Just before Nirmala Sitharaman presented her seventh consecutive Budget as Union Finance Minister of a coalition led by the Bharatiya Janata Party (BJP), which managed to gain power for the third time on an underwhelming mandate, signals from the government seemed to suggest what its thrust may be. The Economic Survey 2023-24 made clear that while India’s industrialists and business elite were “swimming in excess profits”, the priority of the government was not to tax away that excess for developmental purposes, but to ease the burden of regulation on business and goad the private sector into generating productive jobs out of “enlightened self-interest”. Business must lead the march to Viksit Bharat 2047, and the job of the government is to persuade the private sector not to shy away from leadership.

Outside government, speculation was rife on two matters. The first concerned the possible response of the National Democratic Alliance (NDA) to the signal from the parliamentary elections that the strategy of sidestepping core economic problems — varying from rural distress and widespread unemployment to inflation, especially food price inflation — could prove costly. The second related to the scale and the structure of the pay-off to allies, the Telugu Desam Party (TDP) and the Janata Dal (United), or the JD(U), from Andhra Pradesh and Bihar, respectively, who are crucial to keep the post-election coalition government led by the minority NDA in power.

Initiatives and their slotting

The speech did not disappoint by sidestepping these issues, though the beneficiaries of the schemes meant to address them are likely to be disappointed by their scale and efficacy. Embarrassed perhaps by the hordes applying for the few half-decent jobs available, Part A of the Budget speech spent much time on the means to increase employment, especially for the educated unemployed. Multiple initiatives were announced, which broadly fell in two buckets.

One contained schemes that amounted to providing employment subsidies, either directly or indirectly to employers. The scheme to provide ₹15,000 in three instalments to all new employees with salary up to ₹1 lakh a month appears to be directed to those employed in the formal sector. But it is more than likely that the availability of this benefit would influence the compensation package offered by companies attempting to internalise that subsidy. Another set of subsidies, such as the ₹3,000 a month contribution for two years to be made by the government against provident fund subscriptions, accrues directly to employers.

A second bucket consists of schemes, varying from subsidised internships and interest subvention for educational loans, which attempt to ‘skill’ workers largely at state expense, in ways that are expected to make them more employable. The assumption is that it is not inadequate and inappropriate growth, but a skill set mismatch between what job aspirants have to offer and industry needs, that is responsible for unemployment.

Combine this with direct tax concessions for foreign firms and indirect tax adjustments to favour domestic manufacturing, and the picture that emerges is that the unemployment problem is sought to be tackled by persuading private capital with transfers to hire the unemployed in “productive” jobs. The underlying perception, which misses why high growth does not deliver more jobs is that business wants to hire but finds the available labour force too expensive or unsuited, skill-wise.

This mismatch between the problem at hand and what the Budget offers is even more stark when it comes to agriculture. While peasants unable to make both ends meet because crop production is economically unviable have been demanding procurement at a legally guaranteed minimum support price, the Budget promises to implement a long-term programme to raise productivity and production. Farmers who have been on the streets for years now are unlikely to be impressed.

What the key allies have got

The disappointment is likely to be greater among the NDA’s allies. The JD(U) in Bihar has been promised a combination of sundry transport, power, education, sports and religious tourism infrastructure as an implicit quid pro quo for political support, which is a far cry from the large sums that it was expected to receive if granted the special status it demands, but has been denied. The TDP has been offered support to build its new capital at Amravati, on which Chief Minister N. Chandrababu Naidu has staked his prestige and fortunes. But what is shocking is that these promises have not been backed up by significant financial support from the Centre, with much or almost all of the spending to be financed with borrowing, especially from the multilateral development banks (MDBs), facilitated by the Centre. Why the MDBs should listen to the NDA leaders is not clear. But even if they do so, this would only increase the debt burden of these States. Moreover, given the restrictions that have been placed on borrowing by the States, it is unclear how debt for these purposes could be “additional” to what the State may have in any case chosen to incur.

Preoccupied with propaganda aimed at concealing the little that has been done in these politically-sensitive areas, the government in its first year in power has chosen to completely ignore the welfare schemes it made much of in the run-up to the election. Thus, total expenditure for the National Social Assistance Programme covering pensions and disability benefits, which stood at ₹9,652 crore in 2023-24 as per the revised estimates, has been allocated exactly the same amount in the Budget for 2024-25. That is the fate of the National Rural Employment Guarantee Programme, as well, where the allocation for 2024-25 is exactly the same as the revised estimate for expenditure in 2023-24. Despite the extension of the free foodgrain allocation under the National Food Security Act, the food subsidy is budgeted to fall from ₹2,12,332 crore (RE 23-24) to ₹2,05,250 crore (BE 24-25). It is only in the case of the Pradhan Mantri Awas Yojana (PMAY) that there is evidence of backing grandiose statements in the Budget with some increase in allocation.

The ‘secret source’ of funds

So, is there any larger ambition reflected in the Budget? There are two elements that stand out. One is the obsession with fiscal consolidation, with the fiscal deficit expected to come down from 4.9% of GDP in 2023-24 to 4.5% this year, and a promise of staying on that path subsequently. The other is the claim now made every year that the BJP-led government is taking capital expenditure to new heights, especially on infrastructure. Capital expenditure that rose from ₹7,40,025 crore in 2022-23 to ₹9,48,506 crore in 2023-24, is budgeted to rise further to ₹11,11,111 crore in 2024-25. With tax revenues not expected to register any special buoyancy, how are these conflicting targets expected to be achieved? The well known ‘secret source’ is once again dividends and surpluses from the Reserve Bank of India and leading public financial institutions, which, having risen from ₹39,961 crore in 2022-23 to a huge ₹1,04,407 crore in 2023-24, are budgeted to spike again to ₹2,32,874 crore in 2024-25. But even these funds garnered through transfers within the state are not available for welfare spending or meaningful support for allies on whom the government depends. Prime Minister Narendra Modi and his advisers have either not learnt their lessons or believe there is none to be learnt.

C.P. Chandrasekhar is Senior Research Fellow, Political Economy Research Institute, UMass, Amherst, U.S.

Finance Minister Nirmala Sitharaman on Wednesday, February 1, presented the last full budget of the Narendra Modi government before the 2024 general elections. The Minister announced a range of new initiatives, revised income tax slabs and customs duty, and sops for agriculture and energy transition.

The Union Budget 2023-24 document also listed the new allocations for core welfare schemes that drive socio-economic development. Here’s a roundup of how the budgetary allocations for some of the key schemes have changed-

MGNREGS: The government slashed the budget for its flagship rural employment scheme, the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) by nearly 32% compared to the ₹89,400 revised estimate for the scheme in the current year.

Also read | Explained | The funding and demand for MGNREGA

The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) was passed in 2005 and aimed at enhancing the livelihood security of households in rural areas. Under it, the MGNREGS is a demand-driven scheme that guarantees 100 days of unskilled work per year for every rural household that wants it, covering all districts in the country except those with a 100% urban population.

Food Subsidies: The Centre has allocated a little above ₹2 lakh crore for the food subsidy under the National Food Security Act (NFSA)- this includes funds for the Food Corporation of India, funds for decentralised procurement of grains by State agencies, and other logistical costs. Starting from January 1, 2023, the Centre had decided to provide 5 kg of free foodgrains per month to the 81.35 crore beneficiaries of the NFSA for one year starting from January 2023, rather than charging them a subsidised amount of ₹3 a kg of rice, ₹2 a kg of wheat and ₹1 a kg of coarse cereal as is usually done.

It was announced in December that the government was terminating the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY), which had provided an additional 5 kg of free grains every month to NFSA beneficiaries after being launched as an emergency measure in response to the COVID-19 pandemic in April 2020 and received multiple extensions since. In a normal year, without COVID disruptions, the Centre’s food subsidy bill on account of the NFSA amounted to around ₹2 lakh crore, similar to the newly-announced allocation, but the PMGKAY had effectively doubled that sum for the past two years.

Jal Jeevan Mission: The Centre increased its budgetary allocation for the Jal Jeevan Mission (JJM) or the National Rural Drinking Water Mission by about 27% to ₹70,000 crore from the current year’s revised estimates of ₹55,000. The Jal Jeevan Mission aims to provide safe and adequate drinking water through individual household tap connections by 2024 to all households in rural India.

The Jal Shakti Ministry tweeted last week that the government had provided 11 crore rural households with a tap water connection under the JJM scheme. Data from the Ministry’s dashboard suggest that 56% of the targeted 19.3 crore households had been covered.

The scheme has a total financial outlay of about ₹3.60 lakh crore, with the Centre funding 50% of the cost with States and Union Territories, except for Union Territories without a legislature, where it foots the entire bill, and northeastern and Himalayan States and Union Territories with legislatures, where it funds 90% of the bill.

Ayushman Bharat-PMJAY: The budget for the Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (PMJAY) — the national public health insurance fund, saw an increase of about 12% at ₹7,200 crore compared to the ₹6,000 crore revised estimates for the current year.

The Ayushman Bharat PM-JAY is a health insurance scheme launched in 2018, aiming to provide a health cover of Rs. 5 lakh per family per year for secondary and tertiary care hospitalization. It aims to over 10.74 crore poor and vulnerable families (or 50 crore beneficiaries) from the bottom 40% of the Indian population. Union Health Minister Mansukh Mandaviya had said in December 2022, that 4.5 crore people had so far been empanelled under the scheme.

PM-Kisan: The allocation for the Prime Minister’s Kisan Samman Nidhi (PM-KISAN) scheme was the lowest in five years and remained the same as the revised estimates for the current year at ₹60,000 crore. PM-Kisan is a flagship Central scheme launched in 2019 for cash transfers ₹6,000 per year to eligible farmer families in three instalments of ₹2,000 each.

Finance Minister Nirmala Sitharaman informed while presenting the Union Budget on Wednesday that the government has made cash transfers totalling ₹2.2 lakh crore to around 11 crore farmers under the PM-Kisan scheme.

PM-POSHAN: The government has allocated a budget of ₹11,600 crore to the Pradhan Mantri Poshan Shakti Nirman, or the rebranded version of the mid-day meal scheme for 2023-24. This is down 9.37% from the current year’s revised estimates of ₹12,800.

In 2021, while renaming the mid-day meal scheme to give hot cooked meals to 11.8 crore government school students from Class 1 to 8, the Centre had also decided to extend the scheme to 24 lakh children studying in balvatikas, the pre-primary section of government schools from 2022-23.

National Education Mission: A total of ₹38,965 crore was allocated to the National Education Mission for 2023-24, up 19.44% from the ₹32,612 crore revised estimates for the current year. The Mission is the umbrella scheme integrating major education-related schemes so education can be provided holistically and without segmentation from pre-primary to class 12. It includes the Sarva Shiksha Abhiyan under the Right to Education and schemes for secondary and higher education as well those for teacher training and adult education.

PMAY: The Centre allocated ₹79,590 crore to the Pradhan Mantri Awas Yojana (PMAY), up 3.19% from the current year’s revised estimates and 66% from the budget estimates. The PMAY aims at constructing houses in both urban and rural areas. PMAY-Gramin (rural) was initiated in November 2016 with a target of completing 2.7 crore houses and PMAY-Urban was initiated in June 2015 with a target of constructing 1.2 crore homes.

National Social Assistance Program: The budget allotted ₹9,636 to the National Social Assistance Program (NSAP), which provides monthly pension assistance to the elderly, widows, and persons with disabilities.

Development of Scheduled Tribes and Scheduled Castes: The budget allocated ₹4,295 crore and ₹9,409 crore to the umbrella programs for the development of Scheduled Tribe and Scheduled Caste communities respectively. While the ST development allocation saw a nearly 10% increase, the SC programme funding rose by close to 22%, compared to the current year’s revised estimates.

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