UPSC EDITORIAL ANALYSIS : Union Budget 2024-25 — no signs of learning

Source: The Hindu

• Prelims: Indian Economy(GDP, GVA, fiscal policy, budget, 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 Finance Minister presented the seventh consecutive Budget. The Economic Survey 2023-24 Government has eased the burden of regulation on business and goaded the private sector into generating productive jobs out of “enlightened self-interest”.

• The Economic Survey 2023-24 Government has eased the burden of regulation on business and goaded the private sector into generating productive jobs out of “enlightened self-interest”.

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.

#### Budget 2024-25:

• Focus Area: As outlined in the Interim Budget, the focus of the budget remains on four major groups: ‘Garib’ (Poor), ‘Mahilayen’ (Women), ‘Yuva’ (Youth), and ‘Annadata’ (Farmers) .

• As outlined in the Interim Budget, the focus of the budget remains on four major groups: ‘Garib’ (Poor), ‘Mahilayen’ (Women), ‘Yuva’ (Youth), and ‘Annadata’ (Farmers) .

• Budget Theme: The Union Budget 2024-25 emphasizes employment, skilling, support for MSMEs, and the middle class. A significant allocation of Rs 1.48 lakh crore is earmarked for education, employment, and skilling.

• The Union Budget 2024-25 emphasizes employment, skilling, support for MSMEs, and the middle class. A significant allocation of Rs 1.48 lakh crore is earmarked for education, employment, and skilling.

• Budget Priorities: The budget prioritizes nine areas including agriculture, employment, human resource development, manufacturing, services, urban development, energy security, infrastructure, innovation, research & development, and next-generation reforms.

• The budget prioritizes nine areas including agriculture, employment, human resource development, manufacturing, services, urban development, energy security, infrastructure, innovation, research & development, and next-generation reforms.

#### Initiatives:

• Schemes that amounted to providing employment subsidies, either directly or indirectly to employers. The scheme provides ₹15,000 in three installments to all new employees with a salary up to ₹1 lakh a month directed to employees in the formal sector. Availability of this benefit would influence the compensation package offered by companies attempting to internalize that subsidy.

• The scheme provides ₹15,000 in three installments to all new employees with a salary up to ₹1 lakh a month directed to employees in the formal sector.

• Availability of this benefit would influence the compensation package offered by companies attempting to internalize that subsidy.

• Subsidies, such as the ₹3,000 a month contribution for two years to be made by the government against provident fund subscriptions, accrues directly to employers.

• Schemes like subsidized internships and interest subvention for educational loans. It attempts to ‘skill’ workers largely at state expense, in ways that are expected to make them more employable. It is not inadequate and inappropriate growth, but a skill set mismatch between job aspirants and industry needs, that is responsible for unemployment.

• It attempts to ‘skill’ workers largely at state expense, in ways that are expected to make them more employable.

• It is not inadequate and inappropriate growth, but a skill set mismatch between job aspirants and industry needs, that is responsible for unemployment.

• Direct tax concessions for foreign firms and indirect tax adjustments to favor domestic manufacturing. Unemployment problem is sought to be tackled by persuading private capital with transfers to hire the unemployed in “productive” jobs. Issue: High growth does not deliver more jobs that business wants to hire but finds the available labor force too expensive or unsuited, skill-wise.

• Unemployment problem is sought to be tackled by persuading private capital with transfers to hire the unemployed in “productive” jobs.

• Issue: High growth does not deliver more jobs that business wants to hire but finds the available labor force too expensive or unsuited, skill-wise.

• Agriculture: the Budget promises to implement a long-term programme to raise productivity and production.

Allocation to some states:

• Bihar has been promised a combination of sundry transport, power, education, sports and religious tourism infrastructure

• Andhra Pradesh: Support to build its new capital at Amravati

Issues:

• All of the spending to be financed with borrowing, especially from the multilateral development banks (MDBs), facilitated by the Centre.

• This will increase the debt burden of these States. Restrictions have been placed on borrowing by the States: It is unclear how debt for these purposes could be “additional” to what the State may have in any case chosen to incur.

• Restrictions have been placed on borrowing by the States: It is unclear how debt for these purposes could be “additional” to what the State may have in any case chosen to incur.

• It has completely ignored the welfare schemes

• Total expenditure for the National Social Assistance Programme covering pensions and disability benefits, which stood at ₹9,652 crore in 2023-24 as per the revised estimates It has been allocated exactly the same amount in the Budget for 2024-25.

• It has been allocated exactly the same amount in the Budget for 2024-25.

• National Rural Employment Guarantee Programme: Allocation for 2024-25 is exactly the same as the revised estimate for expenditure in 2023-24.

• Despite the extension of the free foodgrain allocation under the National Food Security Act, the food subsidy is budgeted to fall from ₹2,12,332 crore (RE 23-24) to ₹2,05,250 crore (BE 24-25).

• Pradhan Mantri Awas Yojana (PMAY) in the Budget there is some increase in allocation.

Fiscal consolidation:

• Fiscal deficit expected to come down from 9% of GDP in 2023-24 to 4.5%

• Capital expenditure: Capital expenditure rose from ₹7,40,025 crore in 2022-23 to ₹9,48,506 crore in 2023-24, and is budgeted to rise further to ₹11,11,111 crore in 2024-25.

• Dividends and surpluses from the Reserve Bank of India and leading public financial institutions having risen from ₹39,961 crore in 2022-23 to a huge ₹1,04,407 crore in 2023-24, They are budgeted to spike again to ₹2,32,874 crore in 2024-25.

• They are budgeted to spike again to ₹2,32,874 crore in 2024-25.

Way Forward

• A reduction in the government’s market borrowings would facilitate a reduction in policy interest rates and encourage private investment.

• Among the PM’s employment package schemes is a plan to provide one year internships in 500 top companies to one crore youth over five years. It is not clear if this will subsume the Pradhan Mantri Kaushal Vikas Yojana 4.0 that was announced in the last Budget to “skill lakhs of youth within the next three years” with an on-the-job training component.

• It is not clear if this will subsume the Pradhan Mantri Kaushal Vikas Yojana 4.0 that was announced in the last Budget to “skill lakhs of youth within the next three years” with an on-the-job training component.

• Even if the revenue expenditure growth is enhanced to 8%, this would provide additional revenue expenditures close to ₹3 lakh crore over 2023-24 actuals. This would leave fiscal space to provide for capital expenditure growth of 2% in 2024-25 It would be required for supporting investment demand resulting in infrastructure expansion that is consistent with the government’s medium-term objectives.

• This would leave fiscal space to provide for capital expenditure growth of 2% in 2024-25

• It would be required for supporting investment demand resulting in infrastructure expansion that is consistent with the government’s medium-term objectives.

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)