This is the second Union Budget of the third National Democratic Alliance (NDA) government.
A month-long pre-budget consultation was started on December 6, 2024, which included stakeholders. The Ministry of Finance invited more than 100 experts from agricultural associations, trade unions, industry bodies, the financial sector, capital markets, and so on, along with economists.
Citizens were also encouraged to participate in the process by giving suggestions through the MyGov platform.
But to achieve Vikshit Bharat, there is a need for creating regular employment along with higher wages and greater increase in the current per capita income – about four times compared to developed nations. In the last budget, a significant policy announcement was made to address the problem of high unemployment in terms of ‘PM Employment Linked Incentive’. It included internship programmes by top 500 corporates. For these initiatives Rs 12,000 core was earmarked by the Ministry of Labour and Employment and the Ministry of Corporate Affairs. Not much information is available in the public domain on the progress of these employment linked schemes. Since these are supply-side interventions based on the willingness of the corporate sector, therefore there is an apprehension that the desired result cannot be achieved in the short term. The current focus is only on wage subsidies. Skill development of labour components cannot solve the present jobs problem unless the government focuses on the needs of the demand side. The forthcoming budget should therefore seriously consider starting a scheme for creating employment in urban areas.
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Despite the ambitious commitment announced in the previous budget, there is a decline in the GDP growth prospect from 8.2% to 6.4% for the current financial year. Although in the recent few budgets, more focus was given to capital expenditure, this has largely been done in the large physical infrastructure sector including ports, roads, and railways, which have a long gestation period.
Less focus was given to small social and physical infrastructure such as schools, colleges, health centres, Anganwadi centres, and housing for the poor which could have created quick employment and put disposable income in the hands of people.
Additionally, the frontline workers employed in these social institutions – Anganwadi workers and helpers, ASHA workers, and para-teachers are paid even less than minimum wages. The entitlement and benefits in terms of hot cooked meals in schools and Anganwadi centres have very low unit cost. The National Social Assistance Programme covering elderly, widow and disability pension also has poor unit cost ranging from Rs 200 to Rs 300 per person per month. This budget must try to address the problem of low unit cost and link it with the inflation index.
Further, there has been a concern about growing inequality, inflation and the weak rupee. A large part of the nation’s wealth is concentrated in the hands of a few. There is inadequate allocation for education – only 3% of GDP is spent on education, far below the 6% recommended by the Kothari Commission in 1978 and the New Education Policy in 2020. The government should invest in public schools and colleges to reduce dependence on private institutions. It should improve infrastructure, teacher training, and learning resources in government institutions.
There are concerns about public health expenditure. Out-of-pocket expenses constitute 50% of health costs, with only 1.3% of GDP allocated to health compared to the recommended 3%. Communities in the Scheduled Castes, Scheduled Tribes, minorities, and persons with disabilities should be prioritised.
Limited focus is given to Gender Responsive Budgeting (GRB) in budget statements, declining social sector spending, including reduced allocations for the Ministry of Women and Child Development, insufficient social protections for women, such as decreased allocations for MGNREGS, inadequate maternity benefits, and minimal support for pensions. There is also underutilisation of the Nirbhaya Fund and insufficient budget for gender-based violence schemes, combined with a lack of reliable data for gender-based planning and budgeting.
There are many shortcomings in policy design, including inadequate resource allocation, poor implementation and monitoring of Development Action Plan for Schedule Castes and Development Action Plan for Schedule Tribes. A large amount of the budgetary allocation made by general sector schemes towards DAPSC and DAPST continues to be notional in terms of reporting. Funds are allocated without formulating any methodology or scientific criteria. Unit cost for scholarship schemes should be increased for inflation. Further, the government has to increase awareness and continuation of schemes for minorities like Maulana Azad Fellowship for higher education, the Madrasa Modernisation Programme, the Maulana Azad Education Foundation and scheme for competitive examinations.
Noted economist Arun Kumar further says that importance is to be given to achieving full employment to reduce societal inequalities and there is need for reforms in the Goods and Services Tax framework, which disproportionately benefits the formal sector. The informal sector, comprising agriculture and small businesses, often lacks access to GST input credits, leaving it disadvantaged. The Union government has to increase investment in education, health, and skill development.
Jawed Alam Khan is a development economist and associated with Institute of Policy Studies and Advocacy, New Delhi (ipsadelhi16@gmail.com).
