Has the Modi Government’s First Full-Term Budget Brought Any Real Change?

Yesterday, on 23rd July 2024, the Government of India presented its budget. This is the third term of the Modi government, and today was its first full-term budget. Before this, an interim budget was presented in February. If we look at both budgets, there isn’t much difference between them. However, an economic survey was also presented on Monday, highlighting some important points.

Budget Overview

The finance minister listed nine focus areas in this budget: agricultural productivity, employment, and skilling, inclusive HRD and social justice, manufacturing and service sector, urban development, energy security, infrastructure development, innovation and R&D, and next-generation reforms. But are these new priorities?

Agricultural Productivity Was there no green revolution before today? Agricultural productivity has always been a focus, and this budget doesn’t introduce any groundbreaking changes in this area.

Employment and Skilling Creating jobs and making people capable has always been essential. Again, nothing new in this budget.

Inclusive HRD and Social Justice Women’s upliftment and social justice are recurring themes in every budget. There’s nothing unique in this year’s announcements.

Manufacturing and Service Sector These sectors are fundamental to the economy. Without them, there is no employment or product development. This isn’t a new focus.

Urban Development Urban development is a priority for both state and central governments. Nothing new here.

Energy Security Efforts to minimize oil imports have always been ongoing. This budget does not introduce new initiatives in this area.

Infrastructure Development The government’s role includes infrastructure development. The question remains: where does the money go?

Innovation and R&D R&D has been a longstanding agenda item. Even during Manmohan Singh’s tenure, there was a push for R&D institutions to generate their income.

Next-Generation Reforms The budget mentions next-generation reforms, but specifics are still unclear.

Detailed Focus Areas

Job Creation The budget aims to boost job creation, benefiting consumer goods, real estate, and the auto sector. However, there’s no significant change in personal tax rates. The Government of India plans to borrow ₹14 lakh crore from the market to fulfill its announcements, equivalent to ₹4000 crore daily. This raises concerns about the increasing interest burden on the government.

Income Tax and Employee Benefits The standard deduction has increased from ₹50,000 to ₹75,000. While this is a positive step, the overall tax regime remains largely unchanged. Capital gains tax has increased from 10% to 15%, and the securities transaction tax has doubled.

Customs Duty The budget reduces customs duty on mobile phones, spare parts, and chargers to 15%. The duty on gold and silver has been slightly reduced, but the rationale behind this decision is unclear.

Employment and Skill Development The government has allocated ₹2 lakh crore for employment schemes and ₹1.48 lakh crore for education and skill development. However, there’s no detailed plan for improving the quality of education and skill development.

Women Empowerment The budget allocates ₹3 lakh crore for women and girls’ welfare, including hostel construction and skill development programs. This is a commendable effort.

Agriculture and Rural Development About ₹1.5 lakh crore has been allocated for agriculture and allied sectors. The government plans a comprehensive review of agricultural research to improve productivity and develop climate-resilient varieties. However, who will conduct this review, and will the recommendations be binding?

Natural Farming The government aims to teach one crore farmers natural farming over the next two years. There’s a need for a white paper on the economics of natural farming and its impact on food security.

MSMEs Financial incentives for MSMEs are promised, but there’s no roadmap for reducing corruption and bureaucratic hurdles. The need for a corruption-free environment is paramount.

Insolvency and Higher Education Loans About ₹1.25 lakh crore has been recovered from insolvency issues, with an additional ₹10 lakh crore under discussion. The budget also addresses higher education loans, but reducing medical college fees should be a priority over increasing loan amounts.

Infrastructure and Development ₹66,000 crore will be spent on infrastructure development. The budget also focuses on road connectivity, affordable housing, nuclear, and space research.

Government Income and Expenditure The budget estimates government earnings of ₹32 lakh crore from taxes and other resources, with planned expenditures of ₹48 lakh crore. The gap of ₹18 lakh crore will be bridged by borrowing.

Analysis and Critical Questions

The Modi government’s budget, while extensive in its announcements, raises several critical questions about its efficacy and alignment with its campaign promises. Despite the broad focus areas, the lack of innovative measures and detailed implementation plans casts doubt on the budget’s impact.

1. Why has the government failed to introduce groundbreaking changes in agricultural productivity? Agricultural productivity has been a longstanding issue, yet the budget lacks innovative solutions to address this. The government’s repeated focus on agricultural productivity without substantial new measures raises concerns about its commitment to resolving farmers’ issues.

2. How will the government ensure job creation and skill development amidst minimal changes in the tax regime? While the budget promises job creation and skill development, the unchanged tax regime and increased borrowing raise doubts about the actual benefits for the workforce. The significant borrowing requirement of ₹14 lakh crore also raises questions about the sustainability of these promises.

3. What are the specific plans for improving the quality of education and skill development? Despite allocating substantial funds for education and skill development, the budget lacks detailed plans for enhancing the quality of these sectors. How will the government address the existing gaps and ensure effective utilization of the allocated funds?

4. Is the reduction in customs duty on mobile phones and spare parts justified amid other pressing economic needs? The rationale behind reducing customs duty on mobile phones and spare parts remains unclear. Is this decision in line with the government’s broader economic goals, or does it cater to specific industry demands at the cost of other crucial sectors?

5. How will the government tackle corruption and bureaucratic hurdles in MSMEs? The promised financial incentives for MSMEs are commendable, but the absence of a clear roadmap for reducing corruption and bureaucratic obstacles raises concerns about their implementation. What steps will the government take to create a corruption-free environment for MSMEs to thrive?

6. Why hasn’t the government prioritized reducing medical college fees over increasing loan amounts? Addressing the high cost of medical education should be a priority. The budget’s focus on increasing loan amounts rather than reducing fees raises questions about its approach to making higher education more accessible and affordable.

Sentiment Analysis

While the Modi government’s budget includes several positive initiatives, its lack of innovative measures and detailed implementation plans is disappointing. The budget falls short of the transformative changes promised during the election campaign, leading to skepticism about its impact on key sectors like agriculture, education, and job creation. The substantial borrowing requirement further raises concerns about the government’s financial strategy and long-term economic stability. Will this budget bring real change or continue the status quo? The answers lie in the effective implementation and transparency of these initiatives.