Unemployment, inflation and inequality were major issues in the recent general elections. A number of surveys of the Union government such as the Annual Survey on Unincorporated Sector Enterprises (ASUSE) and the Household Consumption Expenditure Survey (HCES) show that a large majority of the population still earn very low incomes.
Over the last few years, there have been many independent surveys as well as analyses on real wages showing that the recent phase of economic growth has only benefited the few super-rich and has failed to create decent job opportunities. The manifesto of the Bharatiya Janta Party (BJP), which has been the ruling party for the last ten years, spoke about a number of guarantees (‘Modi ki Guarantee’) but basically indicated that it would be business as usual if they came back to power, despite the numerous promises involving benefits to the poor, youth and women made by the Opposition parties.
There has been a slowdown in the economy, especially affecting the informal sector following policies such as demonetisation and the abrupt introduction of the Goods and Services Tax (GST) which was exacerbated by the pandemic. Macro indicators on growth in domestic private final consumption expenditure as well as increasing household indebtedness have been causing concern, although there seems to be a recovery in overall GDP growth. Private investment has also not been picking up despite various tax as well as credit incentives.
The strategy of the government over the last few years has basically been to increase public investment through higher allocations for capital expenditure in the budgets. While public capex was 1.6% of the GDP and 11.8% of the total expenditure in 2014-15, it increased to about 4.3% of the GDP and 28.3% of total expenditure (revised estimates) in 2023-24. The interim budget for 2024-25 presented in February this year, also made a substantially higher allocation for capital expenditure. The hope is that this increased capex would lead to infrastructure and other projects which will not only create employment opportunities but also ‘crowd-in’ private investments. However, such returns have not really been seen yet.
Also read: How Consumption Slowdown Meets Persistent Inequality
This strategy is part of an overall attempt to stick with a neoliberal market-based agenda which is also reflected in the speeches of the policy makers a number of times with their focus on the important of ‘wealth-creators’ and so on. In keeping with this trend, the government has also been quite regressive in its taxation with greater emphasis on indirect taxes and various exemptions. The tax to profit ratio for companies with profit (before taxes) greater than Rs 500 crore is 19.14 compared to 24.82 for companies with profit of less than Rs 1 crore.
On the other hand, in terms of expenditure while the capex has increased this has also come at the cost of reduction in expenditure in a number of social sector schemes. As seen in the reports brought out by the Centre for Governance and Budget Accountability (CBGA), the share of health in the Union budget has reduced from 4.1% in 2014-15 to 1.9% in 2023-24 (0.55% to 0.29% of GDP). The share of education budget has come down from 3.1% to 2.5% during the same period.
Accountability Initiative in its report on ‘The Evolution of India’s Welfare Schemes’ showed how the real allocations in the Union budget for many important initiatives such as the Anganwadi scheme, the Mid-day meal scheme and the National Social Assistance Programme (NSAP) reduced by 20-45%. Another report by the HAQ, shows that the share of children in the budget is at its lowest in 2023-24 (2.3%) compared to 2014-15 (4.5%). Similarly, the share of the budget for NREGA in the total budget/GDP has also shown a declining trend.
Also read: The Deep Crisis in the Informal Sector Is Still Keeping the Lid on Real Wages
Budget 2024, to be presented on July 23, needs to be evaluated in this economic and political context. The general tendency of this government over the last few years has been to continue with similar policies in the Union budget and there have not been any big announcements, especially in relation to spending on welfare. The last such announcement in a budget, was the PM-KISAN scheme giving cash transfers of Rs 6,000 to farmers made just before the 2019 parliamentary polls. The budget speeches have tended to layout some long-term vision statements, with new acronyms and slogans such as Amrit Kaal and so on, without any big layouts in the expenditure budgets.
There are limits to what a Budget can do, it is an accounting statement after all – but at the same time it can and has been in the past used to signal what the priorities of the government of the day are. It needs to be seen if there will be any shift in strategy this time in response to not just the election results but the various incidents over the last month showing the poor state of both employment and education. The disaster related to the National Testing Agency (NTA) (in relation to the NEET, CUET, NET and other exams), the multiple incidents of huge crowds leading to stampede situations to appear for job interviews, the desperate attempts to earn a livelihood by undertaking risky migration to other countries are not to be seen as random disconnected episodes rather as being symptomatic of the various issues needing urgent policy attention backed by budgetary commitments.
Dipa Sinha is a development economist.
