Finance Minister Nirmala Sitharaman, presenting her sixth Union Budget and her first Interim Budget, resisted the temptation to hand out dramatic pre-poll sops like the ones unveiled ahead of the 2019 Lok Sabha election, opting instead to bank on the government’s track record and the promise of “unprecedented development” in the next five years.
While broadly sticking to her assurance that this 2024-25 Budget would be a ‘vote on account’, without “spectacular announcements”, Ms. Sitharaman painted an elaborate picture of India’s imperfect past prior to 2014, with the economy and governance needing serious mending. She then outlined how the NDA government, with a ‘nation-first’ approach, had enabled the transition to a virtually perfect present.
Painting a rosy picture
“It is now appropriate to look at where we were then till 2014 and where we are now, only for the purpose of drawing lessons from the mismanagement of those years,” Ms. Sitharaman said, promising a white paper in the House on the mess allegedly inherited by the Narendra Modi-led government and the economy’s subsequent resurgence to a path of sustainable, high growth.
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“People are living better and earning better, with even greater aspirations for the future. Average real income of the people has increased by 50%. Inflation is moderate,” she underlined.
New housing scheme
Though there were no tax breaks, some immediate promises were made, including a scheme to enable the “deserving” urban middle class to buy or build their own homes, two crore more rural houses to be built in the next five years, and 300 units of free power a month for one crore households through rooftop solar solutions, as mooted by Prime Minister Narendra Modi after the Ram Mandir’s consecration last month.
Finance Secretary T.V. Somanathan said the contours for the new housing scheme — which does not directly refer to urban households, but hints at them by picking beneficiaries from chawls, slums or unauthorised colonies — will be finalised before funding the plan.
Apart from a few such feel-good promises, the Finance Minister committed to work with States and stakeholders to implement “next generation reforms” in its next tenure. At the full Budget in July, the government plans to present a detailed roadmap for its vision of a developed India by 2047, she said, enunciating some guiding principles that will drive its approach.
Poll signals
Ms. Sitharaman also made it a point to emphasise that the government is committed to turning the eastern parts of India — Bihar, Jharkhand, West Bengal, Odisha, and Chhatisgarh — into the growth engines of the economy in the coming Amrit Kaal, a term used for the period leading up to 2047. Another plausible poll signal was the constitution of a high-powered panel to consider the challenges arising from “fast population growth and demographic changes”, although she parried queries on the intent of this move in her post-Budget press conference.
Terming ‘social justice’ an effective and necessary governance paradigm, the Minister argued that what was mostly a political slogan in the past has been achieved by this government, through a “saturation approach of covering all eligible people” to address systemic inequalities in society. “This is secularism in action, reduces corruption, and prevents nepotism,” she asserted, adding that the four major castes identified by the PM – the poor, women, youth and farmers — would receive primacy in policy.
There were no philosophers or poets quoted in her speech, which was about 25% shorter than the President’s Wednesday address that had also embellished the government’s achievements. Instead, Ms. Sitharaman invoked the PM’s speeches and beliefs about half a dozen times before she wrapped up.
Stringent fiscal discipline
While some hopes — for measures to spur consumption and rural demand against the backdrop of a poor monsoon, and to prod private investments — were dashed, Ms. Sitharaman’s fiscal discipline surprised most economists, who had expected this year’s fiscal deficit target (5.9% of GDP) to be breached. The FM not only revised the deficit estimate for this year to 5.8% of GDP, but also committed to hit the 5.1% mark in 2024-25, with a firm eye on bringing the fiscal gap to or below 4.5% of GDP in 2025-26.
Capital expenditure plans for the coming year got a modest but assured 11.1% increase, rising to an ostensbily auspicious number of ₹11,11,111 crore, and interest-free capex loans to States were raised to ₹1.3 lakh crore. Yet, gross and net borrowings planned in 2024-25 have been lowered from this year’s levels to ₹14.13 lakh crore and ₹11.75 lakh crore, respectively.
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“Now that the private investments are happening at scale, the lower borrowings by the Central government will facilitate larger availability of credit for the private sector,” Ms. Sitharaman hoped, marking a prudent return to the tradition of keeping Interim Budgets low on profligacy and high on intent.
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