The Union budget 2024-25 in India comes at a crucial time, with the country grappling with widening inequalities exacerbated by the pandemic. The current budget has underscored strong market intervention for skill development and training to enhance employment generation in the country.
Nevertheless, evidence suggests rising market intervention leads to widening inequality due to the failure of a top-down approach and inaccessible resource allocation. Thomas Piketty, while recognising the significance of education for economic growth, argues against its role as the promised equaliser. Education (emphasising free quality education) can happen to be a tool to end the ‘inegalitarian spiral’ by ensuring decent jobs, but not without addressing the root causes of inequality.
Piketty proposes a progressive global tax on capital as a solution, albeit recognising its utopian nature due to the lack of international cooperation. This implies the need for stronger government intervention which sets the context for critically understanding the limitations of the budget’s approach.
Inflation and taxation in the Union budget
The finance minister opened the announcement of the Union budget 2024-25 by highlighting apparently ‘low’ inflation rates. However, the pertinent aspect to focus on was that the low percentage figures (below 4%) emphasised, addressed only the core inflation.
Core inflation essentially does not address the price changes in the food and energy sector, owing to their volatile prices. However, the food inflation rate was seen to recently hit 9.4% mark this year in June. As a consequence of being a necessity and a source of sustenance, this distressingly impacts the household budget, cutting down the real income among the middle-class and the lower-income groups.
Contrary to the argument, the budget also introduced tax benefits and deductions, aiming at increasing the purchasing power of people in the country (particularly targeting the middle class), such as raising income tax limits and enhancing standard deductions (from Rs 50,000 to Rs 75,000). But a closer look at the linkages clarifies that the purchasing power in the hands of the people is consequential of the income or wages received which can again be traced back to the availability of employment opportunities.
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Despite the aim to increase purchasing power, lack of job creation avenues fail to address the broader economic challenges, particularly creating stable employment opportunities.
This is not to forget that the current unemployment rate stands at 8.1% as per CMIE.
Although the issue of job creation was touched upon in the budget, the increasing dependence on market-based mechanisms for employment is a big reason for worry.
Skill development and training: Are market-driven solutions the right way?
The budget’s focus on skill development and training, including with private partnerships, seemingly aim to enhance employability. The announcement of upgrading 1,000 Industrial Training Institutes (ITIs) into a hub-and-spoke model, aligning course content with industry needs, and introducing new courses for emerging fields is a purported effort to modernise vocational education.
The centrally sponsored scheme aiming to train 20 lakh youth over five years further appears to underscore this commitment. These institutes are pivotal in providing vocational education and training to a large segment of the youth, particularly those from marginalised communities who may not pursue higher academic education.
However, simply increasing the number of trained individuals does not automatically translate to job creation, especially in a market where job opportunities are not growing proportionally.
The priority of vocational training must be complemented with policies that accentuate the intersection of stimulating job creation and addressing the structural inequalities across caste, gender and class, which has been conveniently overlooked.
A comprehensive approach with the help of scholarships and grants (without borrowings) can enhance the employability of graduates and contribute to reducing informality in the labour market, which might be a critical step towards achieving sustainable economic growth and social equity.
Additionally, the paramount emphasis on market access and industry collaboration for skill development/internships poses several issues.
While aligning training with market needs is beneficial, over-reliance on market-driven solutions can marginalize those who do not have access, leading to further exclusion. For instance, the proposed schemes for internships, such as paid internships in so-called ‘top’ 500 companies with a Rs 5,000 stipend, may offer short-term benefits but lack long-term solutions for sustainable employment and job security.
Understandably, internships do not guarantee employment which can enhance or sustain livelihoods. Further, complete dependence on the market and the absence of government intervention in the form of schemes for skill enhancement of the youth and workers cannot be a promising way forward, as they are merely a temporary solution for the unemployment condition in our economy.
Student loans: A burden in disguise?
Introducing student loans up to Rs 10 lakh with e-vouchers and a 3% interest rate aims to make education more accessible. However, this approach mirrors the problematic student loan system in the United States, which has led to significant financial burdens for graduates.
Moreover, loans are often taken by the middle class and marginalised, who have limited access to substantial financial resources, further pushing them into a debt trap. Additionally, considering the unemployment rate in our country and inadequate job opportunities, students may find themselves in debt with limited means to repay, exacerbating financial household insecurity.
Loans as a means of funding education do not address the fundamental issue of unequal access to resources. Scholarships, grants, and other transfer payments, on the other hand, should be prioritised to support economically and socially disadvantaged students.
Enhancing women’s participation: Can we speak beyond infrastructure?
According to the current budget, women’s participation can be enhanced by bringing more women’s hostels with industry support. This discards the scientific evidence about plausible reasons for lower women’s participation, such as household crises, low education levels, and limiting women to focus on the reproductive and care economy.
Addressing inclusivity involves tackling deep-seated structural barriers, including societal norms and biases, that hinder women’s participation in education and the workforce. Comprehensive support systems (both economic and social), including financial aid, transfers to benefit the household, and safety measures, are crucial to ensure that women can fully benefit from these initiatives.
Reforms
The 2024-25 Union budget presents an opportunity to align with global objectives of Sustainable Development Goals (SDGs) yet it falls short in several critical areas.
SDG 4 aims to ensure inclusive and equitable quality education and promote lifelong learning opportunities for all. However, the budget’s reliance on market-based support for education and student loans does not adequately address the need for inclusive and equitable access.
Additionally, SDG 10 emphasises on reducing inequality within and among countries. While the budget includes measures to enhance employability and skill development, it lacks a comprehensive approach to tackling the structural barriers perpetuating inequality.
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A critical analysis reveals that without addressing the underlying causes of inequality, the measures in this year’s budget fall short of being the great equaliser they aim to be. Drawing from Piketty’s argument, comprehensive reforms for narrowing inequality can be achieved through focusing on redistribution and allocations such as free quality healthcare, education, and public transportation, which also can lead to decent-paying jobs.
These imply the need for stronger government intervention instead of increasing access and priority on market-based reforms. To truly bridge the gap and create an equitable education system, the government must adopt a holistic approach that goes beyond market-driven solutions and addresses structural inequalities. Moreover, announcements concerning taxation as a move towards increasing people’s purchasing power can only be achieved when the government creates quality jobs, which should not be an interim effort through over-dependence on the markets.
Boddu Srujana and Aurolipsa Das teach Economics at SRM University – Andhra Pradesh.
