A budget is, quintessentially, an expression of pious political intent. It is an occasion for the government to assuage political constituents even as it massages economic impulses.
Budget 2024-25 arrived at the intersection of political compulsions and economic imperatives. The ricochet of rhetoric through the elections and the diminished tally of the ruling regime on one side and distance between headline GDP growth, private consumption and absence of feel-good factors catalysed expectations across segments of the political economy.
The craft of budgets is both an art and a science. Finance Minister Nirmala Sitharaman’s 90-minute speech spread over about 7,800 words acknowledges the high-decibel cries of distress heard from the bottom of the income pyramid and visible in Verdict 2024. Yet, the exercise has eschewed profligacy—in promising to bring down the fiscal deficit to 4.9 percent of GDP, it has managed to preserve the doctrine of fiscal prudence.
The artful management of politics is visible in the financial engineering. In the run up to the budget, the two allies—the TDP and the JD(U)—declared the price for their support and issued demand notes. In its optics, the speech recognises the allies, but the response—besides GPS mapping of infrastructure spending in the states—is a modified IOU. Requests for special treatment have been listed for arrangements with multilateral development banks.
The challenge before the government after February’s interim budget was on utilising the Rs 1-lakh-crore-plus bonanza it received from the Reserve Bank of India and higher realisation in taxes. The demands ranged from tax breaks to the middle class, higher payouts to farmers, a national roll-out of cash transfers for women, a new welfare scheme for women, and so on.
The salaried middle class is left wondering if they should be happy about a conditional gain of Rs 17,500 in direct taxes, or be worried about the loss they will bear every time they encash tax-paid instruments of saving. Those who invest in mutual funds—to fund education or marriage of children, or have saved for a home or a pilgrimage—must factor in parting with a higher share of their gains with the government.
Budget 2024-25 has all the words that people wanted to hear from the government. Not long ago, in January 2024, the screenplay for the political theatre coined the acronym GYAN, placing the poor, the youth, the farmer and women as the four constituents at the centre of BJP’s approach to economic management. That narrative got lost in the din and dust of the hustings as euphemisms of political identity overtook sane debate. In the opening paragraphs of her speech, the finance minister re-invoked the four constituents.
The budget lists nine priorities. It almost reads like chapters of the five-year plans laid out by the erstwhile Planning Commission. The critical context—given the upcoming elections in the states of Maharashtra, Haryana and Jharkhand, where the BJP has fared rather poorly—is whether the promises made satisfies the constituents.
Take the largest political constituency—farmers. The expectations ranged from a legislative guarantee of minimum crop support prices to a top-up of PM Kisan Samman Nidhi. The budget skirts the minefield of populist promises and, instead, opts for a structural approach. It proffered a review of agricultural research, release of high-yield seeds, introduction of natural farming, missions for pulses and oilseeds, clusters for perishables, digital surveys, expansion of Kisan credit cards, and financing for cattle and shrimp farming. The list of much-revised and revisited issues triggers a sense of déjà vu and farmers will likely raise the flag at the next hustings.
The pain of unemployed youth influenced the polls. The government heard them and has devised an employment-linked incentive programme that includes cost subvention to employers, financial assistance to learners and breaks to job seekers. The most talked about idea is the Rs 5,000 a month internship support for a year for one crore job seekers in the top 500 companies. The arithmetic of 100,00,000 persons in 500 companies for 5 years flies in the face of data on educated youth. There are around 43.3 million youngsters enrolled in college courses, of which a fourth would graduate every year.
Much depends on the states as they control land and labour policies. The new labour code is pending adoption by states for over five years. The budget promises a framework to revive the idea of Team India—the symphony of states and the Centre moving in tune. For instance, the potential of tourism to propel employment and growth rests with the states.
This column has flagged the opportunity of using idle land with PSUs to create space for plug-and-produce opportunities. The step to set up industrial parks on idle land is promising. In the segment on energy transition, the budget highlights opportunities and challenges India faces. The idea of encouraging research in small and modular nuclear plants needs an iconic champion to shepherd public-private initiatives. These will be vital for powering growth, especially digitalisation of the economy.
The budget recognises the power of urbanisation highlighted by this column last week. There is obeisance to the concepts of growth hubs and transit-oriented development, but it stops short of the necessary paradigm shift—in creating new cities and managing them. Construction and housing can generate low-skilled jobs between the urban and rural economies. There is repeated reference to the potential of the rental market and need for a legal framework. Yet, mystifyingly, while advocating lower stamp duties for new buyers, the budget has withdrawn indexation for investors willing to invest patient money for long-duration projects.
The budget touches upon the pain points without troubling the exchequer. It’s plain when we tally the expenditures. The total expenditure in the interim budget: Rs 47.75 lakh crore; the total in the July budget: Rs 48.20 lakh crore. The budget connects many dots, but is fuzzy about outcomes. That is the nub of the murmurs of doubt.
Yes, there are many promising points in a budget full of incremental positives. But the big bang required for shifting onto the advanced economy orbit depends on execution. After all is said and done, it remains to be seen if what has been said gets done. This is verily the long and arduous march of hope.
(Views are personal)
(shankkar.aiyar@gmail.com)
Shankkar Aiyar | Author of The Gated Republic, Aadhaar: A Biometric History of India’s 12 Digit Revolution, and Accidental India