A LOT HAS CHANGED in a few months, and it was clearly evident in the Modi 3.0 government’s first budget.
Union Finance Minister Nirmala Sitharaman presented an interim budget on February 1 against the backdrop of the confidence that the BJP-led government would return to power with a larger majority, and her speech dwelled on the achievements of the BJP’s decade-long rule. On July 23, Sitharaman’s speech presenting the full budget was just 30 minutes longer than the previous one, and conveyed a succinct message reflecting the new political landscape.
With an apparent hint of course correction, the focus shifted to job creation, putting more money in the pockets of the middle class, and giving the rural economy a boost, signalling that the government was sensitive to their distress. According to a survey by the Centre for Monitoring Indian Economy, unemployment rate in India rose sharply to 9.2 per cent in June 2024 from 7 per cent in May. The budget’s job pitch may provide relief to the youth and the middle class.
The political intent of the budget outweighed the big-ticket reforms the government had promised before the 2024 polls. But what marks the continuity from the interim budget is the promised fiscal consolidation―with the targeted fiscal deficit going down to 4.9 per cent of the GDP from the 5.1 per cent set in February―and the infrastructure push. Also, the finance minister did not quote any poet, just like the interim budget, and kept her speech short.
What stood out was the prominence of new realities. The government paid the political MSP (minimum support price) to its two most important allies―Bihar Chief Minister Nitish Kumar’s Janata Dal (United) and Andhra Pradesh Chief Minister Chandrababu Naidu’s Telugu Desam Party―as the finance minister announced budgetary allocations and a promise to get more from financial institutions. Together these parties provide the support of 28 MPs in the Lok Sabha and they seem to have exacted a cost as they wanted more than just plum cabinet berths.
Naidu with his 16 MPs is crucial for the NDA government’s survival and he has reasons to feel satisfied now that his dream capital, Amaravati, on the banks of the Krishna, will see the light of the day with Sitharaman promising Rs15,000 crore and more funds later, apart from a commitment on the Polavaram irrigation project, which aims to irrigate 4.36 lakh acres and generate 960 MW power. “It is an emotional issue for Andhra Pradesh as we were working without a capital in the last five years,” said TDP leader and Civil Aviation Minister K. Ram Mohan Naidu. “Prime Minister Narendra Modi had said we will take care of you. People see what has been promised before polls have been delivered.”
With Naidu, the BJP may look at a stable partnership ahead, but with Nitish, it has a chequered past. In an apparent poll pitch, Sitharaman announced Rs26,000 crore worth of road projects while promising more hospitals, airports, and sports complexes apart from developing an industrial node and religious sites in Gaya and a 2,400MW power project at a cost of Rs21,400 crore. She also announced financial support of Rs11,500 crore for flood control measures in the state. For the politicised state, however, the announcements may not mean much. “These are routine announcements. What’s so special about these? We want special status. Nitish Kumar has discarded the special status demand,” said RJD leader Manoj Jha.
The allies in Bihar and Andhra Pradesh might have got enough, but the poll-bound Maharashtra and Haryana failed to find any mention in the budget, kicking up a political storm. Former Maharashtra chief minister Prithviraj Chavan said the budget was only about Andhra Pradesh and Bihar. “And that is why Maharashtra has suffered. There is nothing new for Maharashtra. All that we got was continuation of existing schemes like funding for highways and metro,” said the Congress leader.
Sitharaman, however, said in the Rajya Sabha a day after the budget that all states were not necessarily mentioned in the budget. “PM Modi has already approved Vadhavan port in Maharashtra at a cost of Rs76,000 crore,” she said.
The BJP might have raised a saleable poll pitch for the assembly elections, but the government would have to deliver on its other biggest focus of this budget―jobs and agriculture―to get any traction in Haryana and Maharashtra. In fact, the subtle change in the government’s theme comes with visible emphasis on the middle class, an opinionated section of society that had largely supported the party and hailed Modi. This aspirational class had felt the pinch of inflation and unemployment, and wanted more in the pockets to spend and to save.
The budget made mobile phones and gold cheaper, two things the middle class spend a lot of money on. Wooing them makes political sense, considering their growing size. The government claims to have added 25 crore to the category in the past 10 years. The BJP clearly suffered from the strong undercurrent during the polls generated by a lack of employment opportunities. The series of question paper leaks has only exacerbated the situation. And, as the polls results indicated, people needed more than just guarantees.
The finance minister spent a significant part of her budget speech on job creation. She labelled it as the prime minister’s package of five schemes and initiatives. The package aims to facilitate employment, skilling, and other opportunities for 4.1 crore youth over a five-year period with a central outlay of Rs2 lakh crore.
An innovative scheme announced was of internship opportunities in 500 top companies to one crore youth in five years. The interns will get an allowance of Rs5,000 per month, along with a one-time assistance of Rs6,000. The Congress pointed out that the scheme was lifted from its manifesto.
“They should have the seen full budget,” senior BJP leader Ravi Shankar Prasad retorted. “It is a budget for the country’s progress.”
It was also a budget where the chorus to restructure the income tax slabs had been the loudest. The government gave in to the demand, announcing some tax relief for the salaried as the middle class that have been impacted by the price rise. The finance minister proposed to increase the standard deduction for salaried employees from Rs50,000 to Rs75,000. Also, the deduction on family pension for pensioners is proposed to be enhanced from Rs15,000 to Rs25,000 under the new tax regime. This will provide relief to about four crore salaried individuals and pensioners. The tax slabs were also revised to give benefits to middle-income employees.
The big challenge staring at the government in the next five years is going to be from farmers. As several organisations have been preparing for another round of agitation demanding legal guarantee on minimum support price for crops, Sitharaman could not have ignored it. In fact, she started her budget speech mentioning farmers and agriculture.
The forgotten dream of “doubling farmers’ income by 2022” has now been replaced with realistic increasing productivity and resilience in agriculture. “A provision of Rs1.52 lakh crore has been made for the agriculture and allied sectors with an aim to enhance productivity and resilience through missions for oil seeds and clusters for vegetable production,” she said.
Senior farmer leader Vijay Jawandhia, however, slammed the budget as the one which is fooling farmers. “The message for farmers is to quit farming and villages, move to cities and work on infrastructure projects on low pay and get the free ration given by the government and remain satisfied. This is new colonialism. This is a budget which is making ‘Bharat’ a slave of the new Super India,” he said.
The budget, being the first policy document of the government, has signalled that it was ready to listen to people while maintaining fiscal prudence. It was also the new government’s first big test. We will know the results in the Haryana and Maharashtra assembly polls.
With Dnyanesh Jathar