In praise of the new budget

Strong outlays have been announced for employment generation and skilling, boosting of micro-SMEs with credit guarantee schemes and setting up of e-commerce export hubs in public-private-partnership (PPP) mode

When Finance Minister Nirmala Sitharaman rose to present her seventh successive budget in the Parliament, there were many voices of cynicism that were raised. The naysayers felt that this budget would just pander to the constituencies that seemed to have felt ignored in the run-up to the elections and the stock markets, and global investors were skittish, expecting that the fiscal glide path would be compromised at the altar of rural hand-outs and populism.

There is no doubt that the poor people of India, particularly in rural areas needed a lot of attention and the jobs crisis would not go away without some robust actions by the Government, in and beyond the Union Budget. Even today 50 per cent of India has less than three meals a day, and over ten million jobs lost over the last five years have not been fully replaced and there will be over hundred million new job seekers in the next decade or so. Agricultural productivity has languished, manufacturing share of GDP continues to be low, and the high growth and high profitability segments have been banking, insurance and to some extent pharma over the last few years.

In this daunting context, we should give a strong thumbs up for the budget in most areas. The nominal GDP is targeted to grow by 10.5% in FY25, with an estimated central fiscal deficit of 4.9% of GDP in this fiscal, further declining to 4.5% next fiscal year. The temptation to indulge in more sops was clearly shunned by the powers that be in budget making. Strong outlays have been announced for employment generation and skilling, boosting of micro-SMEs with credit guarantee schemes and setting up of e-commerce export hubs in public-private-partnership (PPP) mode. Financial incentives for both employers and employees in first time jobs and higher education student loans should spur the move towards youth completing their education, getting skills and seeking and retaining jobs in the emerging areas of employment.

A strong focus on agriculture has happened as expected but it is heartening to note that critical sections of the manufacturing industry have also received attention. The full exemption from import duties for rare earth elements like lithium, cobalt and copper, will encourage domestic production of lithium ion batteries, a vital component for the EV economy. The credit guarantee schemes will facilitate lending by banks and the increased attractiveness of savings schemes will enhance the ability of the banking sector to raise deposits. Flow of capital from savings to stock market instruments was flagged recently by both RBI and SEBI leaders as counter-productive for capital formation in a growing economy.

"A strong focus on agriculture has happened as expected but it is heartening to note that critical sections of the manufacturing industry have also received attention"

The reduction in duties for mobile phones and chargers will further boost the already buoyant digital economy in the country. The massive investments in housing to enable one crore urban and two crore rural houses to be built should also spur the consumption cycle among the poorer segments of society.

For entrepreneurs, the abolition of angel tax and for exporters and global competency centres in India, the rationalisation of transfer pricing adjustments, should see the start-up and technology sectors boom and one can only anticipate that there will be a rekindling of the entrepreneurial spirit in all segments of the economy. There will always be some disappointments and in this case, the new capital gains structure could negatively impact the real estate industry and enough has been shouted from the rooftops and television channels about the tax burden on the middle and upper classes in the country.

The most important non-numeric aspect of these budget announcements is the message that this budget is sending out that the Government will not take their eye off the ball when it comes to taking the “Viksit Bharat” idea forward. Infrastructure investments will be accelerated and every effort will be taken in the next few years to ensure that India becomes a viable location for manufacturing, services and technology products to be created and exported throughout the world.

In recent travels around Odisha, Uttar Pradesh, Rajasthan, Tamil Nadu and Pondicherry, I have been more and more enthused about the prospects for India, with its developing road and air infrastructure, use of digital tools and social consciousness. Viksit will happen with a little more focus on Science, Technology and Innovation, encouragement for genuine research and development in all sectors and a return to the era where all Indians, irrespective of caste, class and community are encouraged to work together without divisive voices and negativism affecting morale or purpose.

To close out this discussion on the budget, let me use one of my favourite speeches of an Indian statesman, Pandit Jawaharlal Nehru and his immortal Tryst with Destiny speech. Today when we look at what the budget has done for the four new “priority castes” that Prime Minister announced not so far ago, namely Garib (Poor), Mahilayen (Women), Yuva (Youth) and Annadata (Farmer), one can best say that the budget has indeed addressed the needs of all four castes, “not wholly or in full measure, but very substantially!” As we move on this year, the budget will go through its set of stumbles and successes in implementation but if we keep the faith and play our part, Viksit Bharat is in our sights.