Budget focus should be as much on rural sector as has been for industry and job-linked incentives

A systematic review of public expenditure and publication of the same should happen every year, while also make efforts to enhance transparency and accountability of public expenditure management

Every Union Budget is expected to address issues concerning marginalized sections like farmers, labourers, women, children and informal workers, who need support from the Government. It should focus on MSP for agricultural produce, infrastructure development, MSMEs, social sector expenditure, employment generation for youth, social protection, tax compliance and review of public expenditure’ at the end of the year adopted with an output based approach.

Let’s take a look at what the Union Budget 2024-25 has in store for the country and the people.

Macro variables:

The government has decided to spend Rs. 48, 20,512 crore during 2024-25, while it is 8.5 per cent more than the actual expenditure in 2023-24. Incidentally, 37 per cent of this total expenditure is met through revenue receipts whereas the interest payments account for 24 per cent. The receipts to the government, other than borrowings in 2024-25 are estimated to be Rs. 32, 07,200 crore, 15 per cent higher than the receipts obtained in 2023-24. Interestingly, tax revenue which forms major part of the receipts is expected to increase by 11 per cent over the previous fiscal. It expects a nominal GDP growth rate of 10.5 per cent in 2024-25, including real growth and inflation. Revenue deficit is targeted at 1.8 per cent of GDP while it was 2.6 per cent last year. Fiscal deficit targeted at 4.9 per cent of GDP during 2024-25 is lower than last year’s actual fiscal deficit of 5.6 per cent.

Income tax slabs have been modified with a minor tweaking benefiting the tax payers especially the lower middle class by one lakh on the other side of the range in the two slabs (Rs. three lakh-seven lakh and seven lakh-10 lakh) while tax rate did not change. Capital gains tax on both short term and long term have been increased marginally while securities transactions tax has been increased slightly. TDS on certain items such as payment of insurance commission, payment of life insurance policy, rent payment, payment of commission or brokerage has been slashed from five per cent to two per cent which will benefit the lower and upper middle class.

Employment linked initiatives:

The Centre has planned to generate employment opportunities to approximately 4.1 crore youth over next five years. Towards this, it has allocated Rs. two lakh crore. The Finance Minister Nirmala Sitharaman has earmarked Rs. 1.48 crore for skilling people, while, in a welcome development, she has decided to upgrade 1000 it is. A separate self-financing guarantee fund has been created for MSMEs. This will provide guarantee cover up to Rs.100 crore. Several employment generation measures for the youth and encouragement to the MSMEs is a much needed initiative, though one has to see its impact on the economy. There is a need to promote tax compliance at all levels so as to enhance the tax revenue and broaden the tax base of payers. The five employment-linked incentive schemes/initiatives are a big push in the direction of creating skilled workforce and increasing employment opportunities to the youth. Corporate tax rates on foreign companies investing in India have been slashed from 40 per cent to 35 percent. However, it needs to be seen if it will benefit to Indian corporates and the economy in the process.

Agriculture:

As regards agriculture, the allocation has been increased by 4.58 per cent to Rs. 1,32, 470 crore from Rs. 1,26,666 crore in the revised estimates of 2023-24. But it needs to be explained how this money will be spent on the welfare of farmers. In fact, the government should come out with some innovative schemes and initiatives that can benefit small and marginal farmers in terms of adequate irrigation, cheaper institutional credit and MSP that covers total cost plus 50 per cent profit on the agricultural produce. Surprisingly, the government did not mention anything about MSP for the agricultural produce, which is the only critical measure that improves the incomes of the farmers.

Secondly, the budget did not discuss about new social protection measures especially for the elderly while their population is on the rise and there is an obligation on the part of the government to protect them.

Thirdly, allocations to the social sector did not improve although everyone expected a hike to cater to the needs of health care and education in rural areas. Health care and quality education at the village level will bring about a sea-change in the quality of life of people.

In order to promote vegetable production and control food inflation, vegetable production clusters have been proposed near major consumption centres. This will perhaps trigger growth in agriculture and allied activities.

A national policy is to be drafted for the development of the cooperative sector. Of course, wage employment is created through MGNREGS but allocation has been reduced. Further, it should be mentioned that the deficient demand and slow consumption growth in rural areas are two key issues that should have been taken into cognizance when a budget is being prepared.

Rural and urban development

A transit-oriented development plan will be prepared for 14 identified large cities with a population over 30 lakh. The states, which are charging high stamp duties, will be encouraged to reduce them and even further for women buying property that would result in increased land rights of women. Besides, three crore additional houses will be built under the PM Awas Yojana in rural and urban areas.

The way forward

A systematic review of public expenditure and publication of the same should happen every year, while also make efforts to enhance transparency and accountability of public expenditure management.

The government should invite economists and planners to seek to design and implement any specific scheme for the agricultural community and shock responsive social protection to the elderly, among others. The consultations should happen at the district and state levels and finally at the national-level.

It appears that Union Budget 2024-25 is more towards industry and employment linked incentives by providing subsidy to the urban sector but at the same time the rural sector equally deserves attention.

(The writer is a Hyderabad-based economist and public policy analyst)