The Union Budget 2024-25: Primacy of Political Compulsions | P. S. Jayaramu

July 24, 2024

The Union Budget was presented by the Finance Minister Ms. Nirmala Sitharaman on the 23rd of July 2024. This was a Budget, in a true sense, prepared under the compulsions of Coalition Government as tbe BJP could not get a majority on its own in the recent Lok Sabha elections and had to depend on the Telugu Desam and the Janata Dal (U) to form the government.

Coalition compulsions are all too evident throughout the Budget. The fact that the Budget speaks of the Central Government facilitating ₹15000 crores to Andhra Pradesh through multilateral agencies for the development of the capital city at Amaravati, the early completion of the Polavaram project and special packages for the backward districts of the State, is a reward for Chandrababu Naidu’s support to the Modi-led coalition regime. Likewise, Bihar’s package includes new airports, development of Gaya as an industrial hub, roads to be constructed at a cost of ₹26000 crores etc. A quid-pro-quo of sorts to Nitish Kumar for standing loyally with PM Modi and the BJP. No wonder, Rahul Gandhi described the budget as a “kursi bachao†exercise. Other major States like Maharastra, West Bengal, Tamil Nadu and Karnataka, which is represented by the Finance Minister in the Rajya Sabha, have been left high and dry. Clearly, a case of injustice to the States in the federal set-up.

Let me deal with some statistics in the beginning. The numbers are in lakh crores. Revenue Receipts estimated for 2024-25 are at ₹31, 29,200 with the net tax revenue to the Centre standing at ₹25, 83,499 while the non-tax revenue is pegged at ₹5, 45,701. Effective capital expenditure is placed at ₹ 15, 0, 1889. Market borrowings are at a staggering ₹11, 63,182 crores. Interest payments constitute ₹11, 62,940 crores, which is, quite high. Estimated fiscal deficit is 4.9 percent from the previous year of 5.6 percent, though the ideal limit is said to be 3 percent, which has never been the case with any Government.

With the above broad figures, let me look at the major outlays made in the budget. National Security is a paramount consideration in any budget. The Budget Estimates for Defence are put at ₹4,54,773 crores. On the face of it, it looks impressive. But, when compared with the Revised Estimates of the 2023-24 budget of ₹4, 55,897, there is a decline in allocation by ₹1124 lakh crores. Not a good development if we keep n mind the mounting challenges from our main adversary China. Needless to say, a good portion of it will go towards the pension expenses of retired defence personnel.

Agriculture has become a priority consideration for the Government going by the reverses the BJP suffered in the Lok Sabha elections with farmers’ protests continuing as their justifiable demands have not been met adequately. The money earmarked for Agriculture and Allied Activities is ₹1,51,851 crores. Compared to the Revised Estimates of ₹1,40, 533, the increase is a nominal ₹11 lakh crores only. This may be, of course, in addition to the promise of ensuring MSP to the farmers for their produce, which of course, doesn’t carry any legal guarantees. The Government promises to train one crore farmers in natural farming to keep pace with the need for high yielding climate-resilient crops. Additionally, rural development gets an outlay of ₹2,65,808 crores, which is substantially above the revised estimates of the 2023-24 budget of ₹2,38,984 crores. The Government seems to have woken up to the need for placing emphasis on rural development, recognising that majority of Indians reside in the rural areas. Whether the much-needed urban-rural divide would be bridged with such budgetary allocations is an open question.

Let me turn my attention to education, which is of special interest to me and for the nation as a whole if India has to become a ‘Viswaguru’. The budget earmarks ₹1, 25, 638 crores as against the revised estimates of the 2023-24 budget which stood at ₹1, 08,878 crores. Given the fact that the allocation covers both Primary and Higher Education, the earmarked amount is not very encouraging as it still hovers around the 3.2 percent of the GDP, a far-away from the dream figure of 6 percent promised by P V Narasimha Rao in 1991 and by the subsequent Governments. Of course, the Government promises to encourage education by arranging for loans of 10 lakhs to students desiring to pursue higher education within India, which will effectively go to the coffins of the private colleges/ institutions, to which many students will turn to.

The Modi Government learnt a bitter lesson electorally when most unemployed youth did not vote for it in the recent Lok Sabha elections as they were hit hard by the growing unemployment. To mitigate their sufferings as well as to improve its own electoral prospects in the upcoming Assembly elections in five States, the Government has realised the utmost importance of job creation. Towards that end, the Budget has come up a few measures like providing skill training to unemployed youth, by assuring them one month stipend of ₹15000 to be given to first-time employees in three instalments of ₹5000 each. 500 private sector Industries would be entrusted with the task of imparting skill training to 20 lakhs youth spread-over 5 years, in addition to upgrading 1000 ITIs for a similar purpose. The idea of unemployment stipend and skill training have no doubt been borrowed from the Congress Party’s Manifesto, signalling clearly that the BJP and PM Modi have realised that Ram Mandir and communal polarisation per se cannot get them votes!!

Health is another crucial sector where the Government has to invest heavily, given the fact of infant mortality and deaths due to epidemics and pandemics. Budget Estimates for health stand at ₹8, 9287 crores up from ₹8,8956 lakh crores in the previous year. A paltry increase indeed. Going by the GDP-wise allocation, Government’s spending on health is still abysmally low. The state of Government hospitals in India, barring some premier hospitals, is far from being satisfactory, driving even the lower-middle class to approach private hospitals, regardless of their financial capacity. Needless to say, health and wellness of citizens holds a mirror to the status and position of a country at the global level. India lags far behind in so far as this metric of development is concerned.

Regarding the much-expected concessions on income tax to the tax-payers, while the increase of ₹25000 was expected in the Standard Deduction from ₹50000 to ₹750000, the Government seems to be determined to gradually do away with the old tax regime as is evident from the concession provided under the new tax regime. While the first slab of ₹3 lakhs remains unchanged with zero percent tax, the 2nd, 3rd and 4th slabs gain by ₹1 lakh each. The slabs have remained the same for the 12-15 lakh at 20 percent tax and for the 15 lakh and above persons at 30 percent. No incentives for honest tax payers. It is a small consolation that the tax- laws are going to be liberalized.

In conclusion, it can only be said that the proof of the pudding is in eating. We have to wait and see whether the allocations made for various sectors will remain the same and truly be spent or see a downward revision when the revised estimates are brought out.

(Author: Dr. P.S. Jayaramu is a former Professor of Political Science at Bangalore University and former Senior Fellow at ICSSR, New Delhi)