Free houses or free food?

"Finance Minister Nirmala Sitharaman announced an increase of 66% for a program that seeks to democratise home ownership in the country, bolstering financial commitment that goes far beyond the definition of 'incremental'." ET. "The Pradhan Mantri Awas Yojana (PMAY), Sitharaman announced, will now have an outlay of more than Rs 79,000 crore (Rs 790 billion), and this is expected to support, development of more low income housing across the country, especially in peripheral areas of the city." "A public capital expenditure (capex) of Rs 10 lakh crore (Rs 10 trillion, or $122 billion) for FY24, as proposed in the union budget is mammoth." ET. In fact, "While the proposed Rs 10 lakh crore capital outlay is equivalent to 3.3% of India's GDP, the effective capex of the Centre for the next fiscal, pegged at Rs 13.7 lakh crore (Rs 13.7 trillion), is 4.5% of the GDP. Effective capex includes grants to states for the creation of capital assets." All this is in the hope of nudging private sector investment by increasing demand. "Total spending will rise 7.5% to 45.03 trillion rupees ($549.51 billion) in the next fiscal year starting on April 1." Reuters. "Sitharaman said the government would target a fiscal deficit of 5.9% of GDP for 2023/24 compared with 6.4% for the current fiscal year." She will spend more but lower market borrowing at the same time. How will she square the circle? "Her deficit plan will be aided by a 28% cut in subsidies on food, fertiliser and petroleum for the next fiscal at 3.75 trillion rupees." "The government has reduced spending on the rural jobs guarantee scheme for the next fiscal to Rs 60,000 crore (Rs 600 billion, or $7.34 billion)." ET. "Under the Mahatma Gandhi National Rural National Rural Employment Guarantee Act (MGNREGA), introduced over 15 years ago, citizens can enrol for work such as building roads, digging wells, or creating other rural infrastructure and receive a minimum wage for at least 100 days a year." Subsidies for the poor, by reducing spending on essentials like food, free up spending on non-essential goods and services. A bulletin from the Reserve Bank (RBI) predicted annual inflation cooling to 5.9% in January-March 2023 and to 5% in April-June, but will rise to 5.4% in the next 3 months. Reuters. "The RBI's projection of 6.8 percent inflation for FY23 was outside the upper target limit of 6% according to the Economic Survey 2023. The report stated the number is neither high enough to deter private consumption, nor too low to weaken inducement to invest." ET. "Estimates made by economist Nikhil Gupta of Motilal Oswal suggest the net household financial savings 'plunged to a three-decade low of 4.0% of GDP' during the first half of 2022-23," wrote Vivek Kaul. Households were financing their consumption by running down their savings. That cannot continue indefinitely. "The balance sheets of companies and banks are better than they were in the past. Nevertheless, private corporations tend to invest when they expect strong and robust consumer demand." Acquiring land and awarding tenders require months, if not years. Cutting subsidies and rising prices are immediate. Are they planning large handouts next year just before elections in May? That would be truly Machiavellian.