Although it is Prime Minister Narendra Modi’s third term in power, the shift in voter perception and the BJP’s near ousting from power have influenced Budget 2024. A victory in the Lok Sabha election felt more like a loss as it exemplified high voter discontent. It poll outcome showed that unemployment and rural distress can significantly impact electoral results. With its Lok Sabha tally dropping from 303 to 240, the BJP is forced to rely on coalition partners and accommodate their demands.
Confident in its victory in the elections, the ruling party did not include any welfare handouts and sops in the interim budget that preceded the elections. Instead, it focused on trimming the fiscal deficit, bolstering infrastructure, and other long-term goals aimed at making India a developed nation by 2047. However, the election results served as a rude wake-up call. Consequently, the full-fledged budget, which was also the first of PM Modi’s third term, was grounded in a new political reality. Public anger over unemployment, inflation, and inequality could no longer be ignored.
READ | Union Budget 2024-25 offers lifelines for MSMEs, rural economy
The Budget proposals seem like a response to political compulsions than a well-thought-out plan. This did not go unnoticed by opposition parties, with Congress leaders pointing out that the Budget’s major announcements closely resembled their Lok Sabha election manifesto and previous budgets. They alleged that the BJP borrowed ideas from the Congress manifesto such as the scheme to provide internship opportunities to youth. The Congress manifesto had promised a right to apprenticeship programme.
However, the BJP took it further with arbitrary targets of one crore internships. While these schemes support rural development, India urgently needs to create 78.5 lakh non-farm jobs annually by 2030 to absorb workers leaving agriculture, says the Economic Survey. For a government that has vehemently dismissed critics’ allegations of jobless growth, the job-related announcements came with some reluctance.
In the Budget announcement for the current financial year, the government emphasised youth, women, farmers, and the poor—four categories that likely affected the party’s vote share. The focus on jobs and youth was arguably the most striking feature of the Budget, with the words “employment” and “jobs” appearing prominently compared to the interim budget before the polls. Headlines were made by the announcements of $24 billion spending on job-creating measures over the next five years.
This includes plans to incentivise hiring in the formal sector by contributing to employees’ first month’s wages and reimbursing some of employers’ social-security contributions. The opposition likely gave itself a pat on the back as its poll promises also focused on youth employment. However, the government must recognise that simply dreaming of something is quite different from manifesting it.
Another focus area for the opposition that found greater mention in the Budget speech is MSMEs. MSMEs have struggled under the successive blows of demonetisation, GST, and Covid and need greater government support to thrive. The budget announcement for MSMEs includes a credit guarantee scheme to buy machinery and equipment without collateral, making it easier for them to get loans. Despite the budget’s support for MSMEs, they remain cautious about the GST regime’s complexity. MSMEs are still awaiting the promised simplification and tax structure rationalisation from the Minister.
Then there was the issue of appeasing coalition partners. The BJP cannot afford to upset its alliance partners, hence the announcements of a separate section on the Andhra Pradesh Reorganisation Act, which promises financial support for the development of the state’s capital, Amaravati, a pet project of BJP ally TDP. Bihar also received its due with proposals for financial and industrial support, including $3.1 billion for road projects and funding for airports, medical colleges, sports facilities, and tourist infrastructure around religious sites. However, despite putting Andhra and Bihar front and centre, the Budget failed to address their concerns with any finesse.
What did the Budget 2024 miss?
Who will ultimately pay for all the election sops remains to be seen. Many have expressed their anger over the tax regime. Indians who have benefited from a recent boom in India’s stock market will partly foot the bill as there is an increase in taxes on capital gains and some securities transactions.
The budget allocated increased funds to rural development overall, but a closer look reveals some concerning cutbacks. The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), a crucial scheme providing guaranteed work for rural populations, faces a significant funding reduction. The budget allocates its lowest share (1.78%) of total spending in nine years, despite the ongoing need for rural job creation. The budget also cut subsidies across essential sectors like fertilisers, food, and petroleum.
These cuts could strain household budgets, particularly in rural areas. Despite all the fanfare, the Finance Minister’s speech made no mention of plans for the Indian Railways, historically the country’s largest employer. This silence is particularly noteworthy given the importance of the railways for infrastructure development and job creation.
While the budget did allocate funds towards healthcare and education, the increase was marginal compared to the significant needs of these sectors. The health sector, particularly, is still recovering from the impact of the COVID-19 pandemic, and many experts argue that the allocations are insufficient for building robust healthcare infrastructure and addressing systemic issues. The budget included some measures for promoting green energy, such as incentives for solar energy projects and electric vehicles. However, critics argue that these measures are not bold enough to address the pressing issues of climate change and environmental degradation.
The budget emphasised infrastructure development, particularly in urban areas, but was criticised for not adequately addressing the infrastructure needs of rural areas. Improved rural infrastructure is crucial for equitable development and economic growth across the country. There were some new initiatives aimed at social welfare, but the overall funding for existing programs was either stagnant or reduced. This has raised concerns about the government’s commitment to social equity and support for marginalised communities.
The budget aims to reduce the fiscal deficit, but there are concerns about the growing public debt. Critics argue that while fiscal prudence is important, it should not come at the expense of necessary public expenditure, especially in a post-pandemic recovery phase.
In conclusion, while the budget includes some promising initiatives, it reflects a compromise between addressing immediate political compulsions and laying out a long-term vision. The government’s challenge will be to effectively implement these measures while balancing fiscal prudence and addressing the diverse needs of India’s population.