The general expectation is that Modi 3.0's first full Budget for fiscal 2024-25, to be presented on July 23, could see a renewed emphasis on stable economic policy. But don't be surprised if you catch a strong whiff of masala early on and through the presentation.
Welfarism including a focus on selected 'social welfare' programmes, many freebies, and a set of 'feel-good' announcements visibly aimed at job creation along with an increased focus on youth and women are all possibly in the works.
Then there's the possible need to placate two demanding allies in Chandrababu Naidu and Nitish Kumar, both of whom might be expecting goodies for Andhra Pradesh and Bihar.
While it is going to be a real task to blend all of these needs together, the government has no option but to do so. At stake is the need to rebuild the ruling party's hold on the voters, and also to satisfy its difficult-to-tame coalition partners.
Finance Minister Nirmala Sitharaman and her team's skill then will certainly be tested as they stir it all together.
Thankfully, the government is in a relatively comfortable position resource-wise, thanks to a significant increase in tax collection and a large RBI dividend payout.
Tax collection for fiscal 2024-25 has crossed Rs 4.6 trillion, a 20.99% growth over the previous year.
Additionally, the RBI declared a record dividend payout of Rs 2.1 trillion.
However, the Budget could face resistance from a stronger opposition, complicating the passage of Budget sops and economic reforms.
Why job creation is such a big priority
The disappointing Lok Sabha election results, with significant vote shifts in strongholds like UP and Karnataka, were mainly due to factors such as falling income levels, consumer price escalation, and lack of employment opportunities.
The CSDS-Lokniti survey of over 20,000 voters after the Lok Sabha results revealed that economic turmoil, particularly inflation and unemployment, created a strong anti-incumbency factor. According to the survey, about 30 percent of the surveyed voters were worried about inflation and 27% showed their frustration over unemployment.
The Centre for Monitoring Indian Economy (CMIE), meanwhile, reported an unemployment rise from 7.4% in March to 9.2% in June 2024. While the RBI jobs report painted an upbeat picture, realities on the ground cannot be wished away, at least in the budget.
According to sources, the government is likely to allocate a substantially higher budget for the National Rural Employment Guarantee Act (NREGA), aimed at giving a boost to the disposable income of people in the rural region.
With this, the government can kill three birds with one stone: ensure job creation, provide increased income levels to those most worried about rising prices, and boost consumption to support the economy as well as satisfy the industry.
Welfare schemes and freebies
Other welfare schemes that Nirmala Sitharaman might announce could include increased cash handouts to farmers and enhanced rural housing subsidies.
Insurance for unorganised workers, including taxi, truck, and three-wheeler drivers, could also be part of the Budget sops.
State-sponsored welfare schemes and incentives, despite their toll on the public exchequer, have proven politically beneficial. The Modi 3.0 government's first budget is expected to attempt to milk this sentiment.
Expect new welfare schemes to rebuild public confidence, raise income levels, and boost rural consumption. The latest examples of BJP governments taking this route came from Madhya Pradesh where the government offered an enhanced collection price -- up from ₹3,000 to ₹4,000 per bag -- for tendu pattas and the Ladli Behna Yojna, and from Maharashtra where again they rolled out the Ladli Behna Yojna.
Sources suggest an increased focus on women and youth welfare and several incentive schemes for the unemployed will be seen on July 23. Prime Minister Modi's early decisions on farmers' welfare and housing schemes portend the arrival of more populist measures in the Budget session, they underline.
Money bill strategy unlikely
The government previously used the Money Bill provision to fast track its economic agenda, bypassing the Rajya Sabha where it had a weak majority.
However, with a stronger opposition in the Lok Sabha, this strategy may not pass muster. The BJP's reliance on NDA allies -- particularly Chandrababu Naidu and Nitish Kumar -- could only further complicate the situation.
