The Union Budget for financial year 2024-25 was approved by the Lok Sabha this week. The lower house of Parliament has sanctioned Rs 48.21 lakh crore spending by the Union government. After finance minister Nirmala Sitharaman presented the budget, it was discussed in both the Lower and Upper houses of Parliament. The budget proposes to reduce the central government’s fiscal deficit to 4.9% of GDP during 2024-25 and further to below 4.5% in 2025-26. The appropriation bills were also passed by the houses. The Budget session, which began on July 22, will conclude on August 12.
The Narendra Modi government is facing criticism for several of its Budget decisions, including removing the indexation benefits of property and increasing capital gains taxes. The opposition accused the Budget of favouring BJP’s alliancepartners – the JD(U) in Bihar and the TDP in Andhra Pradesh. In her defence, Sitharaman argued that just because a state was not named, it does not mean it was not included in the Union Budget. She added that the budget proposed providing ₹818 crore to Left-ruled Kerala as viable gap funding. Notably, Rs 15,000 crore were allocated to develop Andhra Pradesh’s new capital, Amaravati, and Rs 26,000 crore was set aside for road connectivity projects in Bihar.
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Among other states that received significant grants, Jammu and Kashmir received support of Rs 17,000 crore, including Rs 12,000 crore towards financing the cost of the Jammu and Kashmir Police. An additional central assistance of Rs 5,000 crore was also provided.
Regarding the opposition’s allegations that the Centre did notallow additional borrowings by some non-NDA-ruled states beyond the net borrowing ceiling of 3% of the gross state domestic product (GSDP), the government said that additional borrowings of 0.5% were availed by the non-NDA-ruled states of Tamil Nadu, Kerala, and West Bengal in 2021-22, 2022-23, and 2023-24.
As discussions continue in the Rajya Sabha, Sitharaman asserts the government’s commitment to cooperative federalism. She also defended the government’s record on allocations for the agriculture and health sectors. She noted that the Budget has allocated Rs 1.52 trillion for agriculture and allied sectors, which is Rs 8,000 crore more than the previous year.
Budget 2024-25: Hits and misses
While the Budget has made progress in the right direction, much bolder and comprehensive reforms are needed to ensure India’s economic growth reaches all. The Budget has sent a clear message that the government has taken the voter rejection evident in this year’s election results to heart. Its focus on employment and skilling, rural distress, and small and medium enterprises, as well as the need to address factor-market distortions in labour and land, is a testament to this.
Budget 2024 also continues the good initiatives taken under Modi 2.0, including the priority on infrastructure. Analysts have also praised the government for its further fiscal consolidation promises. However, without profound action and stern policy reforms, India may not be able to unlock its potential.
While initiatives like the employment push are laudable, they are not enough as they will not significantly impact the job scenario. What will create jobs on the scale India needs is more private investment in labour-intensive manufacturing sectors, not employment subsidies. The government should also consider policies that support employment in the tourism sector.
The Budget’s emphasis on reforming factor markets, including labour, land, and capital, in collaboration with states is a positive step. While the specifics remain unclear, successful implementation could significantly boost India’s employment-driven growth.
The focus on MSMEs is also encouraging, but superficial benefits will not suffice if the overall business environment hinders growth. The prevalence of micro-enterprises with fewer than ten employees, as highlighted by the Periodic Labor Force Survey, underscores the distortive impact of labour laws.
The costly PLI scheme in its present shape largely benefits large corporations and generates limited employment. This requires reconsideration rather than increased funding.
Despite numerous subsidies and schemes, core government functions like health, education, and defence remain underfunded. While increased agricultural R&D and the push for oilseed and pulse self-sufficiency are positive, they do not address the root causes of rural distress: unemployment outside agriculture. A shift away from heavily subsidised, resource-intensive crops like cereals and sugarcane is essential.