Context:
Union Finance Minister Nirmala Sitharaman is scheduled to present the Union Budget next week, on July 23. The Budget is more than a mere statement of government revenue and expenditure; it reflects the policy and politics of the ruling government. The recent general election focused on ‘bread and butter’ issues, contrasting with the aspirational and emotive themes of 2014 and 2019. The electorate has clearly expressed disappointment with the government’s handling of its concerns, making this Budget highly anticipated.
Relevance:
GS2-
- Indian Constitution
- Government Policies & Interventions
GS3-
- Growth and Development
- Planning
- Government Budgeting
- Fiscal Policy
- Inclusive Growth
Mains Question:
How can the Union Budget for 2024-25 address the bread and butter issues that were prominent in the 2024 general election? Discuss. (10 Marks, 150 Words).
Employment as a Major Issue:
- Unemployment was a major issue in the 2024 general election campaign, alongside concerns about inflation and questions of social and economic justice. Employment is central to addressing these economic issues.
- Economists from the Chicago School of thought and Columbia University have strongly opposed government efforts to generate employment opportunities.
- This opposition affects potential allocations for the already underfunded Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) program and similar demands for urban employment programs.
Role of MGNREGA:
- The MGNREGA emerged as a response to the shortcomings of neoliberal development policies, which failed to generate sufficient employment through the private sector or the market.
- Recent employment reports from the Centre for Monitoring Indian Economy Pvt. Ltd. (CMIE), the International Labour Organization, and the Institute for Human Development highlight significant employment issues in India.
- These reports reveal high levels of underemployment, youth unemployment (particularly among those aged 15-29 and the educated youth), and a decline in real incomes for regularly employed individuals, likely due to increased informalization and poor-quality jobs.
- Conversely, casual labor incomes have risen, possibly due to MGNREGA and other government social programs.
- Although women’s participation in the labor market has increased, it is often in the form of unpaid family labor and irregular service activities to supplement household incomes.
- These employment challenges coincide with structural shifts, including increased primary sector employment and decreased secondary sector employment.
Contraction of MSMEs:
- This shift is partly due to the significant contraction of the unorganized sector, especially micro, small, and medium enterprises (MSMEs).
- The MSME sector has been significantly impacted by three major shocks: demonetization, the Goods and Services Tax (GST), and the COVID-19 lockdown. This sector requires special attention and a nuanced understanding in the upcoming Budget.
- Previous Budgets have emphasized infrastructure (CAPEX), skill-based programs, credit for start-ups, and fiscal prudence to generate employment. However, these interventions often had a supply-side bias and targeted high-value activities.
- Even within the MSME segment, the focus has been on export-oriented enterprises, which have high value-added but low employment elasticity.
Where the Focus Should Be:
- The focus must shift from prioritizing growth for its own sake to creating employment opportunities and promoting inclusive growth.
- Social and economic justice should not be mere slogans. This Budget needs to prioritize MSMEs that serve the domestic consumption needs of low-income and socially marginalized groups.
- Given India’s poor performance on the Human Development Index and the Multi-Dimensional Poverty Index (MDPI), it is essential to allocate more resources to education, health, and housing for deprived sections, alongside employment-generation objectives.
Conclusion:
Recent rhetoric about India becoming the fifth-largest economy and aspiring to be the third-largest has overshadowed the persistent issues of joblessness and poor-quality employment growth, which have been ongoing since the mid-1990s. Although political strategies may resist rethinking, aiming to project continuity, it is crucial that this overconfidence does not influence the Budget.
