24

Jul

"It is a save my govt." budget on 10 Development Pillars

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Prof Shivaji Sarkar

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New Delhi | Thursday | 25 July 2024

It is a coalition budget with the promise of job creation through the corporation a tall task placating the contentious allies with a large package and opening the states to multilateral bank funding, which can become a dilemma.

Politics and coalition have a message of June 4, 2024, becoming the benchmark for at least a visible change in approach to the economy. Inflation control has now emerged as a priority. The government claims inflation has moderated, but the RBI says it remains at 5.1 per cent or above.

Changes in the new income tax rates are welcome but it has also seen the bracket of Rs 20 lakh at the 30 per cent rate getting at Rs 15 lakh which was under a lower slab.

The changes in capital gains tax would cause more outgo in taxes as the indexation process beyond 2001 has been done away with. It could lead to many deals in cash as the outgo between the old rates and the new would be heavier. The government to plug it should better continue with the system of indexation.

Agriculture allocation of Rs 1.52 lakh crore is inadequate. There is a large sum of Rs 1.64 lakh crore allocated separately for the free food programme to 81 crore people. The growth rate of agriculture has come down to 1.4 per cent from 4.4 per cent. The fisheries sector has grown 8.9 per cent, a success of the PM’s Matsya Sampada programme.

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Article at a Glance
The recent budget announcement has been met with mixed reactions, with a focus on job creation and inflation control. The government has set an ambitious target of creating one crore jobs per year for the next five years, with an allocation of Rs 2 lakh crore for employment generation. The budget also aims to promote entrepreneurship, with the Mudra scheme loan limit doubled to Rs 20 lakh.
The agriculture sector has received an allocation of Rs 1.52 lakh crore, which is considered inadequate by some experts. However, the government has emphasized its commitment to horticulture and climate-resilient agriculture, with the development of 109 new crop varieties.
The budget has also introduced changes to the income tax rates, with a welcome reduction in the 30% tax bracket. However, the removal of indexation for capital gains tax has raised concerns about increased tax outgo. The government has also cut the gold tax to 6% from 15%, which is expected to boost demand in the pre-wedding season.
The budget has been criticized for its focus on placating contentious allies, with large allocations for Bihar and Andhra Pradesh. The government has also announced a 50-year loan to states, which has been met with skepticism by some experts.
Overall, the budget has been described as a "coalition budget" with a focus on job creation and development. While it has its limitations, the budget has been praised for its efforts to promote entrepreneurship and strengthen the agriculture sector. The government's commitment to reducing the fiscal deficit to 4.9% has also been welcomed as a positive step towards fiscal prudence.

 

Gold tax cut to 6 per cent from 15 per cent is good in pre-wedding season. Gold would, however, be appreciated as it is becoming a global currency.

Bihar and Andhra are beneficiaries of the largesse and boom of the construction lobbies in these states.

Amaravati to be built will have many perks for the Andhra construction and other industries and boost the clout of Chief Minister N Chandrababu Naidu. There are at least two major industrial corridors envisaged in the state. It is supposedly to spur industrial activities.

Multi-dimensional construction of bridges, and other infra and turning Nalanda and Gaya from pilgrim destinations to tourist destinations would see many destructions of old and maybe ancient structures as it happened in pilgrim centres of UP. Giving importance to Chief Minister Nitish Kumar, a key alliance partner of the Narendra Modi government, Union Finance Minister Nirmala Sitharaman announced to sanction of Rs 58,900 crore to Bihar in the 2024 Union Budget.

A review of Gaya and Nalanda, which have basic infrastructure developed during the last many years can be improved but caution is needed so that the basics are not changed. There are proposals to have industry in Gaya. It should match ecologically and aesthetically.

Be it Andhra Pradesh or Bihar the developments should not be done just to prop up real estate prices. In some of the places in UP, this has happened and the cities have seen the destruction of habitats without compensation or payment of paltry sums. There are rumblings in states that all need special care which has been given to Andhra and Bihar, who were demanding special status. But a multilateral institutional window has seemingly been opened. Sitharaman also announced the provision of a 50-year loan to the states that would have to be repaid in 2073. It is a bonanza as some states may see but it is a burden also on the future generation.

The budget continues with the developed India vision built on the pillars of agriculture, employment, inclusive development, manufacturing and services, urban development, energy, infrastructure, innovation-research and next-gen reforms. This was the bedrock of the interim budget presented in February. Finance Secretary Somnathan stressed the point to underscore that the basic focus of the budget has not changed.

The big theme of the budget is a bouquet of jobs or employment, raised by the opposition INDIA alliance during the election campaign with an aggregate spending of Rs 2 lakh crore, aimed at incentivising companies to create jobs, and at training people to be ready for jobs, including apprenticeships, at 500 best companies. This is to address the jobless growth that had become a problem even before the NDA government took over in 2014. This is perhaps the first time a budget is focused on employment and creating employability among the youth. The Economic Survey 2023-24 highlighted the issue.

 The government wants to create a crore of jobs a year for the next five years or till the 2029 elections. This means each of the 500 companies, including those in critical and having issues with safety like power plants, refineries, and chemicals, have to employ 4000 persons as trainees to be eligible to have incentives of Rs 6000 per employee. The companies would have to retain them for 12 months. The apprenticeship programme was introduced by late Prime Minister Indira Gandhi too. It had limited success. In automated software-controlled operations, few companies need a large workforce. Part of the expenses are to be met by the Corporate Social Responsibility funds. Still employing such large numbers is not convenient for many.

Though well-intended, actual beneficiaries could be far less.

It is a productive response by the BJP as also to create a narrative. The government perhaps would do better to do away with Agniveer-like schemes to suit the needs of Haryana youth. Armed forces recruitment could continue as done.

Mudra scheme loans have been doubled to Rs 20 lakh. It is not considered adequate to start a new business. Threshold requirements are high.

The farm sector has been given further stress for horticulture and 109 different kinds of 32 varieties to suit the climate changes are being developed. Horticulture and vegetable production have increased to over 200 lakh tonnes each. An effort to ensure that rice, wheat or vegetables do not see price fluctuations that lead to high inflation.

On the fiscal side, the government has adopted a cautionary attitude leading to the reduction in fiscal deficit to 4.9 percent. This would also mean government would be careful in its expenses including capital expenditure of Rs 11.9 lakh crore. Instead of massive spending, it would be more selective as it has done for the railways where the largest infra fund would be spent on safety and signalling issues.

Overall despite continuity from the interim budget, the finance minister has presented a budget that is different in its outlook though it may not contain inflation but aims at creating jobs and strengthening the development of the country.

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