BUDGET 2024-25: HOW TO TACKLE MAJOR CHALLENGES

 Union Finance Minister is to present full fledged Budget 2024-25 on 23rd July 2024 with specific objectives of generating employment, infrastructure development, reviving exports, accelerating GDP growth, Higher investment in health and education,boosting housing sector and real estate development.containing fiscal deficit and achieving fiscal consolidation,  price and financial stability etc.EventhoughBudget is only a financial statement of anticipated income and expenditure of the Government comprising of public revenue, public expenditure, public debt and the financial administration but if effectively and efficiently utilised it can achieve desirable economic, political and social goals. Hence allocations and roles assigned to each sector assumes significance. Given the prevailing geopolitical situation country will have to rely largely on domestic growth drivers to meet our economic challenges. Indian economy is expected to grow its GDP around 7% in the current fiscal year 2024-25  and further expected to maintain same growth trend for coming years as well. In order to sustain 7% growth experts  say that real investment measured in Gross Fixed Capital Formation (GFCF) as a percentage  share of GDP must be 35% as against 32.8% recorded in 2022-23. Interestingly the Index of Industrial production (IIP) reached a seven month high of 5.9% growth in May 2024 with electricity accounting for record growth of 13 .7% mining 6.6% and manufacturing witnessed a decline to 4.6 %. In use based classification of IIP growth showed 7.3% growth in primary goods , 2.8%.in capital goods 2.5%intermediate goods 6.9% in infrastructure and construction 12.3% in consumer durables and 2.3 % in consumer nondurablle goods. Apart from higher GDP growth projected other favourable factors benefitting India are Lumpsum dividend transfers recieved from Reserve Bank of India, increased tax buoyancy both in direct taxes namely personal income tax,corporate taxes and indirect taxes especially Goods and services tax(GST),record buffer of foreign exchange reserves  and service sector export revenues. Targeted level of fiscal deficit adheres to the original target of 5.1% of GDP envisaged  in 2024-25 accordingly the total expenditure to be financed become rupees  49 lakh crores, and a major share of expenditure is caused by enhanced subsidies and expenditures largely for both  health and MGNREGA schemes. Assuming that more  or less the existing conditions may prevail it may take  more than 3-4 years to bring down fiscal deficit to 3% of  GDP.

Regarding the objective of employment generation there are sharp and divergent  views. Both Government and Reserve Bank of  India studies claim that employment in the economy increased from 596.7 million in 2022-23 to 643,3 million in 2023-24.But critics observe that if employment generation really took place rural demand should not have declined. According to forbesindia.com unemployment rate in India has increased from 5.98 in 2001 to 7.33 in 2022,8.003 in 2023 and 9.2 as on June 2024.Usually measures prescribed to generate employment range from a National Employment policy, emphasis on education, health and skill development, adoption of labour intensive technology, both diversification and increased investment in agriculture,measures to correct rural distress and promotion of industries in general and marginal small and medium enterprises (MSMES)In particular. In this context Associated Chamber of Commerce and Industryof India(ASSOCHAM) suggested structural reforms in the agricultural sectorto enhance productivity, market access,and income opportunities to farmers.It also advocated promoting contract farming, investing in agri infrastructure,  facilitate value chain ,integrate and encourage diversification resulting in high value outcomes with emphasis on education and research that foster innovation.These proposals need meticulous study inorder to assess the impact on small and marginal farmers in particular with specific projects for adequate safety net in times of  agriculture failure. India Employment Report 2024 released by International Labour Organisation (ILO) and Institute of Human Development indicated that youth account for about 83% of the  country's unemployed workforce,but unfortunately about 90% of the workforce are working in informal sector. Significant youth population is considered  to be a "demographic dividend" provided they  can be imparted with required training education and Skilling so that they can be absorbed appropriately either within the country or abroad with suitable jobs. Proposals for educational  reform focus on how to enhance accessibility and affordability in education offering a variety of programs from test preparation,job oriented skills training particularly aimed at students from Below  poverty  line (BPL)and Low Income Groups(LIG).For the desired benefit Government should follow a Partnership role by a Public  Private Partnership. Initiatives like stablishment of AI (artificial Intelligence) hubs ,start ups,and Centers of excellence that would promote broadening access and foster creation of local solutions in areas of transportation, agriculture and energy  efficiency challenges. 

In the pre budget parleys private corporate sector is demanding lowering cost of  capital extension of Production Linked Incentive (PLI) scheme for more industries and facilitating business infrastructure to 10% of GDP along with sops like subsidies on  capital expenditure for innovations and development. It is observed that since employment generation is a major problem incentives should be largely restricted to only employment generating firms.The forthcoming budget is also expected to provide crucial health care support to senior citizens  through Ayushman Bharat Health insurance scheme and also comprehensive health care support  to family members by public private partnership model.Eventhough inflation is under control but vegetable and food prices remain very high. Relief from rising prices can be provided through reduction in taxes.Since income tax payers are around three crores only  reduction in indirect taxes  like  Goods and Services Tax which is quite regressive in nature will likely to  benefit the entire population including the distressed rural poor  which do make  better sense.Another reason for price rise is the fluctuating petroleum prices.It is high time to bring petroleum pricing under GST so that uniform pricing is possible across the country. With regard to special political packages to states though funds are normally transferred adhering to finance commission awards Centre has got the discretion to transfer funds to states and Union territories based on certain principles of  distribution. But  generally it is not done on large scale due to lack of fiscal prudence. However political uncertainty may compel  Government to spend more on popular welfare measures and if it is efficiently administered it should be welcomed.