A Five-Year Political Roadmap

Union Finance Minister Nirmala Sitharaman did not pull the punches in outlining the message of the Lok Sabha polls in beginning her Budget speech by noting that voters have reposed their faith in Prime Minister Narendra Modi by giving him a “historic” third successive term in office while underlining that India’s economic performance is the shining exception in a global context that continues to be beset with uncertainties despite some improvement in prospects.

The minister also reaffirmed the commitment to work for all Indians irrespective of caste, religion, gender or age, saying that considerable progress has been achieved in realising the goals and aspirations of common citizens. Signalling that the basic priorities of Modi 3.0 remain the same as spelt out in the interim Budget iterated by Modi during the poll campaign, she said the government will work for “four” castes—women, youth, poor, and farmers. The assurance was backed by the assertion that the government has the fiscal space for its plans due to low core inflation and robust growth.

“India’s inflation continues to be low, stable and moving towards the 4 per cent target. Core inflation (non-food, non-fuel) currently is 3.1 per cent. Steps are being taken to ensure supplies of perishable goods reach [the] market adequately,” said Sitharaman. The reference to perishables was acknowledgement of the seasonal spurt in vegetable prices with crops and movement of farm products affected by disruptions due to the monsoon and flooding. She mentioned hikes in minimum support prices (MSP) and continuation of free rations for the poor right upfront in her speech.

Sitharaman promised to deepen reforms intended to deepen growth and make it more resilient in the latter part of her speech, choosing to cut to the chase at the start by identifying the Budget’s focus on employment, skilling and the middle class. The employment debate has become shriller after the results with a section of commentators saying “joblessness” was a reason for BJP’s under par performance. The Budget looks to blunt this in two ways. It promises internships for young people in the private sector and fiscal incentives for youth who join the workforce. The minister also set out plans to promote manufacturing and skilling.

The ‘first timer’ scheme will provide one-month wages to those newly entering the workforce in all formal sectors, the minister said, adding that the government will seek to promote additional employment in the manufacturing sector by an incentive provided directly to both the employee and the employer with respect to EPFO contribution in the first four years of employment. The Centre will reimburse employers up to ₹3,000 per month (per employee) for two years towards their EPFO contribution for each additional employee.

The direct benefit transfers (DBT) for new employees is the only concession to ‘dole’ economics, and the modest payouts are intended to signal the Modi government’s commitment towards creating opportunities for the youth. This is different from ‘unemployment doles’ as it rewards—and incentivises—those who find employment. It is also a step towards employment-linked incentives many in the industry have been calling for ahead of the Budget.

The attention the Budget devotes to MSMEs and the middle class is also an acknowledgement of rising aspirations and expectations. The tax-paying classes and MSMEs are key to economic stability and employment growth.

“I am happy to announce the prime minister’s package of five schemes and initiatives to facilitate employment, skilling and other opportunities for 4.1 crore youth over a five-year period with a Central outlay of ₹2 lakh crore… This year, I have made a provision of ₹1.48 lakh crore for education, employment and skilling,” Sitharaman said.

The Budget, said the finance minister, looking to the full year and beyond, holds the promise of a larger frame of reference. Setting out nine themes, she said subsequent Budgets will build on these and add priority areas and actions. There is a determined bid to promote natural farming with a target of one crore farmers who will be aided by plans to set up 10,000 bio-input resource centres and promote 109 varieties of 32 climate-resilient horticultural and field crops. There is a promise to leverage India’s new strengths on digital public infrastructure (DPI) to integrate details of farmers in land and farm registries and plans for vegetable growing clusters and shrimp farming. In both farm and manufacturing, there is an effort to create new opportunities—a recognition that voters are looking for options in their local contexts.

There is tax relief for the middle class along with continued engagement with welfare and skill promotion schemes that have served the Modi government well. The PM Vishwakarma scheme is ready for rollout and its beneficiaries are mostly artisans from among OBCs who have moved towards BJP in recent years. A shift in this category towards the SP-Congress alliance in Uttar Pradesh hurt BJP—along with a less evident movement of Dalits—and the saffron party would want to seal the leak as quickly as possible.

Budget 2024jobsmanufacturingmiddle classNarendra ModiUnion Finance Minister Nirmala Sitharamanyouth