The Budget speeches usually contain political messages, especially with an upcoming election. Since this was an interim Budget, there was not much to expect. The Finance Minister's speech was short on substance but emphasised that the last decade had seen remarkable growth, moderate inflation, and significant progress in social welfare. The political message of the Budget was that everything was going well and that the future would be better.
The Interim Budget is commendable for avoiding populist measures and achieving a good balance between continuity and progress. The announcement of a corpus of ?1 lakh crore and 50-year interest-free loans for research and development in the sunrise domains will undoubtedly strengthen the country's digitization efforts while creating opportunities for emerging entrepreneurs. A higher allocation for infrastructure will not only help boost the economy, but it will also stimulate long-term investment.
However, the Interim Budget 2024 appears more like a campaign document for the upcoming elections than a Budget that addresses the critical issues facing the nation. One of the most worrying areas that the country faces is the exodus of young and educated individuals, who are the real strength of the nation, in search of a better life. Unfortunately, Budgets often come and go, leaving taxation policies on the sidelines. The hardest hit are employees and pensioners who battle with inflation and taxes without any relief. The mere talk of development, infrastructure, and growth would mean very little to those who are struggling.
The Indian population, already suffering from unprecedented inflation and worrying levels of unemployment, had high hopes for the Interim Budget. However, they were disappointed as the Finance Minister did not announce any significant increase in the allocation for the four identified segments - farmers, women, youth, and the poor. There were no changes made to the income-tax slabs, and no measures were taken to create wealth or build an atmosphere of trust.
The speech overlooked several significant facts about the economy and the potential threats it could face from the global economy's fragmentation. Despite a satisfactory recovery from the COVID pandemic, the official statistics suggest that the employment situation remains grim. For instance, the data from the Periodic Labour Force Survey show that there has been no growth in regular salaried employment in the last five years. Most of the jobs generated are unpaid family labour, a clear indication of disguised unemployment. Real wages in agriculture have also decreased. These data points suggest that the benefits of the supposedly spectacular growth have gone to those receiving rents, interests, and profits, who represent only a small fraction of the population or households. This growth outcome cannot be considered equitable or inclusive. The long-term growth of a poor and overpopulated economy depends on the workforce's structural transformation from the rural/agricultural sector to modern industry and services in urban areas, where labour productivity is much higher. However, during the last decade, we've seen an increase in the agricultural workforce and a slight decline in manufacturing employment. This trend shows that we are witnessing premature de-industrialization.
The Budget and economic review seem to be content with the overall growth and external balance, but there are concerns about the composition of this growth. One concerning area is the increasing reliance on China for industrial inputs. The trade deficit with China has been steadily increasing over the years, accounting for one-third of India's trade deficit. Despite initiatives like 'Make in India' and 'Atmanirbhar Bharat Abhiyaan', India's industrial output and investment growth rate have been declining over the last 5-7 years. The gravity of the situation is better reflected in the much-ignored Annual Survey of Industries, which provides estimates, rather than the macro aggregates in the National Accounts Statistics.
The Budget report gives an account of the achievements of the previous decade with a promise to continue with the same approach. However, it fails to address issues such as lack of employment opportunities, wage growth, and critical deficiencies in sectors like manufacturing. It also appears to ignore potential threats arising from geopolitics or strategic risks posed by dependence on China for crucial inputs. Such an approach is not in the long-term national interest.
In conclusion, the Finance Minister's budget speech seemed to be mostly focused on praising the Modi government. Although there was a noticeable emphasis on "welfare" schemes, which have been largely attributed to the Prime Minister, it remains to be seen whether this or the government's claim of financial prudence will impress voters. The BJP appears to be confident of returning to power, but in the ever-changing world of politics, nothing is permanent, and the BJP may not be an exception.
