Union Budget should focus on growth, equity and job creation
THE Union Budget is set to be presented later this month. It should be guided by two important considerations: India’s aspiration to become a developed country by 2047, and the Lok Sabha election verdict, which seems to have been impacted by growing inequalities, rural distress and unemployment. Since 2014, the Union Budget has followed a vision guided by four pillars — fiscal prudence, building state-of-the-art infrastructure, achieving a higher growth trajectory and welfarism. The Finance Minister (FM) needs to recalibrate these pillars by according priority to high growth, equity and employment. Fiscal prudence and world-class infrastructure may be used as instruments to achieve these pillars, while welfarism may be taken care of with equity.
High growth would remain an epicentre of economic policies to achieve the meta-objective of making India a developed country (Viksit Bharat). The Indian economy’s growth rate is hovering around 7 per cent per annum. According to an RBI study, ‘India@100’, the country’s real GDP needs to grow at an annual rate of growth of 9.1 per cent during 2023-24 to 2047-48 for achieving the IMF benchmark of the GDP ($49,069 billion) of an advanced economy. The rate of growth, as per the World Bank benchmark of a developed country ($35,025 billion GDP), works out to be 7.6 per cent. This Budget should lay a foundation for achieving the average of these targets (8.35 per cent) by adopting a multi-pronged strategy — increasing capital expenditure, inducing private investment, creating world-class infrastructure, incentivising the adoption of latest technologies for improving efficiency in the economy and initiating outcome-oriented reforms across sectors for making the Indian economy globally competitive.
The second priority of the Budget should be the promotion of equity across classes, sectors and regions. During the post-reforms era, India has witnessed growing inequalities. For India to become a developed nation, it is essential to make development inclusive. Over the past decade, the Union Budget has adopted the welfarism approach for improving the economic wellbeing of the poor, women, girls, farmers, youth and tribals by initiating financial inclusion and schemes focusing on areas like food, housing, health, education and skill development. Richer classes have reaped the benefits of opening up of the Indian economy. However, people just above the poverty line and the lower middle class have borne the brunt of market forces in the form of inflation and a lack of adequate quality jobs due to contractualisation, automation and the use of smart technologies like artificial intelligence. In the forthcoming Budget, it is recommended to have better policy packages both for the poor, people just above the poverty line and the lower middle class. These packages would help generate a huge demand and stimulate economic growth.
Sectoral inequalities are also an outcome of India’s growth story. The services sector and the industry have grown faster than agriculture. For achieving a rate of growth above 8 per cent in the coming 25 years, it is essential to develop all sectors simultaneously as they have forward and backward linkages. Allocating more budgetary resources for developing agriculture and allied activities would help mitigate rural unrest and act as a catalyst for growth in the form of an expanding market. The growing urban-rural divide also needs to be addressed in the Budget by building urban-level infrastructure in rural areas.
The fruits of growth are unevenly distributed across regions. States like Gujarat, Karnataka, Andhra Pradesh, Telangana, Odisha, Madhya Pradesh, Haryana and Tamil Nadu have grown faster than the Indian economy (5.66 per cent per annum) from 2011-12 to 2021-22. Gujarat, with an 8.36 per cent annual growth rate, has topped the list. Some states have registered growth below the national average. West Bengal (4.34 per cent) has experienced a low rate of growth. Regional variations in terms of per capita state income are also huge. In 2021-22, Goa had the highest per capita income of Rs 3,06,471, whereas Bihar had only Rs 28,679. For achieving the objective of Viksit Bharat, it is essential to have Viksit states. The election results have also reflected regional diversity and aspirations. In this backdrop, the Finance Minister should accord priority to backward states while allocating funds to various development projects particularly infrastructural projects.
India can draw lessons from the European Regional Development Fund, which aims to strengthen economic, social and territorial cohesion among member countries by correcting imbalances between regions. For this purpose, a budget of 200 billion euros for 2021-27 has been approved. Funds are made available for developing infrastructure, productive investments in enterprises and soft support like consultancy services and advice to backward regions.
Finally, the FM needs to allocate funds among sectors in such a manner that more jobs are created. Unemployment among the youth is very high in the country. According to the India Employment Report 2024 by the International Labour Organisation and the Institute for Human Development, the youth unemployment rate was 12.4 per cent in 2022. India had 18.9 million unemployed youth during that year. Unemployment is more pronounced among educated youth. Their share was as high as 65.7 per cent among all unemployed people. Youth migration to foreign lands for jobs is taking place through legal and illegal routes. Cases of youth from Punjab and Haryana going to conflict zones like Russia and Israel are also reported. Unemployment was also one of the key issues during the recent Lok Sabha elections.
In this backdrop, it is the right time to factor in the mitigation of unemployment in the Budget. Resources should be allocated to labour-intensive sectors on priority. Simultaneously, upgradation of technology of employment-oriented industries should be incentivised so that these can compete with capital-intensive units.
