Budget 2024: More Band-Aids Than Surgery!!
In a recent article, the Union Finance minister has been commended for adopting major policy proposals from the Congress’s 2024 manifesto. Employment-linked incentives and apprenticeship provisions are seen as positive steps, though they might not address the fundamental economic issues.
The New Employment Generation scheme and New Internship Program received Rs. 10,000 crore and Rs. 2,000 crore respectively, reflecting a cautious approach reminiscent of the Atmanirbhar Bharat package. The government's reliance on supply-side measures in a demand-driven crisis raises doubts. On average, each company would need to take on 20,000 interns, a daunting task with uncertain returns. Without increased demand and production, companies may not be willing to reduce profit margins by hiring more workers.
The budget's focus on short-term fixes instead of long-term solutions is evident. Private consumption growth hit a 20-year low in 2024 (excluding the COVID-19 period), and household savings fell to a 47-year low. The RBI's May 2024 consumer confidence survey indicated growing pessimism among people. Amidst a generational income crisis, the budget's measures fell short.
Tax exemptions could have provided a quick boost to consumption. However, the revised tax slabs only apply to the new regime, which lacks deductions. A middle-class family, for instance, might defer purchasing a flat due to the inability to deduct home loan interest. Such deferred decisions collectively contribute to a national demand slump.
Inflation remains a significant concern, with food inflation surpassing 9.5 percent in June. The finance minister's claims of controlled price rise seem disconnected from reality. Household consumption surveys reveal that over 80 percent of people spend less than Rs. 200 per day, and nearly 34 percent spend less than Rs. 100 per day. This vast population sees little benefit from the budget.
The budget's allocation choices are also telling. Cuts in food and fertilizer subsidies, a marginal reduction in the defense budget, and stagnant funding for MGNREGS despite increasing demand highlight the government's priorities. Despite growing eligibility, allocations for PM Kisan and crop insurance schemes have not increased.
Critics point to the government's appeasement of political allies, notably andhra pradesh and Bihar, which undermines the PM's strongman image. The budget contrasts sharply with Dr. manmohan Singh’s 1991 reforms, which, despite unpopularity, set india on a path to economic growth. While Singh and Rao risked political power for long-term prosperity, the current leadership appears more focused on consolidating political alliances.
As tomorrow marks the anniversary of Dr. Singh’s transformative budget, it's a poignant reminder of missed opportunities. The government had a chance to initiate economic recovery but chose to prioritize political expediency instead.
The New Employment Generation scheme and New Internship Program received Rs. 10,000 crore and Rs. 2,000 crore respectively, reflecting a cautious approach reminiscent of the Atmanirbhar Bharat package. The government's reliance on supply-side measures in a demand-driven crisis raises doubts. On average, each company would need to take on 20,000 interns, a daunting task with uncertain returns. Without increased demand and production, companies may not be willing to reduce profit margins by hiring more workers.
The budget's focus on short-term fixes instead of long-term solutions is evident. Private consumption growth hit a 20-year low in 2024 (excluding the COVID-19 period), and household savings fell to a 47-year low. The RBI's May 2024 consumer confidence survey indicated growing pessimism among people. Amidst a generational income crisis, the budget's measures fell short.
Tax exemptions could have provided a quick boost to consumption. However, the revised tax slabs only apply to the new regime, which lacks deductions. A middle-class family, for instance, might defer purchasing a flat due to the inability to deduct home loan interest. Such deferred decisions collectively contribute to a national demand slump.
Inflation remains a significant concern, with food inflation surpassing 9.5 percent in June. The finance minister's claims of controlled price rise seem disconnected from reality. Household consumption surveys reveal that over 80 percent of people spend less than Rs. 200 per day, and nearly 34 percent spend less than Rs. 100 per day. This vast population sees little benefit from the budget.
The budget's allocation choices are also telling. Cuts in food and fertilizer subsidies, a marginal reduction in the defense budget, and stagnant funding for MGNREGS despite increasing demand highlight the government's priorities. Despite growing eligibility, allocations for PM Kisan and crop insurance schemes have not increased.
Critics point to the government's appeasement of political allies, notably andhra pradesh and Bihar, which undermines the PM's strongman image. The budget contrasts sharply with Dr. manmohan Singh’s 1991 reforms, which, despite unpopularity, set india on a path to economic growth. While Singh and Rao risked political power for long-term prosperity, the current leadership appears more focused on consolidating political alliances.
As tomorrow marks the anniversary of Dr. Singh’s transformative budget, it's a poignant reminder of missed opportunities. The government had a chance to initiate economic recovery but chose to prioritize political expediency instead.