Budget 2024: Well-fed partners make better allies

The Budget presented by finance minister Nirmala Sitharaman on 23 July was predictably disappointing, its standout feature being the politically motivated largesse for the two big allies that prop up the BJP government at the Centre. The budget doles for N. Chandrababu Naidu of Andhra Pradesh and Nitish Kumar of Bihar should keep them quiet for a while.

Apart from this commitment to cling to power, Budget 2024 is a pretty directionless document, low on substance and actionable detail — and utterly devoid of charm — if still high on rhetoric.

The early minutes of Sitharaman’s budget speech made some cursory nods at the problems of unemployment, inflation, poverty, while also seemingly addressing the important pressure groups of mahila (women), yuva (youth) and kisan (farmers )— in other words, an attempt to be seen to be addressing the reasons for its election disappointments.

But the Budget provisions, once you scratch the surface, are sketchy and wishful, at best.

Unemployment rates have been rising, reaching 9.3 per cent in June this year. The urban unemployment rate is 8.9 per cent. The near stagnancy in manufacturing means creation of jobs will be hard. Even where capital outlays (Rs 11 lakh crore for infrastructure) are expected to create jobs, incremental employment will probably be negligible because the same labour force that has been working on earlier infrastructure projects will likely corner a large chunk of the jobs.

The so-called employment-linked incentives (ELIs) announced in the Budget are similarly wishful. A month’s wages to new entrants in formal sectors and reimbursing EPFO contributions up to Rs 15,000 for first-time employees are not substantial baits for employers to throw open their doors to new employees.

In 2022, most will remember, over 12 million young people applied for 35,000 clerical jobs in the Indian Railways. The unsuccessful applicants went on a rampage across Bihar and Uttar Pradesh, setting fire to an empty train coach. The problem persists: the number of youth who can’t find good jobs in India is staggeringly high — tens, even hundreds of millions — and a large population of young people without jobs is an inflammable mix.

Two days before Sitharaman presented the Budget, former chief economic advisor Arvind Subramanian wrote about the three puzzles of the Indian economy. If India is growing, as the government claims it is, then why is consumption falling, employment so weak and inflation low? (Another conundrum, of course, is that food inflation is high — and food accounts for 40 per cent of the consumer price index or CPI) — even while CPI is manageably low). The budget does not address Subramanian’s puzzles.

On inflation, as former finance minister P. Chidambaram pointed out in the Lok Sabha, the finance minister spared just 10 words in her budget speech. On employment, the Economic Survey had acknowledged the problem and the budget, as noted above, wishfully hopes to address the problem by offering ELIs to corporate houses.

It made no mention of jobs in government or public sector undertakings (PSUs). Nor was there an announcement to scrap the controversial Agnipath scheme for recruitment to the Army.

As an observer pointed out, this budget was a desperate copy-paste job, necessitated by the demands of coalition politics. Preparations for the past several months before June were to present a dazzling ‘400-paar’ Budget, but the election results sent the finance ministry scurrying back to the drawing board.

Chidambaram sarcastically invited Sitharaman to read the entire Congress manifesto and not just pages 11, 30 and 31, from where some of the proposals, including the apprenticeship programme, seem to have been lifted, he insinuated. Congress president Mallikarjun Kharge’s words were similarly biting: “The Modi government’s ‘copycat budget’ could not even copy the Congress’s Nyay Patra properly. The Modi government’s budget is distributing half-hearted revadis (freebies) to dupe coalition partners so that the [government] survives.”

India’s economic growth, the headline GDP numbers, give people the false impression that we are doing very well. But becoming the third or fourth largest economy means little if the living standards of the poor don’t improve, if the per capita income is still low. In per-capita-income terms, India continues to be a low- to middle-income country.

On the other hand, income inequalities have grown worldwide, and India is no exception. Recent studies have shown that the top 1 per cent in India own over 40 of the country’s wealth. The income share of the richest 10 per cent Indians has gone up from about 35 per cent in 1991, when India launched its economic reforms, to about 57 per cent now.

Experts have pointed out the connection between the low employment generation of the Indian economy and the increase in income inequality. A lot of the growth of the Indian economy is driven by rising consumer spending in the burgeoning upper-income urban class.

The goods and services this class of consumers demands are less labour intensive than goods consumed by the poor and lower middle class. Hence the phenomenon of ‘jobless growth’, which means India’s economic growth is excluding large swathes of its population.

India needs to invest heavily in the human largescale employment, the Budget does precious little to incentivise job creation in the MSME (micro, small and medium enterprises) sector or to reduce the GST compliance burden on this sector.

There are other glaring omissions and commissions, but to return briefly to the peeve of non-BJP/NDA states, Andhra Pradesh and Bihar were handpicked for a budget provision of Rs 1.5 lakh crore in interest-free loans for 50 years, among other ‘special scheme’ goodies, while the borrowing limits of non-BJP states were slashed and Tamil Nadu denied disaster-relief assistance.

As Congress president and leader of the Opposition in the Rajya Sabha Mallikarjun Kharge quipped in the House: “Sabki thali khali, sirf do ki thali mein pakoda aur jalebi (everyone's plates are empty, only two plates have pakoda and jalebi).”