit, now brought down to 4.9 percent of GDP compared to the 5.1 percent targeted in the interim budget.
• The goal is to achieve a fiscal deficit of 3 percent of GDP as soon as possible. This is crucial given the decline in household savings in financial assets, which stood at 5.3 percent of GDP in 2022-23, a historical low.
• To boost private investment, it is essential to reduce the government’s drawing on financial savings, allowing more space for the private sector.

Revenue Side Measures

• Several interim revenue-side measures have been announced. The Budget speech mentions a comprehensive review of the Income Tax Act 1961, to be completed in six months.
• A major change on the direct tax side includes rationalization and rate increases concerning the capital gains tax, with debates surrounding the discontinuation of indexing for real estate assets. This regime may need re-examination in the upcoming review.
• Other measures, such as moving towards a single “new” personal income tax model and the removal of the angel tax, are steps in the right direction to facilitate smoother venture capital flow into startups.

Expenditure Trends

• The final Budget shows only a marginal increase in revenue expenditures compared to the Interim Budget, with no change in the budgeted amount of capital expenditures, which remains at Rs 11.11 lakh crore.
• Notably, the non-defense capital outlay has been reduced by nearly Rs 21,000 crore, reallocated to loans and advances, including a provision for an interest-free loan to states amounting to Rs 1.5 lakh crore.
• However, the offtake from this provision for capital spending has been limited, with some less developed states like Bihar, Madhya Pradesh, Rajasthan, and Uttar Pradesh showing higher utilization percentages.

Future Expenditure Schemes

• Many of the expenditure schemes announced in the Budget appear to pertain more to future years.
• It is essential to quantify the success of similar past schemes, such as self-sufficiency in oilseeds, which has not been adequately assessed.
• A new initiative, “Employment Linked Incentives,” aims to create formal, stable, and long-term employment. However, the effectiveness of these schemes in generating desirable employment remains uncertain.
• Training and experience imparted during temporary employment can improve absorption in the formal non-farm sectors, but the employment elasticity of growth in these sectors is a critical factor, especially with the advent of new technologies like AI and GenAI.

Conclusion

• Overall, the Budget effectively highlights critical areas for facilitating growth and emphasizes fiscal consolidation.
• However, there is still some distance to travel. Performance budgeting is crucial to ensure actual expenditures match the planned expenditures.

PYQ: One of the intended objectives of Union Budget 2017-18 is to ‘transform, energize and clean India’. Analyse the measures proposed in the Budget 2017-18 to achieve the objective. (250 words/15m) (UPSC CSE (M) GS-3 2017)

Practice Question:  Critically analyze the final Budget’s objectives and action plans, with a focus on the effectiveness of its implementation strategies. Additionally, evaluate the potential impact of the revenue-side measures and expenditure trends highlighted in the Budget. (250 words/15 m)

2. For profit, not learning

(Source: Indian Express; Section: The Ideas Page; Page: 11)

Topic: GS3– Disaster Management GS2– Governance: Government policies – Interventions for development in various sectors

Context:

On July 27, three civil services aspirants drowned in a basement used illegally as a coaching centre in Delhi. This tragic event highlighted the blatant violation of zoning regulations and the apparent negligence of the Municipal Corporation of Delhi (MCD), which failed to act on written complaints about the illegal use of the basement for commercial activities. The incident raises serious questions about the enforcement of building bylaws and the responsibilities of MCD officials.

Regulatory Failure and Accountability

• The arrest of the coaching centre’s owner and coordinator, along with statements from Delhi’s mayor declaring the illegality of running a coaching centre in a basement, underscores the regulatory lapses.
• The incident could have been prevented with timely intervention by MCD authorities.
• The lack of action, despite urgent complaints, points to a failure in the monitoring and disposal of public complaints, implicating the zonal engineer and his superiors.

Misplaced Focus in Public Discourse

• Media and social commentary have diverted the discussion to peripheral issues like clogged drains and water deluge, rather than addressing the core problem: the illegal operation of a coaching centre in a basement.
• The MCD building bylaws clearly prohibit such activities in basements, and this violation is a matter of criminal culpability.
• Immediate and stringent action against the responsible MCD officials is necessary to prevent similar incidents in the future.

Broader Issues with Coaching Centres

• The incident brings to light broader issues within the coaching industry, which operates with minimal regulation.
• Misleading advertisements, exorbitant fees, poor teaching quality, and unsafe infrastructure are common problems.
• With over a million aspirants for limited seats in civil services and medical entrance exams, coaching centres have become a lucrative business.
• Governments must address these issues by building awareness, improving regular education, and reducing dependency on coaching centres.

Government’s Role and Response

• Earlier this year, the Ministry of Education issued “model guidelines” for regulating coaching centres, suggesting registration and oversight.
• However, the guidelines seem to have had little impact, especially in Delhi. The guidelines were sent to various educational bodies, but there is confusion over who should regulate coaching centres.
• The coaching industry remains largely unregulated, raising questions about its role in education versus business.

Recommendations for Regulation

• The model guidelines recommend non-misleading advertisements, minimum space requirements, disclosure of tutor qualifications, course details, fees, success rates, and adherence to safety codes.
• Violations would incur penalties. However, if the responsibility for regulating coaching centres falls on education departments, it may legitimize these businesses as educational institutions, which they are not.

Conclusion and Suggestions

• Immediate action is needed against MCD officials who failed to enforce regulations.
• Coaching centres should not be regulated by state education departments, as this would confer undue legitimacy. Instead, they should be treated like other commercial activities requiring registration and licensing, similar to gyms, swimming pools, theatres, and cinema halls.
• This approach ensures oversight while maintaining the distinction between educational institutions and businesses.

Practice Question:  Examine the recent incident of the drowning of three civil services aspirants in a coaching centre basement in Delhi. What steps can be taken to ensure such incidents are not repeated, and how can the regulation of coaching centres be improved without legitimizing them as educational institutions? (250 words/15 m)