It’s typically expectations which determine the level satisfaction in most events, and this time around, expectations were riding high in both directions (for better and for worse) on the first budget in Modi 3.0.
However, the July 2024 Union Budget stayed on the set path, building on policies and intentions announced in previous budgets. The stated theme – employment, skilling, MSMEs, and the middle class – endorsed the focus on segments that were highlights of previous budgets and the proposals relating to each of these segments, if passed, will only deliver benefits over time.
An interesting proposal to address both employment and skilling was the Prime Minister’s package of 5 schemes and initiatives to facilitate employment, skilling and other opportunities for 4.1 crore youth over a 5-year period with a central outlay of Rs 2 lakh crore.
India, being in the unique position of having more than 50% of its population below the age of 25 and more than 65% below the age of 35, could be sitting on a large dividend or an equally large crisis. The outcome – our ‘demographic’ being a boon or bane – will depend on what we do with this potential asset. Acknowledging the need to make our young population an asset, the budget proposed ways to boost youth employment and skills development.
The most innovative proposal in this domain was a comprehensive scheme for providing internship opportunities in 500 top companies to 1 crore youth in 5 years. The scheme feeds two birds with one scone – on the one hand, youth gets exposure to real-life business environment, varied professions, skilling and potential employment opportunities and, on the other hand, corporates get access to fresh talent at a marginal cost.
In many other ways, the budget resorted to innovation and digital technology, while still maintaining continuity with previous policies. Releasing 109 new high-yielding and climate-resilient varieties of 32 field and horticulture crops for cultivation by farmers to boost productivity, encouraging cooperatives and start-ups to create vegetable supply chains and leveraging the new trend towards natural produce were all instances of modern solutions to a classic problem.
Interestingly, another subtle theme of the budget was leveraging untapped on under-optimized resources. It clearly signaled its intent to bring women into the workforce with an allocation of more than Rs 3 lakh crore for schemes benefitting women and girls. Given that among the BRICS nations India has the lowest female labor participation rate and women make up 48% of India’s total population but only 9% of the workforce post-pandemic, the under-utilization is apparent.
Another instance of un-optimized resource utilization is India’s potential to be a magnet for tourists. Towards this end the budget continued its quest to position India as a global tourist destination. This will unlock multiple economic opportunities for other sectors, create jobs and stimulate investments.
In many ways, the budget also leveled playing fields – for small entrepreneurs (enhanced access to funding), women (access to skilling, support infrastructure, etc.) and even foreign companies (in the form of a reduction in the corporate tax rate).
Overall, by demonstrating its commitment to promote all-pervasive and all-inclusive development of farmers, youth, women and the poor, the budget took one step further on its path towards creating a stronger and more sustainable base for growth and development.
The most notable feature of July Budget 2024 was its ability to stay committed to the path of fiscal consolidation that it set out for itself in 2021. In fact, the government has actually managed to trim the fiscal deficit target for FY25 to 4.9% of GDP, significantly lower than the 5.1% target announced during the interim budget in February 2024. Critics would argue that the RBI’s transfer of a record Rs 2.11 lakh crore of its surplus money for FY 2024 to the central government provided an economic cushion, as did the buoyancy in tax revenues. However, absence of populist policies endorsed the intent of fiscal rectitude, which does not seem to have come at the cost of increasing capex or allocations to segments of the economy that needed funding.
All in all, the budget may not have received a resounding applause from the stock market, which is typically the real time, first response, ‘judge and jury’ of the policy announcement. However, that was only to be expected, since the budget stayed on the set path, building on previous policies and making a few tough choices rather than playing to public sentiments. In all fairness, it neither delighted nor disappointed; it simply stayed on course.
