Finance Minister Nirmala Sitharaman has presented the first budget of Modi 3.0 with a focus on four major segments: 'Garib' (Poor), 'Mahilayen' (Women), 'Yuva' (Youth), and 'Annadata' (Farmer). The budget reflects the mandate of 2024 by addressing critical concerns while laying the groundwork for a developed India by 2047.
While keeping crucial allies like the JDU and the TDP in good humour, the government has recognized unemployment as one of the foremost challenges facing the country, while offering modest tax relief to middle-class taxpayers.
The budget underscores the reality that it's an NDA government at the Centre, not just the BJP's. With dependencies on allies like Nitish Kumar and Chandrababu Naidu, Bihar and Andhra Pradesh have received special mentions and allocations in the budget. Together, their 28 MPs out of 293 NDA MPs, comprising 10% of the coalition, wield considerable influence. Both parties, despite their demands for special status being technically unfeasible, have secured substantial packages.
What Bihar And Andhra Got
Bihar's allocations include the Purvodaya project, an industrial node at Gaya, road connectivity initiatives, expressways totalling Rs. 26,000 crore, and power projects costing Rs. 21,400 crore, alongside Rs. 11,500 crore for flood relief. K C Tyagi, JD(U) advisor and chief national spokesperson, expressed satisfaction, stating, "We are very pleased with Bihar's provisions."
Additionally, Andhra Pradesh receives Rs. 15,000 crore for reconstruction, additional funds for the Polavaram Project, investments in the Vizag Chennai Industrial Corridor, and special funds for seven backward districts.
Critics from the opposition have labelled the budget as favouring Bihar and Andhra Pradesh disproportionately. However, the government has refrained from making announcements for states with impending elections like Maharashtra, Haryana, Jharkhand, and Jammu-Kashmir, aiming to avoid electoral motivations.
Middle Class Gets Some Relief
Post-poll studies by CSDS indicate a 3% decrease in middle-class support for the BJP in the 2024 general elections compared to 2019. To address this, the government has raised the standard deduction limit from Rs. 50,000 to Rs. 75,000 annually and adjusted tax slabs for incomes up to Rs. 12 lakh, resulting in annual savings of Rs. 17,500.
Nevertheless, the increase in long-term capital gains tax from 10% to 12.5% has dampened the middle class's sentiment. The move is perceived as a message to mitigate inequality, especially among those feeling excluded from the benefits of the stock market boom.
Food Inflation And Unemployment
Unemployment, along with inflation, emerged as foremost concerns during the elections. The reduced support for the NDA in key states like Uttar Pradesh, Maharashtra, West Bengal, Rajasthan, Haryana, and Karnataka among the youth demographics (18-25 years and 26-35 years) underscores the gravity of these issues.
The Budget allocates ₹10,000 crore for a 'price stabilisation fund' aimed at curbing food inflation.
According to the Economic Survey, India needs to create 78.5 lakh jobs annually until 2036 to meet the demands of its growing workforce. Therefore, the budget places a strong emphasis on job creation and skill development. Five schemes, with a total outlay of ₹2 lakh crore, have been launched to educate, employ, and skill youth entering the job market, benefiting over 4.1 crore individuals in the next five years.
A new initiative will provide internship opportunities at 500 leading companies for 1 crore students over the next five years, with each student receiving a monthly stipend of ₹5,000 and a one-time assistance payment of ₹6,000.
Further initiatives in skill development aim to train 20 lakh youth over five years, aiming to bridge the gap between industry demand and the current workforce's capabilities, thereby enhancing youth employability.
Contrary to expectations in certain quarters, the government has not introduced direct cash transfers for women or youth, nor has it increased support under the PM Kisan Nidhi scheme. This stance underscores Prime Minister Modi's economic philosophy.
Allocations For Other Sectors
An ambitious ₹11.11 lakh crore has been earmarked for capital expenditure, continuing the government's focus on top-down infrastructure development, which is expected to create jobs and stimulate economic growth through multiplier effects.
Acknowledging rural and agricultural distress apparent from recent electoral outcomes, the budget has allocated ₹1.52 lakh crore for agriculture spending, an increase of ₹11,318 crore from the previous year. Additionally, rural spending has been raised by over 10% to ₹2.66 lakh crore.
Overall, it appears that the government is acknowledging unemployment as a significant concern among the youth for the first time and has taken proactive steps to generate employment, leveraging India's demographic dividend.
Amongst all this though, the government has remained committed to maintaining a tight fiscal path, refraining from populist measures, with fiscal deficit pegged at 4.9% of GDP, lower than the 5.1% in the interim budget.
(Amitabh Tiwari is a political strategist and commentator. In his earlier avatar, he was a corporate and investment banker.)
Disclaimer: These are the personal opinions of the author