The Finance Minister of the Government of India, Nirmala Sitharaman, presented the Union Budget 2023-24 earlier this month to the Parliament. The speech is widely considered to be an announcement of policy intentions, indicating major thrust areas (e.g., infrastructure, financial sector reforms, agricultural subsidies etc.) as well as outlining key changes in the coming financial year (India follows the April 1 - March 31 financial year). It is typical to see, for instance, financial markets responding to announcements in the budget speech, which concludes by the middle of the trading day. This is of course not to say that the budget speech does not have any implications outside of financial markets -- specific sectors of the economy could update their beliefs about policy in the future, and change their behaviour accordingly.
In this analysis, we examine the change in expenditure patterns and allocations by the Government of India in its Budget for 2023-24. This is meant to indicate a shift in policy priority areas, likely responding to changes in social, economic, and political conditions within the economy. The larger shifts or changes in expenditures are already outlined in this budget document, but what is less clear is whether changes not large enough to form a part of this statement, but still large as a fraction of the fiscal expenditure are signalled in the budget speech. One could argue that any fiscal consolidation or change in thrust areas should also feature in the budget speech, given that a substantial fraction of expenditures are being rejigged.
See data below on a comparison between changes in major Ministries and Departments by the Government of India between 2023-24 and the previous fiscal year (Figure 1). There are four major areas that have seen a large uptick in expenditures -- these are Defence, Fertilisers, Road Transport and Highways, and the Railways. Jointly, these amount to an increase of more than INR 3 Lakh crore. In terms of areas that saw the biggest decline in expenditures, Telecommunications has the largest cut (nearly INR 0.7 lakh crore), followed by a much smaller decline for the Department of Posts, and the Department of Food and Public Distribution. As has been documented elsewhere, the recent budget cuts for the Public Distribution System (PDS) are among the highest in terms of reducing dependence on social security schemes in recent times. There are a few other Ministries and Departments that we include below to show which areas have seen hikes and others which have had their budgets slashed.
Figure 1: Change in Allocations between 2023-24 and previous FY.
Source: Authors’ own calculations using Table 4B from Union Budget website
It is therefore worth examining whether this change in emphasis is something that the Finance Minister references in her speech explicitly, and whether she was more likely to have spoken about increase in allocations rather than a cut in allocations from the previous budget. This might be an example of choosing to frame policy decisions as gains rather than equivalent losses, as public perception, for example, may be characterized by loss aversion. To do this, we conduct a word frequency analysis of the budget speech of 2023-24, and compare the number of times an area was mentioned relative to its mentions in 2022-23 (the previous budget speech). If there was a positive change in policy emphasis (i.e., an area becomes a greater priority), we would expect to see more mentions of it in the current year’s budget speech compared to the number of times it was mentioned in the previous editions. Figure 2 contains the key changes for each of the areas highlighted in Figure 1.
Figure 2: Mentions in Budget Speech (2022-23 vs 2023-24)
Source: Authors own calculations using budget speech transcript from unionbudget.gov.in
From reconciling the data in Figure 2 with that of expenditures from Figure 1, there is an increase in the number of times ‘fertilizer’, ‘education’ (taken together with the mention of ‘colleges’), and ‘security’ (referring to the Ministry of Home Affairs) is mentioned in the 2023-24 budget speech relative to last year’s speech. This is in line with the increase in fiscal expenditures associated with these areas as well. There is also a reduction in the mentions of ‘telecom’, ‘communications’, and ‘post’, which all drop to zero in the current budget, broadly in line with the substantial reduction in allocations to the Department of Telecommunication and the Department of Posts.
However, there is also an increase in the mentions of ‘farmers’ and ‘food’, which appears to be at odds with the large reductions in expenditures that we noted in Figure 1 for the Departments of Food Distribution as well as the Department of Agriculture and Farmers Welfare. Looking up the mentions of ‘farmer’ and ‘farming’ in the current budget speech document suggests that the context in which farmers are mentioned are often not with regard to any particular scheme, but rather newer policies (e.g., digital public infrastructure, agriculture accelerator fund). If we broaden the term to ‘agriculture’, then the past budget speech has 29 mentions, but the current only has 10, which could explain the divergence.
Interestingly, the areas for which there were more mentions in the previous budget speech (e.g., the railways, water, road, and transport) actually have higher allocation in the current budget (2023-24). Thus, though there is a substantial increase in expenditures for these areas and Ministries, there is actually little or negligible mention of them in the current budget speech.
As with every budget speech, the Finance Minister often emphasizes various policy priorities of the government of the day. With any big changes in fiscal expenditures, there could be an expectation that it is addressed as part of the budget speech. However, it is not uncommon to see various post-budget press conferences and addresses by government officials to provide clarity on the changes in allocations, which this analysis does not take into consideration.
Anirudh Tagat
Anirudh Tagat is Research Author at the Department of Economics, Monk Prayogshala.
