Union Budget 2024-25 is the first Budget of the new government. Since it has a full term, the government can afford to have medium term orientation. The Budget offers medium term vision setting nine priorities covering agriculture, industry and services, infrastructure, employment and skill development, future reforms agenda, innovation and scientific research, urban development, social sector reforms and social justice and energy security.

This is a desirable mix of priorities so that aspiration and opportunities can be well articulated. We examine how these priorities are proposed to be implemented. Scanning expenditure budget of FY25, only a 5 per cent increase in expenditure is seen in agriculture in FY25 over RE FY24. In education there is a decrease in allocation from interim final numbers and in health a small increase over RE of FY24.

On education, addressing cognitive skills deficiency is not adequate. The Centre should not leave this to State governments as its major focus is on skill development. Railways, Roads and Rural Development see a small increase of allocation in FY25 over RE of FY24. The spending for next generation reform will happen only when the contours of the reforms are fleshed out and allocations made. Increased revenues, RBI transfers, dividends and disinvestment proceeds have helped to keep deficit under control in FY24 and the windfall transfer from RBI and higher revenue collection would reduce FD and fund new schemes of ₹62,000 crore in FY25.

Fiscal front

On fiscal policy, we see a marked improvement in the measures such as revenue deficit (RD) and primary deficit (PD) . There is a steep fall proposed for FY25 in both RD and PD from the BE of last year.

This is facilitated by increase in revenues and non-tax revenues and a tight subsidy management despite the cost of foodgrain supply to 80 crore people. Subsidies have been reducing as percentage of GDP and proposed at 1.2 per cent in FY25 against 2.0 per cent from FY23. The Centre’s debt /GDP ratio is estimated to fall from 58.1 per cent in FY24 to 56.8 per cent in FY25. The States’ Debt/GDP is at 27.6 per cent. Together they need to fall substantially so that sticky interest payments go down, boosting the chances of a sovereign rating upgrade.

There is a concern that government expenditure in real terms is going down in the past few years, especially when consumption and private investment growth are tepid. The answer lies in productivity improvement and higher revenue realisation. Our tax/GDP is still low for comparable countries.

Agri scene

Productivity improvement and shift in cropping pattern away from cereals is crucial in agriculture. Mission oilseeds and pulses so far have not succeeded, mostly due to lack of technical breakthrough and the relatively attractive MSP for wheat and rice, which led to persistence of these crops as mono crops.

Lessons learnt from failures of previous missions must guide now. Further, low productivity in East and North-East India and drought prone areas need to be addressed. FPOs must be the feeding ground for private commercial enterprises to market their wares in branded form thus forming symbiotic relationship.

Agri food processing corridors under Purvodaya must be established. These States must play a strong role in improving ease of doing business conditions. The farm laws were unfortunately withdrawn but they need to be introduced by States.

Jobs focus

Employment is rightly a major priority. Manufacturing employs nearly 13 per cent of workforce, around 70 million, but more than half of them are in MSMEs and nearly a third of them in own account establishments run by family members. The subsidy support proposed through EPFO should focus majorly on medium and major MSMEs.

Major industries now seek highly skilled manpower and have even started using cobotics. We must promote skilling institutions like what Tatas and Bajajs are currently introducing. Public funds and private sector implementation are called for. Many have suggested Japanese, Korean and Germany models for vocationalisation. This requires serious consideration.

The reasons why running of ITIs by private sector has failed need a close look. Government rightly believes now that employment cannot be a derived issue. For sustainable employment Labour Codes need to be actualised by the States with appropriate modifications.

There is a trade-off between housing and civic amenities and a decline in household financial savings. Post Covid, in urban centres, affordable housing concept itself has undergone a change. Housing schemes and funding should accommodate these realities. At least for residential houses, indexation needs to be brought back on LTCG.

All the eight schemes announced in the Budget for MSMEs are long overdue. Their success lies in their implementation. Provision of common services for HR, finance, logistics etc in clusters of MSMEs will bring depth to the announcements.

On assistance for capital investments, guarantee must be waived off below a threshold of loan. This will rebuild the capital destroyed of household enterprises due to Covid and other policies.

We appreciate the continued focus on infrastructure on account of its multiplier effect. Reduction of infra cost to GDP makes us competitive in global value chain. Changes in policies, rules, contract drafting along with VGF should help infrastructure. If implementation of Gati Shakti projects is delayed, special focus on them is required.

Will all the priorities outlined in the Budget and allocation made increase the income and consumption of the lower 500 million of our population? Especially when their real incomes are falling? The fact is that the impact of free cereals on consumption and prices of food is marginal. Food as expenditure item now constitutes only 40 per cent.

The prices of manufactured products and services consumed by them needs to be made affordable, which enjoins on the Centre and the States to focus on productivity and ease of doing business.

Our view is that this cannot be business as usual and needs special focus. The government having set its sights on medium term aspirations must do the heavy lifting in this regard.

Gopalan is former Secretary, Economic Affairs, and Singhi is former Senior Economic Adviser, Ministry of Finance. Views are personal