Union Budget 2023
The Budget of India is an annual financial statement presented by the Finance Minister in Parliament that outlines the government’s revenue and expenditure plans for the upcoming fiscal year. In the recently presented Budget for 2023-24, Finance Minister Nirmala Sitharaman proposed a total expenditure of Rs. 45,03,097 crore, which marks a significant increase from the revised estimates of the current fiscal year.
One of the key highlights of this year’s budget is the steep increase in capital expenditure outlay, which has been raised by 37.4% to a whopping Rs. 10 lakh crore. This increase is aimed at creating a virtuous cycle of investment, growth, and job creation that will help revive the Indian economy in the aftermath of the COVID-19 pandemic.
Apart from this, the budget lays out several other measures to promote economic growth and development across different sectors of the Indian economy. The government’s plans for generating revenue, managing the deficit, and promoting economic growth are also outlined in the budget.
G20 Meeting of Finance Ministers
The first meeting of finance ministers and central bank governors was held from 24-25 February 2023 in Bangalore. Discussions centered around the demand for resources from multilateral development banks (MDBs) has increased due to transboundary challenges such as climate change and pandemics. Advanced economies want to restructure MDBs to tackle these global issues, while low-income and developing countries want to maintain the current mandate of MDBs to support development goals such as poverty reduction and sustainable development. The G20 has presented a balanced policy narrative in the February Chair’s Statement and Outcome Document, which outlines the group’s intention to advance MDB reforms in a balanced manner.
Furthermore, the global economy was already facing a growing debt problem prior to the COVID-19 pandemic, and recent geopolitical tensions have worsened the situation. At the beginning of 2022, a significant number of the world’s poorest countries were at high risk of debt distress, while every fourth middle-income country was at high risk of a fiscal crisis. The G20 finance ministers and central bank governors have called for a swift resolution of the debt treatment of countries seeking relief under the Common Framework.
The regulation and supervision of crypto assets require international coordination and cooperation due to their cross-border and online nature. While some countries have allowed cryptocurrencies to be used in transactions and a few have recognized them as legal tender, others have completely banned them. The G20 has emphasized the need for a coordinated and comprehensive approach to regulate and supervise crypto assets in the Chair’s Summary and Outcome Document.
Digital Currency Pilot Project
The RBI digital currency, also known as the Central Bank Digital Currency (CBDC), is a digital form of currency that is backed by the Indian government and issued by the Reserve Bank of India. The CBDC aims to offer a secure and reliable form of digital payment that is widely accessible to the Indian population.
The digital currency will facilitate faster and cheaper transactions, thereby reducing transaction costs and improving the efficiency of the payment system. Additionally, the digital currency can help to prevent fraud and counterfeiting by providing a secure and traceable payment system.The RBI digital currency has several benefits over UPI (Unified Payments Interface), which is a popular digital payment system in India. The CBDC provides a more secure payment system, offers faster and more efficient payment processing, can facilitate financial inclusion for the unbanked population, and may have lower transaction costs.
India’s Plan to launch its fully functional digital currency has achieved another milestone with the launch of the second pilot project for CBDC-R (R stands for Retail), which now includes 15 Indian cities with over 50,000 customers using it. The first CBDC-R pilot project was launched on December 1 in four Indian cities. The CBDC-W (W stands for Wholesale), which is restricted to financial institutions, was launched on November 1.
Pakistan Economic Crises
Pakistan is currently experiencing one of its worst economic crises in recent history, which started in 2020 due to a confluence of factors. The COVID-19 pandemic, which hit the country hard, had a major impact on its economy. This was compounded by rising fuel prices and the ongoing conflict between Ukraine and Russia, which affected Pakistan’s trade ties with those countries.
One of the worst floods in Pakistan’s history also wreaked havoc on the country, with one-third of the country submerged under water. The natural disaster had a significant impact on the country’s infrastructure, agriculture, and energy sectors, further exacerbating the economic crisis.
In addition, Pakistan has been plagued by political instability and a lack of proper leadership, which has led to a decrease in foreign investment and a lack of economic reforms. The country has also taken on significant debt from China as part of its Belt and Road Initiative, putting Pakistan in a precarious financial position.
The rise of the Taliban in neighboring Afghanistan has also contributed to Pakistan’s economic and political woes. The Taliban’s resurgence has catalyzed the Tehrik-i-Taliban Pakistan (TTP), an extremist group that has launched numerous terrorist attacks in the country, causing further instability and uncertainty.
This Crisis worsened even further in February , with the country’s consumer price index (CPI) inflation reaching 31.5% in February, while the foreign exchange reserves dwindled below $3 billion, enough to cover only three weeks of imports. In February, Pakistan failed to secure a $7 billion loan from the International Monetary Fund (IMF), which was expected to be disbursed in December. The IMF has demanded that Pakistan increase tax rates, remove fuel and electricity subsidies, and shift to a market-based exchange rate. Despite the challenges, Pakistan managed to secure a $700 million loan from China, which will help to boost its foreign exchange reserves.