Expect more populist announcements in the upcoming budget, say experts

There is a need to reorient capex towards more labour-intensive sectors than the capital-intensive sectors, say experts.
Representational image.
Representational image.

NEW DELHI: The upcoming Union Budget 2024-25 is likely to see more policy announcements towards sectors such as education, health and unorganised sector to generate more jobs in the economy, as per experts.

According to experts, there is a need to reorient capex towards more labour-intensive sectors than the capital-intensive sectors.

“The organized sector has enough capital. They don’t need capital. Unemployment is a big issue so expenditure needs to be increased in labour-intensive sectors like agriculture,” said Arun Kumar, former professor of Jawaharlal Nehru University (JNU).

Demand needs to be generated at the bottom of the pyramid in the economy, he added while emphasizing on the need for rural infrastructure development and increased outlay for schemes like MNREGA, education and health.

In the interim budget, Finance Minister Nirmala Sitharman had announced an 11% increase in the capital expenditure (capex) for 2024-25 while revising the fiscal deficit to 5.8% of the gross domestic product. In addition, Madan Sabnavis, Chief Economist with Bank of Baroda, expects some income tax relief in the Union Budget to boost consumption in the economy. “Given higher surplus from the Reserve Bank of India (RBI), it will be used for lowering the deficit, increasing capital expenditure a bit, as well as implementing social schemes as promised during the elections,” he said.

According to DK Srivastava, Chief Policy Advisor, EY India, in the upcoming 2024-25 budget, the government must adjust budget priorities outlined in the interim budget to address current economic challenges. Despite strong tax revenues and significant RBI dividends, there may be a need to reassess expenditure allocations, especially regarding subsidies and MGNREGA. The government must balance maintaining growth in capital expenditure to support GDP growth with the goal of reducing the fiscal deficit to GDP ratio for fiscal consolidation.

“Policy should emphasize on containing inflationary pressures emanating from high food prices and stimulating private investment through lower interest rates and enhanced consumption expenditure. Robust growth in government and private investment expenditures are critical for sustaining a 7% plus real GDP growth in medium-term,” Srivastava stated.

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