Modi govt taking non-populist route in the Interim Budget an audacious move

The India National Congress, still the main political rival for BJP across many States, is likely to bank on a host of welfare schemes in the General Elections as it has done in the Karnataka and Telangana Assembly polls last year. Former finance minister and senior Congress leader P Chidambaram made that amply clear when he recently said that it would be welfare versus Hindutva in the 2024 elections

When Finance Minister Nirmala Sitharaman presented the much-awaited Interim Budget for 2024-25 last week, she took everyone by surprise by ending her speech in just 57 minutes. That’s the shortest budget speech in recent decades. Interestingly, she also has the record of making the longest budget speech in her name. She spoke for a total of 2 hours and 42 minutes in 2020, her second budget. That’s independent India’s longest budget speech, for completion of which, she had to take a couple of breaks!

Apart from delivering her shortest budget speech this time, she also equaled the record of Morarji Desai for having presented the budget six times on the trot. Interestingly, like in the case of the former Prime Minister, her sixth budget is also an interim exercise. As a convention, a government tables an interim budget before the country heads to the General Elections.

Sitharaman mentioned at the beginning of her speech that she was presenting an Interim Budget for FY25, but her budgetary exercise turned out to be a full one. Barring taxes, it has all ingredients that a full union budget comprises. Perhaps, she wanted to show the electorate about what will be in store for them if they vote for BJP in the upcoming polls.

Among the notable proposals the first full-time woman Finance Minister put forth this time was the move to increase capital expenditure for FY25. She enhanced it by 11.1 per cent to Rs.11,11,111. This is an interesting allocation with some critics asking how the Finance Minister has arrived at that fancy number.

Nevertheless, the capital expenditure, which accounts for 3.4 per cent of the GDP, will continue to be the main growth driver for the country’s economy. But the increase pales in comparison to what she did in the previous budget. In the Union Budget for 2023-24, Sitharaman enhanced capex by a whopping 37.4 per cent to Rs. 10 lakh crore. Of course, the Modi government fell short of the target for the current fiscal. But it will be good for the economy as a whole if the new government sticks to the target and implements it religiously in the next financial year.

The agriculture sector that still generates maximum livelihood opportunities in the country is presently not in a good stead. That’s what the advance budget estimates have also revealed. As per the official data, the agriculture sector is estimated to grow at 1.9 per cent in the current financial year. This key sector clocked four per cent growth in preceding fiscal year. That represents a debilitating 52 per cent year-on-year drop in the growth rate in FY24. Given the visible distress in the sector, it obviously requires higher budgetary support. Surprisingly, Sitharaman went for a marginal hike in the allocation for the sector. The Union Agriculture Ministry got Rs. 1,17,528.79 crore, an increase of a meagre Rs. 1997 crore or 1.7 per cent, for FY25 from Rs. 1,16,788.96 crore (revised estimates) in FY24. Will this key sector get more funds in the full budget?

In her budget speech, the Finance Minister also said that inflation moderated due to proactive steps taken by the Modi government. But inflation pressures are still high. In December 2023, retail inflation went up sharply to 5.69 per cent. Though it’s within the RBI’s tolerance band of two per cent to six per cent, people, more so those from the poorer background are still feeling the pinch as food prices continue to stay high. Higher prices of food items and slowdown in the agriculture sector don’t augur well for the government, which will face elections in a few months from now.

As per a pre-budget opinion survey carried out by a private agency, people strongly felt that the Modi government did not manage inflation in its second term as effectively as it did in the first. But people’s optimism about future growth prospects under Modi is coming to the rescue of his government in this aspect. Will this optimism last till the elections?

On the fiscal consolidation side, the FM said that the fiscal deficit would be cut to 5.1 per cent of GDP in FY25 from 5.8 per cent this fiscal year. That’s a tall target indeed. It’s good if the government achieves it.

Apart from these, she has given a new definition to secularism in her budget speech. According to her, the Modi government has been implementing its targeted welfare schemes at saturation level. So, people from all communities, religions and castes are benefitting from these schemes. She claims that that’s what true secularism means. That’s an interesting take on secularism! Political rivals mainly target BJP for its pro-Hindu stance, saying it dents India’s secularism credentials of treating all religions with equal respect. Will this new definition of secularism blunt that criticism? We will know that only after the elections.

Anyway, through her budget speech, Nirmala Sitharaman sent across two key messages, loud and clear.

Firstly, she sounded extremely confident that the BJP would score a resounding victory in the upcoming General Elections. The second message is far more audacious. In its third term, the Modi government will shun populist schemes. Instead, it will solely focus on development. That’s obviously the reason why it has not included any populist schemes in the Interim Budget.

I am calling it audacious because the India National Congress, still the main political rival for the saffron across many States, is likely to bank on a host of welfare schemes in the General Elections as it has done in Karnataka and Telangana last year.

Former finance minister and senior Congress leader Palaniappan Chidambaram made that amply clear when he recently said that it would be welfare versus Hindutva in the 2024 elections. Given the prevailing situation, that might be the only option for Congress. But BJP may be under the impression that people will not shift their loyalties to Congress even if it comes out with large-scale freebies as they don’t trust the grand old party anymore. There are also ample chances of BJP telling the voters that Congress has failed to implement the welfare schemes it has promised in Karnataka due to lack of funds. But BJP is aiming for a third consecutive term at the Centre. As I wrote earlier, no other Prime Minister barring Pandit Jawaharlal Nehru has achieved this rare feat in the last six decades.

The saffron party is shunning populist schemes while going into such a crucial election! Have the three factors of overwhelming response to the consecration ceremony of Shri Ram Lalla in Ayodhya, an opposition that is getting weaker by the day and its recent victory in three States, made the BJP believe that the 2024 General Elections will be a cakewalk? It looks so.

But the fact of the matter is that all the proposals in the Interim ‘Full’ Budget will have a meaning only if BJP comes back to power! That’s the bottom line!