UPSC EDITORIAL ANALYSIS – The Union Budget as litmus test of a rethink or stasis

Source: The Hindu

• Prelims: Indian Economy(GDP, GVA, fiscal policy, budget, MGNREGA, CMIE, FRBM, gross fixed capital formation (GFCF), economic survey, budget, Employment etc )

• Mains GS Paper III: Fiscal policy, Monetary policy, GDP, Issues related to planning etc.

ARTICLE HIGHLIGHTS

• The Union Budget (2024-25) will be presented by the Finance Minister in the Lok Sabha on July 23.

• The President of India, on the recommendation of the Government has approved the proposal for summoning of both the Houses of Parliament for the Budget Session, 2024.

INSIGHTS ON THE ISSUE

Context

Budget:

• The government’s blueprint on: expenditure taxes it plans to levy other transactions which affect the economy and lives of citizens.

• expenditure

• taxes it plans to levy

• other transactions which affect the economy and lives of citizens.

• Article 112 of the Indian Constitution: Union Budget of a year is referred to as the Annual Financial Statement (AFS).

• The Budget Division of the Department of Economic Affairs in the Finance Ministry is the nodal body responsible for preparing the Budget.

• Components of the Budget: expenditure receipts deficit indicators.

• expenditure

• deficit indicators.

• Depending on the manner in which they are defined, there can be many classifications and indicators of expenditure, receipts and deficits.

#### Employment issue and MGNREGA:

#### ● Potential allocations for the neglected Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) programme as well as the demands for a similar programme for the urban unemployed.

#### ● MGNREGA is an outcome of the failure of the neoliberal development policy in terms of generating employment through the private sector or the market.

#### ● Centre for Monitoring Indian Economy Pvt. Ltd. (CMIE) and the International Labour Organization and the Institute for Human Development, have highlighted concerns with the problem of employment in India.

#### ○ The reports point out high levels of underemployment;

#### ○ unemployment among youth (15-29 years) especially among the educated youth (above secondary school education).

#### ○ The real incomes of the regular employed have seen a contraction, perhaps on account of high levels of informalisation and poor quality employment.

#### ○ The incomes of casual labor have increased, this could be on account of MGNREGA and other social programmes of the government.

#### ● Participation of women in the labor market has increased, it is more as unpaid family labor and odd service activities to supplement household incomes.

#### ● Structural retrogression in terms of employment, implying that contrary to the orthodox imagination, there has been an increase in primary sector employment and a contraction in secondary sector employment.

#### ○ This is on account of the significant contraction of the unorganized sector, especially the micro, small and medium enterprises (MSMEs).

#### MSME sector:

#### ● The MSME sector has significantly contracted on account of demonetisation, Goods and Services Tax (GST) and the COVID-19 lockdown.

#### ● Earlier Budgets have focused on infrastructure (CAPEX), skill-based programmes, credit for start-ups and fiscal prudence to generate employment.

#### ● In the MSME segment the government’s emphasis has been on those MSMEs which are

#### ○ Export oriented, having high-value production and the infrastructure sector together with enterprises having foreign direct investments

#### ○ export-oriented sectors having had high value-added but very low employment elasticity.

Way Forward

#### ● The MSME sector requires special attention in this Budget and the sector needs a nuanced understanding.

• This Budget has to focus on MSMEs which cater to the domestic consumption of low-income groups, which are also socially marginalized groups.

• Given the poor performance of India on the Human Development Index and Multidimensional Poverty Index (MDPI), education, health, and housing for the deprived sections ought to find higher allocations combined with employment-generation objectives in this Budget.

• The development of India into third largest economy, has coexisted with the nagging problem of joblessness and poor quality employment growth — witnessed right from the mid-1990s.

QUESTION FOR PRACTICE

Explain intergenerational and intragenerational issues of equity from the perspective of inclusive growth and sustainable growth.(UPSC 2020)

(200 WORDS, 10 MARKS)

Editorial Analysis – 15 July 2024