Economic Survey 2023: Big reforms that helped the government navigate financial crisis

The US Treasury allowing Lehman Brothers to fail and pose a systemic risk is still the subject of many academic studies

India’s annual pre-budget Economic Survey 2022-23 tabled in Parliament on January 31 not only highlighted India’s medium-term growth outlook being bright but also spoke of the efforts undertaken by the government during crises and major reforms implemented.

Chapter 2 of the 414-page document tells the story of the government navigating the economy through a period of financial stress wherein corporate, banking and nonbanking balance sheets were repaired and restored to health.

It essentially highlights how the government fashioned a policy response to the financial crisis by ramping up public investment in infrastructure to prepare the ground for the private sector to invest, hire and prosper.

These reforms, according to the survey, helped the government attend to its fiscal policy targets. It adds that reaching a budget estimate for the fiscal deficit during FY23 shouldn’t be a concern for the government.

“Resilient economic growth, continued revenue buoyancy, and careful expenditure management have underpinned the government to be on track with the fiscal path outlined by the medium-term fiscal policy statement,” read the document.

Here are some major reforms over the last few years the survey listed out.

1) Improved fiscal transparency and realistic revenue assumptions in the budget:

The government, the document said, accorded the highest priority to improving transparency in its financial statements and accounts by bringing below-the-line expenditures above the line. The extra-budgetary borrowings of the government were brought down from Rs 1.48 lakh crore in FY20 and Rs 1.21 lakh crore in FY21 to Rs 750 crore in FY22 (RE).

No extra-budgetary resources were estimated for FY23 in the budget. In addition to cleaner fiscal accounting, Budget 2022 based its revenue projections on realistic assumptions, thus providing a buffer to the government in an uncertain global environment.

2) Discontinuation of plan-non-plan classification:

Ending the regime of plan and non-plan classifications under the erstwhile Planning Commission model in the government’s expenditure from Budget FY18 onwards gave a greater emphasis on the revenue and capital classification of government expenditure.

3) The merger of the rail and Union budgets:

In a measure that gave a holistic picture of the government’s financial position, the railway budget was merged with the Union budget from FY18.

The initiative envisaged facilitating multimodal transport planning between highways, railways and inland waterways, and has been strengthened with the Gatishakti programme in 2021 which laid out a roadmap for multimodal connectivity.

4) Shifting the budget date to February 1

Advancing the date by a month to February 1 from FY18-paved the way for the early completion of the budget cycle. It has also enabled various ministries to ensure better planning and execution of schemes from the beginning of the financial year, said the Economic Survey.