Union Budget 2o24-25: A Budget should ideally be based on a realistic understanding of the economy. The general public expects the Finance Minister’s prescriptions in the budget to address the problems diagnosed in the Economic Survey. Unfortunately, the Economic Survey 2023-24, published by the Union government on July 22, 2024, does not present a realistic understanding of the Indian economy, particularly the fiscal position.
The Economic Survey indicates GDP growth of only 6.5% to 7%which is highly conservative to meet the requirements of Viksit Bharat. Regarding the fiscal position, the growth of total expenditure is a meagre 0.04% in 2023-24 compared with 2022-23figure. Even though a 13.61% growth is anticipated for 2024-25, considering the previous year’s growth pattern, the realisation of this growth is doubtful. Revenue expenditure growth is only 1.18% in 2023-24 compared with 2022-23, and the estimated growth of revenue expenditure for 2024-25 is only 4.6%. The budget has given a boost to capital expenditure with a growth of 28.17% in 2023-24, achieved at the cost of reducing revenue expenditure on social sector and welfare schemes.
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Decline in subsidies and fiscal deficit
Expenditure on major subsidies declined by 22.1% year-on-year, led by a decrease in fertiliser and food subsidies by 24.6% and 22.4%, respectively, in the financial year 2024. An attempt at fiscal consolidation is seen in the budget by reducing the fiscal deficit from 6.4% in 2022-23 to 5.6% in 2023-24. The fiscal deficit for 2024-25 is estimated at 5.1% of GDP in the interim budget, expected to further decline to 4.9%. However, this estimate is still above the Fiscal Responsibility and Budget Management (FRBM) limits.
The central share of taxes to states increased only to Rs 12.47 lakh crore in the present budget from Rs 12.19 lakh crore in the interim budget, with an increase of only 0.28 lakh crore. There is a 19.09% growth in the tax share to states observed in 2023-24 compared to 2022-23, but this growth declined to 10.42% in the proposed budget. This decline in the tax share will impact states’ financial positions and create stress on developmental and welfare spending.
The agriculture sector lags behind all other sectors, contributing only 19% to the Gross Domestic Production (GDP), although its share of employment is 46%. Agricultural sector growth declined to 1.4% in 2023-24 from 4.7% in 2022-23. Food grain production declined to 328.8 million tonnes in 2023-24 from 329.7 million tonnes in 2022-23. The decline in the agricultural sector growth is ignored in both the Economic Survey and the budget speech. There is only a marginal increase in Gross Capital Formation (GCF) as a percentage of Gross Value Added (GVA) from 17.7% in 2021-22 to 19.9% in 2022-23.
Budget 2024 focus on employment and skilling
The Budget 2024-25 focuses on employment and skilling. Some schemes for employment and skilling include a new centrally sponsored scheme for skilling in collaboration with state governments and industry. Announcements include skilling 20 lakh youth over a 5-year period, upgrading 1,000 Industrial Training Institutes in hub and spoke arrangements with outcome orientation, providing financial support for loans up to Rs 10 lakh for higher education in domestic institutions, and offering internship opportunities in 500 top companies to 1 crore youth over 5 years with an internship allowance of Rs 5000. These are welcome steps for skill development.
While many announcements for tourism development are made, they are primarily for pilgrimage tourism focused on states like Bihar, UP, and Odisha. There is no mention of Kerala, “God’s Own Country.” It is unfortunate that the state of Kerala requested a special package of Rs 24,000 crore, including a special Vizhinjam pack, but nothing materialised in the budget.
The budget 2024-25 is not sufficiently development-oriented to achieve the Vikasith Bharat goals in 2047. Considering India’s rankings in the Human Development Index and Multidimensional Poverty Index, as well as other development indices, substantial increases in public expenditure and capital investment are required to meet our development targets.
(Anitha Kumary L is visiting faculty at Gulati Institute of Finance and Taxation (GIFT), Thiruvananthapuram. Dr Sumalatha BS and Dr Nirmal Roy VP are assistant professors at GIFT.)