Prime Minister Narendra Modi along with Finance Minister Nirmala Sitharaman recently met economists ahead of the unveiling of this year's Union Budget on July 23. The discussion largely revolved around accelerating efforts to reduce poverty by keeping inflation under check, deepening and broadening welfare measures, and creating employment opportunities through investments and skilling. This year's budget assumes importance as it will lay the economic roadmap for the next five years of the Modi government to boost inclusive growth, with the aim of making India the third-largest economy in the world.
PM Modi recently said in the Rajya Sabha: "The next five years will be decisive for the fight against poverty... and this country will be victorious in this fight against poverty. I can say with confidence based on the experience of the last 10 years."
To achieve this mission, economic growth and social reforms have to be the focus area of the government. The key areas for the government should be rural development, agricultural growth, investments in infrastructure, health, housing, sanitation, education and skilling. In the just-concluded Lok Sabha elections, the Bharatiya Janata Party's (BJP) performance fell short of expectations due to, among other factors, inflation and unemployment. So, the government has to be mindful of harsh ground realities.
Job Creation
The Modi government must accept that there is an economic slowdown in rural India, which is home to 60% of its 1.4 billion-strong population. Rural distress has mainly been due to declining real wages and declining consumption expenditure. As a first step, the government can alleviate the agriculture crisis by fixing adequate and reasonable MSPs (Minimum Support Price) for farmers' produce to increase their income.
India's 'jobless growth' is also a reality as development fails to create jobs in not-so-labour-intensive sectors like technology, services, finance, etc. The government must concentrate on job-intensive industries like MSMEs (Micro, Small, and Medium-sized Enterprises), renewable energy and manufacturing, which are integral to India's economy.
Employment in the manufacturing sector has declined due to technological advancements and automation. Employability and skill gap remains a challenge.
The good news is that renewable energy expansion can create millions of jobs, focusing on skilled workers for installation, maintenance, and research in green energy technologies. Similarly, MSMEs, which contribute more than 30% to the GDP, can be a vital sector for generating employment.
The existing skill gap can be minimised through numerous actions like vocational training, digital upskilling and STEM education, as these initiatives can prepare the workforce not only for the present job market but also for future roles in emerging industries.
Curbing Inflation
High inflation has been a real pain for the people. The RBI data may reflect a decline in inflation -- from 7.8% in April 2022 to 4.8% in June 2024 - but the prices of food and fuel, accounting for close to 70% of the consumption basket, pinches the common people. Retail inflation based on the consumer price index (CPI) rose to 5.08% year-on-year in June, according to government data, after having dropped to a 12-month low of 4.75% in May. As experts point out, a fall in the inflation rate only means a decrease in the rate of increase in prices and not a decrease in the price level.
"Even though the world is going through food inflation due to supply chain disruptions, India is particularly vulnerable, given a sizeable population that is poor. The government has been driving the free grains programme for the very poor, and that has got a large coverage. Non-grain inflation is still a problem, and the only way out is to increase supplies," says Jaijit Bhattacharya, president, Centre for Digital Economy Policy Research.
Relief For The needy
The Finance Minister may provide major relief to the middle-class and salaried class by increasing the limit of standard deduction. This would mean more money in the hands of the taxpayer. Higher consumption requires more income in the hands of citizens. The government could also consider an increase in tax exemption limits under Section 80C and Section 80D.
"The government can provide direct cash transfers and strengthen the Public Distribution System for food security. Expanding MGNREGA and introducing urban employment schemes will generate jobs. Skill development programmes and support for SMEs can enhance employability and sustain businesses," says Ashmita Gupta, member-secretary, Asian Development Research Institute, Patna.
"Reducing GST on essentials, offering tax relief, and ensuring favourable interest rates will ease the financial burden," she adds.
Along with the development of critical sectors for nation-building like defence, there is also an expectation of increased funding for public hospitals and the provision of free or subsidised health check-ups to improve healthcare services.
"We expect the government to strongly tackle inverted duty structures of the industry in order to make India a manufacturing powerhouse and create jobs. This includes critical minerals such as molybdenum oxide and ferro alloys, which are crucial for India's space and military programmes," says Mr Bhattacharya. "We also expect an increase in tariffs for products such as Isopropyl alcohol so that our pharma supply chain becomes resilient and 'atmanirbhar'," he adds.
While consolidating its fiscal position and sustaining public expenditure to boost growth, the government must push for more ease of living, and focus on farmers, women, youth, middle-classes, and the weak. Citizens yearn for policies that make everyday life easier.
(Bharti Mishra Nath is Contributing Editor, NDTV)
Disclaimer: These are the personal opinions of the author