The Budget’s Missed Opportunity For India’s Economic Drift – OpEd
Wes Anderson’s The French Dispatch poignantly captures a profound sense of resignation, a sentiment echoed by many after the recent Union Budget 2024. The budget offered a lukewarm acknowledgment of past economic failures but failed to present a decisive course correction. Despite the efforts of economists and opposition voices, the government’s approach seems resigned to economic stagnation rather than addressing the underlying issues.
The budget’s focus on employment through the New Employment Generation scheme and the New Internship Program appears promising at first glance. Allocating Rs. 10,000 crore for employment and Rs. 2,000 crore for internships seems substantial. However, these measures primarily address symptoms rather than the root causes of economic distress. The New Employment Generation scheme aims to create jobs, while the New Internship Program is designed to offer temporary work experiences. While these initiatives may provide some relief, they fall short of addressing the fundamental problem of weak demand in the economy. The government’s approach remains heavily skewed towards supply-side solutions, which are insufficient given the current economic context.
Private consumption growth has reached a 20-year low, and household savings have plummeted to a 47-year low. The Reserve Bank of India (RBI) reports a concerning drop in net financial savings, indicating a broader economic malaise. The budget’s failure to stimulate demand through significant tax relief is a critical oversight. The revised tax slabs apply only to the new tax regime, which eliminates key deductions such as those for home loan interest. For many middle-class families, this means facing higher financial burdens without the benefit of relief. Rising costs for essentials, including food, education, and healthcare, exacerbate this problem. Without meaningful tax relief, households are forced to cut back on spending, further dampening economic demand.
Inflation, particularly in food prices, remains a significant concern. The budget’s dismissal of rising food inflation as a minor issue does not align with the reality faced by many households. With food inflation exceeding 9.5 percent and essential items becoming increasingly unaffordable, the government’s response seems insufficient. The promise to improve supply chains and address inflation lacks the urgency required to address the immediate financial strain on ordinary citizens. Household consumption surveys reveal that a large portion of the population spends less than Rs. 200 per day, with a significant percentage spending less than Rs. 100 per day. This demographic is severely impacted by inflation and the lack of effective budget measures. The failure to provide substantial support to these households underscores the disconnect between the budget’s proposals and the needs of the general population.
A closer look at the budget’s expenditure reveals a concerning trend. Reductions in food and fertilizer subsidies, a marginal cut in the defense budget, and stagnant allocations for programs like MGNREGS indicate a lack of commitment to addressing critical economic and social issues. Food and fertilizer subsidies, crucial for supporting agriculture and ensuring food security, have been reduced. The MGNREGS budget remains stagnant despite a significant increase in demand for jobs. Similarly, allocations for crop insurance and subsidies for urea and nutrient-based fertilizers have been cut. These reductions undermine the government’s commitment to supporting vulnerable sectors and communities.
The budget’s focus on political appeasement, particularly in Andhra Pradesh and Bihar, highlights a troubling shift. The government’s emphasis on coalition compulsions rather than economic priorities reflects a broader trend of using the budget as a tool for political consolidation. This approach undermines the budget’s effectiveness in addressing the country’s economic challenges. In contrast, the 1991 budget delivered by Dr. Manmohan Singh stands as a historic example of bold economic reform. Singh’s budget introduced transformative policies despite intense political opposition and a dire financial situation. It was a budget that took risks for long-term prosperity, setting India on a path of high growth.
The current budget’s failure to address deep-seated economic issues reflects a broader disengagement from pressing realities. Instead of seizing the opportunity for meaningful reform, the government has opted for superficial solutions and political maneuvering. The result is a budget that seems resigned to its failures rather than actively seeking effective solutions. The missed opportunity to implement significant economic reforms and address critical issues such as demand stimulation, inflation, and social support underscores a broader failure in policy-making. The government’s approach reflects a troubling disconnect between its priorities and the needs of the economy.
In conclusion, the Union Budget 2024’s lack of bold, forward-thinking measures highlights a broader failure to address India’s economic challenges. By focusing on short-term political gains and superficial solutions, the government has missed a crucial opportunity for meaningful economic recovery. The budget’s failure to tackle fundamental issues and its reliance on political considerations rather than substantive reform reflect a broader trend of disengagement from the country’s pressing economic needs. The result is a budget that, much like the character in The French Dispatch, seems resigned to its failures rather than actively seeking solutions to drive India’s economic future forward.