Harsh Goenka, Chairman, RPG Group

The Finance Minister’s speech during the Vote on Account exudes confidence that our economy is on track to achieve the Hon’ble Prime Minister’s vision of becoming a ‘developed nation’ (Viksit Bharat) by 2047. The budget last year had significantly increased infrastructure spending alongside multiple welfare schemes. The results of the reforms and investments are now clearly visible with significant strides in various sectors that bolster the nation’s trajectory towards inclusive growth and sustainable development.

Continued focus on infrastructure, with substantial investments in railways, airports, and highways underscores the government’s commitment to strengthen these sectors which are the backbone for economic growth, job creation, and enhanced quality of life. The budget also continues several social welfare measures, crucial for India’s long-term growth, ensuring that development is inclusive and benefits the most vulnerable sections of society. The healthcare initiatives are particularly noteworthy, reflecting the lessons learned during the pandemic and doubling down on the commitment to building a robust public health system. The decision to extend healthcare coverage under Ayushman Bharat to all ASHA and Anganwadi workers will motivate those working at the grassroots and strengthen the primary healthcare ecosystem. The decision to encourage cervical cancer vaccination for young girls will reduce the risks of developing cervical cancer for the 511.4 million women aged 15 and older.

The foresight shown towards technology is commendable. The 1 lakh crore support for technology investments aligns with the nation’s rapidly growing digital economy, unlocking new growth avenues and fostering innovation to cement India’s position as a global leader in the digital space. Strengthening of deep-tech technology for the defence sector will ensure our defence forces are always equipped with the most advanced technologies to meet any future threat.

The agricultural sector, the backbone of the Indian economy, has been getting due attention with 11.8 cr. farmers having received direct financial assistance from PM-Kisan Samman Nidhi so far. The initiatives to enhance agricultural productivity, improve post-harvest marketing and storage infrastructure and better market access will not only boost the sector but also empower millions of farmers. This will go a long way in elevating the rural economy and ensuring food security for India.

The budget makes a strong case for environmental sustainability, aligning with our Net Zero commitment. Viability gap funding for investments in renewable energy, green initiatives, and sustainable urban planning demonstrate our proactive stance on climate change. The proposed rooftop solar investment of 1 crore households will promote grassroot level energy self-sufficiency and also create multiple economic opportunities.

The budget showed continued commitment to simplifying tax structure and removing irritants eg. withdrawal of old outstanding direct tax demands which will bring relief to around one crore small taxpayers. The government’s approach to fiscal management also deserves an applause. Measures to consistently bring down fiscal deficit, aiming at a below 4.5% number by FY26 will ensure economic stability.

Overall, balancing growth with social welfare, modernisation with sustainability, and fiscal prudence with ambitious development goals, the Interim Budget 2024 has ensured that India’s economic juggernaut continues to roll on as we build a prosperous, resilient, and future-ready nation.

A potato farm on the outskirts of Varanasi.
| Photo Credit: AFP

The report released by the Finance Ministry and the vote-on-account presented by the Finance Minister are concerned more about portraying a glowing image of the government than about the financing plans for 2024-25. For the same reason, one is constrained to confine the discussion on the Budget to one question: was the distress in agriculture over the past decade alleviated by policy, or has it been exacerbated?

Incomes and profitability

All official data appear to indicate the latter. First, there was a strong downward pull on agricultural prices leading to a squeeze on farmers’ incomes. The sectoral deflator in agriculture and allied sectors — estimated as the difference in the growth rates of gross value added in current and constant prices — declined from 9.4 in 2013-14 to 5.0 in 2019-20 and 3.7 in 2023-24.

Second, the stagnation or fall of agricultural prices in the market was not ameliorated by any rise in minimum support prices (MSP). For major foodgrain crops, the MSPs rose by an average of 8-9% per annum between 2003-04 and 2012-13, but only by about 5% between 2013-14 and 2023-24. The refusal to adequately raise MSPs affected the government’s ability to intervene effectively in the market to control prices — on the farmers’ side as well as on the retail side.

Third, a promise was made that real incomes of farmers would be doubled between 2015 and 2022. But the issue appears to have disappeared from policy and media discourse in recent years. In fact, real incomes of agricultural households from cultivation fell by about 1.4% between 2012-13 and 2018-19. The fall of incomes from cultivation was not only owing to the stagnation or fall of agricultural prices, but also due to a sharp rise in the costs of inputs in agriculture, particularly fertilizers.

Fourth, rural unemployment rose between 2011-12 and 2018-19. For rural men, the rise was from 1.7% to 5.6%. For rural women, the rise was from 1.7% to 3.5%. Rural unemployment rates fell after 2018-19 but their levels remained higher than in 2011-12 in 2022-23: at 2.8% for men and 1.8% for women. More importantly, the fall of rural unemployment was accompanied by a rise in the share of self-employed women among all women workers. And most of this rise in the rural areas was in agriculture. In short, there was a crowding of the agricultural sector by unemployed workers from the non-agricultural sectors at a time when agricultural prices were not rising and agricultural incomes were falling.

Fifth, real wages in rural India have never risen after 2016-17 and have even fallen after 2020-21 – particularly in the context of the crowding of the agricultural labour market. These trends have been true for agricultural wages and non-agricultural wages in the rural areas. All rises in nominal wages were wiped out by inflation.

Finally, public investment in agriculture, in general as well as in specific fields like agricultural research and extension, were stubbornly stagnant, and occasionally even fell, over the past decade. Consequently, capital investment in agricultural and allied sectors did not rise. Most of the long-term bank credit supplied to agriculture was also diverted away as short-term loans to corporates and agri-business firms.

It is thus clear that incomes and profitability in rural India were under severe stress across the two terms of the Union government.

Painting a rosy picture

Yet, the Finance Ministry’s report and the Budget speech attempt to paint a totally different picture. They cherry-pick and cite absolute numbers on the increases in agricultural production. But they ignore the fact that the index numbers of production of all principal crops grew by 3.1% annually between 2003-04 and 2010-11, but only by 2.7% annually between 2011-12 and 2022-23. If we consider the index numbers of yield, the fall was sharper: from 3.3% per year to 1.6% per year. In short, the fortuitous spurt of agricultural growth during the pandemic years was inadequate to reverse the long-term decline of agricultural growth beginning from the early-2010s.

The Budget Estimates for 2024-25 also do not inspire confidence. There is no plan in the Budget to substantively reverse the decline of growth in agriculture — either through welfare measures or through investment measures.

In 2024-25, the most important heads and flagship schemes in agriculture and allied sectors are to face a spending cut. Fertilizer subsidies are to fall from ₹1.9 lakh crore in 2023-24 to ₹1.6 lakh crore in 2024-25. Food subsidies are to fall from ₹2.1 lakh crore in 2023-24 to ₹2 lakh crore in 2024-25. The allocation for the Pradhan Mantri Gram Sadak Yojana is to decline from ₹17,000 crore in 2023-24 to ₹12,000 crore in 2024-25. If ₹90,000 crore was the spending under MGNREGS in 2022-23, the allocation for 2024-25 is only ₹86,000 crore. The transfers under the PM-Kisan scheme remain the same as during its inception in 2019, implying a fall in the real value of cash transfers.

There was much mention in the Budget speech on blue revolution in the fisheries sector, but the budgeted allocation for the sector has been increased by only ₹134 crore. The budgeted allocation for the Department of Animal Husbandry and Dairying has increased only by ₹193 crore between 2023-24 and 2024-25.

The revival of agricultural growth from its long-term slump requires imaginative policy shifts and decisive fiscal measures. But the interim Budget provides no indications of such a plan or even intent.

R. Ramakumar teaches at the Tata Institute of Social Sciences, Mumbai

Well before Finance Minister Nirmala Sitharaman rose to present the Interim Budget for 2024-25, there were indications as to what its focus would be. Doubts that this would be anything more than a vote-on-account had been settled when Prime Minister Narendra Modi publicly declared that “when polls are this close, the government presents an interim budget” — and went on to say with confidence of a victory in the polls, “we will bring a full budget when a new government is formed”.

Meanwhile, an ‘interim Economic Survey’, innocuously titled “The Indian Economy: A Review”, has presented a survey of post-Independence economic development, with a periodisation that divides those years into the pre- and post-Modi government eras. In language reflective of an electioneering pamphlet, peppered with the Prime Minister’s own assessments of his government’s record, the document concludes that the decade 2014-24 was one of “transformative growth”. Periods of significant or even high episodes of growth prior to that transformative decade are identified as wanting, on the grounds that such growth either left structural challenges unaddressed or was the result of an unsustainable credit boom that damaged the banking sector.

A eulogy

Given this background, it was to be expected that the Budget speech would be a vocal expression of this eulogy of the two governments of the last 10 years. For years, Part A of the Budget speech has been a tiresome recounting of policies already adopted, and to be adopted, many of which have little to do with the issues of resource mobilisation and allocation and the strategy they signal, which must be the actual concern. That has been true of this year’s Interim Budget as well, which focused on all the “welfare” schemes, in areas varying from housing to food, which have been largely attributed to the Prime Minister. It is another matter that the Prime Minister has in the past dismissed such schemes as representative of a “revdi” (sweet gifts) culture when implemented by non-Bharatiya Janata Party (BJP) State governments.

With the Interim Budget being identified as a mere vote-on-account, Part B of the speech was a declaration that while pursuing consolidation in the sense of achieving periodically revised fiscal deficit to GDP ratios, the government will be stepping up spending on infrastructure and welfare. In the circumstances, what can be assessed from the detailed Budget documents is the fiscal performance of the Centre in the current (rather than next) financial year, 2023-24. Even that exercise is fraught with difficulty because the practice of presenting Budgets on February 1 adopted in recent years has meant that “revised estimates” for the financial year incorporate projections relating to most of the last quarter of the financial year extending to March 31.

CGA data sheds more light

The only substantial figures at hand are the estimates of actual expenditure under different broad heads for the first three quarters of 2023-24 provided by the Controller General of Accounts (CGA), which can be compared with the estimates for the whole year provided in the Budget. This is, in certain areas, quite revealing. For example, if we take the estimates for the Department of Rural Development, under which the all-important Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) scheme falls, as compared to budgeted expenditures of ₹1,57,545 crore for 2023-24, the revised estimates are placed at a much higher ₹1,71,069 crore. That points to a significant step up relative to that budgeted, despite claims that the NREGA scheme is being inadequately funded, wages are in arrears and job card holders are being excluded from work because wage payments are to be linked to Aadhaar.

Editorial | Poll posture: On the 2024 Interim Budget

But a comparison of revised and budgeted expenditures conceals what is actually occurring. The actual expenditure on the MGNREGA scheme was ₹1,11,170 crore in the COVID-19 year 2020-21 and ₹98,468 crore in 2021-22. That came down to ₹90,806 crore in 2022-23 and the revised estimate projects spending on the programme in 2023-24 at an even lower ₹86,000 crore. The figures clearly do not match the government’s pro-poor rhetoric. Interestingly, the CGA reports that expenditure of the Department of Rural Development till December 2023 amounted to only ₹1,07,912 crore or 63% of the total projected in the revised estimates. So, more than a third of the estimated expenditure for the financial year is projected to occur in the last quarter of the year.

That deviation between revised expenditures over the financial year and the actual till December 2023 is even larger in the case of the Department of Agriculture and Farmers Welfare, under which the much-touted Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) scheme of transfers falls. The budgeted expenditure for 2023-24 for that department was placed at ₹1,15,532 crore and the revised estimate is projected at ₹1,16,789 crore. The actual till December is placed at ₹70,797 crore by the CGA, or 61% of the revised estimate. Spending on the PM-KISAN scheme alone, which amounted to ₹66,825 crore in 2021-22, fell to ₹58,254 crore in 2022-23 and is projected at ₹60,000 crore in 2023-24.

There are two ways in which such deviations between actual spending till December and the revised estimates in the Budget can be interpreted. One could be that the Finance Minister has chosen to inflate revised estimates of spending to back her claim that the government has provided massive support to farmers and rural workers. The other could be that, despite tardy spending till December, the government plans to launch a pre-election spending blitz in areas where it believes it can swing votes in favour of the BJP. Being election season, the latter is a possibility. But trends of the kind noted with regard to spending on the MGNREGA scheme suggest that the government believes that rhetoric can be a substitute for actual allocations. Thus, despite claims that free rations for 80 crore people are a huge expansion of food support under the National Food Security Act, the total food subsidy has fallen from ₹5,41,330 crore in 2020-21 to ₹2,88,060 crore in 2021-22 and a projected ₹2,87,194 crore (RE) in 2023-24.

Estimates and projections

At the macroeconomic level, the Budget’s claim is that in 2023-24, the central government has managed to ensure that its receipts other than borrowing are almost equal to that budgeted. This is because it has met budgetary expectations with respect to tax revenues as well as expects to raise its non-tax revenue receipts by 25% relative to budget. The explanation for that hefty increase is that income from dividends and profits is slated to rise from ₹99,913 crore in 2022-23 to ₹1,54,407 crore in 2023-24 (RE). This is because, as compared with a budgeted ₹48,000 crore to be received as dividend/surplus from the Reserve Bank of India and nationalised financial institutions, the revised estimates suggest that the actual inflow will be more than twice that figure at ₹1,04,407 crore, largely because of transfers from the central bank. This has more than made up for a projected fall in miscellaneous capital receipts, consisting of receipts from disinvestment from a budgeted ₹61,000 crore to ₹30,000 crore. It is not clear whether even the figure of ₹30,000 crore can be realised, since the CGA estimates that ‘other non-debt capital receipts’, consisting of disinvestment proceeds, just crossed ₹10,000 crore by December.

Estimates and projections of this kind allow the Finance Minister to claim that even while ensuring total expenditure in line with the budgeted, she has managed to keep the fiscal deficit, at 5.8% of GDP, marginally below the budgeted level, hoping to please financial markets with her government’s prudence. Whether it would please voters to give the National Democratic Alliance a “resounding victory”, as she hopes, is yet to be seen.

C.P. Chandrasekhar is an economist and columnist based in New Delhi