Budget 2024: Continuity and employment
Budget retains welfare-with-prudence focus. Govt heeds electoral lesson on need for jobs
Ahead of Budget 2024, the big question was whether the Bharatiya Janata Party’s (BJP) sub-par performance in the summer’s national election would push the government into unveiling a populist budget, especially with assembly elections due in Maharashtra, Haryana, and Jharkhand later this year. The budget presented by finance minister (FM) Nirmala Sitharaman has answered this question in the negative by shunning populism in favour of the government’s templated approach of welfarism, reforms, and fiscal prudence, but, despite the length of the FM’s speech — it was her second shortest budget speech after her speech while presenting the interim budget on February 1 this year — still sought to create a positive political narrative, a big theme that touches lives, make a real difference, and which the government can speak about.
The big theme of Budget 2024 is jobs, or employment. Mrs Sitharaman announced a bouquet of five schemes, with an aggregate spend of around ₹2 lakh crore, aimed at incentivising companies to create jobs, and at training young people to be ready for jobs (including an apprenticeship programme that can expose young people to the biggest and the best companies in the country). Irrespective of data, it was clear that India was not creating as many jobs as it needed, nor providing young people with the required skills to be employable, and this is perhaps the first budget to attempt to solve both problems, and in scale. Much (as it always does) will depend on the implementation, but this is, on paper, exactly the kind of intervention the most populous country in the world (and also the one with the largest working- class population, a distinction India will hold till 2049) needs. It is also a more productive response to the angst that was perhaps responsible for the BJP’s performance in the Lok Sabha elections; after all, more jobs is exactly what India needs at the moment. But the BJP’s choice of employment as its big theme for the budget suggests that it also believes it can build a political narrative around it. To be sure, there are other things it can do between now and the elections that could also help — for instance, in the case of Haryana, a tweak in the Agniveer recruitment scheme for the armed forces.
There are other political exigencies that the budget has responded to more traditionally. With the BJP dependant on Andhra Pradesh’s Telugu Desam Party, and Bihar’s Janata Dal (United) — both are senior partners in the respective National Democratic Alliance governments in the two states — for its majority in the Lok Sabha, it was a given that the budget would announce a package of some sort for both. It has done just that, with an emphasis on infrastructure, and the first reactions of the two partners indicates that they are satisfied, at least for the moment. That should remove any question marks (if indeed, any existed) over the stability of the BJP-led NDA government.
The budget has generated a lot of conversation around taxes; it has made more changes in direct and indirect ones (the duty inversion in customs duties of several products has been addressed, making local manufacturing more competitive) than many budgets in recent years. Stock market investors are unhappy about the increase in long term capital gains tax to 12.5% from 10%; and real estate investors are happy at the reduction in the same tax from 20% to 12.5%, but unhappy that the benefits of indexation (it increased the acquisition value of the asset by taking inflation into account) have been scrapped; and some middle-class taxpayers who have opted to be taxed under the new tax regime are cheering the slight changes in the definition of income slabs, and the increase in standard deduction, but there is a larger message behind these changes in taxes. Read along with the FM’s statement that suggests that a new direct tax code is in the works (or will soon go into the works), there is clearly a move towards simplification of the tax framework.
And, finally, the economics of the budget show that the government has, in reality, not moved away from its established template. This is not a contractionary budget, so the focus on welfarism continues; as does the emphasis on capital expenditure (it remains at 3.4% of GDP). But neither has come at the cost of busting the bank. The budgeted fiscal deficit, at 4.9% (lower than the 5.1% mentioned in the interim budget) is a sign of fiscal prudence and macroeconomic stability that has become characteristic of the Indian economy under this government. Continuity is good, as long as the jobs get created.
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