The Impact of Indian Budget Allocations on Research and Development

In the recent announcements made by Finance Minister Nirmala Sitharaman in the Interim Budget proposed on 1st February stated "A Corpus of Rupees 1 Lakh Crore will be established with 50 Years interest-free loans" to provide "Long-term financing or refinancing" with long tenors and low or nil interest rates (to encourage the private sector to scale up research and innovation) significantly in sunrise domains, is aiming to improve the defense-capital expenditure explicitly is worth considering into the account so far.

The nominal GDP growth for 2024-25 is conservatively estimated at 10.5%, this means an implicit price deflator-based inflation of 3.3% if we assume a 7% real growth.

FISCAL DEFICIT:

So, in simpler terms is the difference between the total revenue and total expenditure of a government in a financial year. A fiscal deficit arises when the expenditure of a government is more than the revenue generated by the government in a given fiscal year.

Fiscal Deficit Target

The Fiscal Deficit for 2024-25 is expected to go down to 5.1% a decline of 0.7% points from the previous year. Well, this is according to the Finance Minister as stated earlier. Also Considering having a road map to our target we must have estimated 3% of GDP for the Central Government as accounted Fiscal Deficit and not 4.5% according to Chief Policy Advisor D.K Srivastav.

Any Fiscal Deficit of the Centre and States that have taken together substantially above 6% of GDP can only lead to Inflation. According to C. Rangarajan a Former Chairman and Economic Advisor to the PMO We need to set a target fiscal deficit relative to GDP and the time horizon over which this target is achieved. The goal must be to get to a fiscal deficit of 3% of GDP each for the Centre and the States.

Budget Allocution on Research and Innovation in India:-

According to the first advanced estimates by the National Statistics Organisations (NSO) Report India is spending only about 0.65% of its GDP on Research and Development as compared to the Global Average of 1.8% of the country's GDP. Also in comparison with the major Global Export-led countries such as China spending more than 2.55% of its GDP to 3.6% by Japan, to 3.4% by the US and to OECD it is estimated that South Korea spends as much as 4.93% of its GDP on Research and Development.

• The Fcat that investing in Deep Tech will ultimately result in potential- transformative- to finding solutions- to more profound innovation leading to Job formation and productivity.
  

• The Government needs to spell out, among other things, how it plans to select the beneficiaries of its Rupees 1 Lakh Crore Corpus for private sector research and innovation.
  

Nevertheless, with so many demands on the corpus, the government needs to define what it is expected to achieve, whether it will have domain-wise allocations and targets, and time frame; and how the government intends to select beneficiaries, and whether the corpus will be replenished.

CapEx Annexure (Capital Expenditure):-

The important feature of Budgets presented in recent years is an increase in capital expenditures of the central government. As in the Context of COVID-19 and other global developments, perhaps it was felt that the investment climate could be improved only by the government raising its investment. It could act as a catalyst for private investment.

The interim Budget has maintained this trend and has provided for an increase of 11.1% in Capital expenditures when a comparison is made with the 2023-24 Budget Estimates.

The Growth Rate of Capital Expenditure is higher at 16.9% when compared with the Revised Estimates of 2023-24. It is implied that capital expenditure growth is lower than what was budgeted in 2023-24.

Thus, it may be possible for a 17% CapEx growth in FY 2024-25 to enable a real GDP growth of 7% provided Private sector investment picks up and the momentum of CapEx growth of the State Govt is maintained as in the current year.

In a Nutshell a few things stand out in the Budget. First, there is a continued emphasis on increasing capital expenditures of the Union government and second, there is a continued emphasis on fiscal correction and consolidation. In accord with the Fiscal Consolidation of the Budget.

-A Blog by Jitisha .S. Hiremath

Source: Through an article from the Hindu Newspaper and the Economic Times Newsletter in consolidation with the Sansad TV