By: Heet Dhawale; Edited by: Parisa Chatrath
Finance Minister Nirmala Sitharaman etched her name in history by delivering her seventh consecutive Union Budget. The vision set by her for India’s development is all-pervasive, all-round and all-inclusive.
Viksit Bharat 2047 represents the government’s vision to transform the country into a developed entity by its 100th independence day in 2047. One of the key goals is to transform India into a $30-trillion developed economy by 2047, catering to a projected population of 1.65 billion.
Asserting that the poor, women, youth, and farmers were the four ‘castes’ that this government was focused on serving, Ms. Sitharaman stressed that this year’s Budget laid particular emphasis on “employment, skilling, MSMEs, and the middle class.” This article delves deeper into these promises, which, if fulfilled, could set India firmly on the path to progress. It aims to set the context for further reading, instigate curiosity, and make prevalent discourse apparent for discussion.
The Necessary
The Middle Class: Driving the Economy Forward
National Council for Applied Economic Research (NCAER) classifies households earning between Rs 2 and 10 lakh per annum as the middle class. It divides the middle class into three categories: the lower-middle class, which includes households earning between Rs 2 - 5 lakh per annum; the middle class, which includes households earning between Rs 5 - 10 lakh per annum, and the upper-middle class, which includes households earning between Rs 10-20 lakh per annum. In reference to the strata distinction in the image above, India 2 and 3 essentially cover these categories. These categories will drive the economy forward due to their substantial impact on the GDP due to their sheer volume.
The budget focuses on improving the middle class by introducing a new income tax regime. This improved system offers tax relief, making it especially appealing to salaried taxpayers. Additionally, the budget targeted support for micro, small, and medium enterprises (MSMEs) through credit guarantees and stress support mechanisms. These initiatives are designed to strengthen the backbone of the economy, which, in turn, supports middle-class employment. While the tax relief is much welcomed, this relief is relatively small compared to the enormous overall tax burden shouldered by the middle class.
The middle class isn't the only section of society that remains plagued with the absence of a solution to the employment problem, the growing youth population suffers the same fate. The next section dissects the manner in which the budget addresses youth unemployment.
The Youth: Addressing Employment Challenges
One of the primary concerns of the young citizens remains the job creation for youth employment. The Indian economy needs to create nearly 7.85 million jobs annually until 2030 to meet the demands of the growing workforce. Many new provisions were announced for the youth which include a one-month wage to new entrants in all formal sectors in 3 installments up to ₹15,000, expected to benefit 210 lakh youth. The government will also reimburse EPFO contributions of employers up to ₹3000 per month for 2 years for all new hires which is expected to generate 50 lakh jobs. Under this, 20 lakh youth will be skilled over a 5-year period and 1,000 Industrial Training Institutes will be upgraded.
The Opposition, however, has called it a ‘Kursi Bachao Budget,’ (Seat-Saving Budget) with Mallikarjun Kharge alleging that the Modi government's Budget has mere internships forced upon the industry with no long-term solution in sight. It seems like an ambitious yet unfeasible promise to nudge the 500 top companies to hire 4,000 interns per year. This follows after the inability to form a conducive environment for private investment and productive employment schemes. People have lost belief in these “long-term” solutions because there are no details given regarding these namesake employment-linked incentive schemes and the outcome arrives too late for the people to remember the policy.
The Farmers: Overcoming Sectoral Challenges
The youth, with nowhere to go, looks to the agricultural sector for short-term employment. Yet this sector already employs 45.76% of India's total workforce and does not have much capacity to grow until given support. The Economic Survey 2023–24 lists a number of unique obstacles that the agriculture sector must overcome in order to perform well, including low productivity levels, the impact of weather variability, fragmented land holdings, and inadequate marketing infrastructure. Despite the promising initiative to 'focus on raising productivity through a review of the agricultural research setup,' the administration's approach seems less innovative, especially after the passage of three new farm laws. The plan to "initiate" one crore farmers into natural farming "in the next two years" is essentially a virtual repetition of the budgetary commitments made in FY23 and FY 24. Past policies include promises to "promote" chemical-free farming in 5-km wide corridors along the Ganga river and to "facilitate" one crore farmers to adopt the same "over the next three years,” respectively.
Will this provide any actual value is an essential question to be asked. The government needs to center its attention on existing gaps in the agriculture value chain to empower small farmers, FPOs, intermediaries, start-ups and large companies and adopt a region-specific approach to tackle these challenges.
Women: Enhancing Labor Force Participation
The focus for a Viksit Bharat then comes to the women, who are increasingly driving the economy forward. After many decades of lows, India’s women’s labor force participation rate (WLFPR) is now trending upward — rising to 37 percent in 2022-23 from its lowest point of 23 percent in 2017-18. This increase is primarily driven by rural women, by factors like economic necessity, government schemes, and social changes encouraging work outside traditional roles, as rural WLFPRs increased to 41 percent. At the same time, urban WLFPRs remain at 25 percent. This hints at the challenges of limited job opportunities, safety concerns, and the need for flexible working conditions. With this slow turning tide, the social situation around women WLFPR majorly demands basic prerequisites including safe locations, regular hours, and proximity to residences.
Following this need, the Union Budget carries an allocation of more than Rs 3 lakh crore for schemes promoting women-led development. This Budget, being heralded as a “Gender Budget,” also focuses on women's development and labor participation. Examining past budgets reveals that initiatives focused on rural development have successfully increased WLFPR among rural women. Programs like MGNREGA and PMMY have been pivotal in this progress. In an effort to promote women's involvement in the workforce further, the government will collaborate with businesses to establish working women's hostels and childcare centers. The government has expanded its focus on many interconnected facets to improve the metric even further, namely investments in the care economy, skill training for women in non-traditional areas, and women’s entrepreneurship development, particularly in rural areas. However, the budget has missed out on the need for gender-aggregated data to be placed in the public domain to see how women have benefitted from gender budgeting over the years.
Green Economy
As we end the section of ‘The Necessary’, it is important to analyze whether the world will sustain itself to see a Viksit Bharat. A sustainable future is the only foreseeable future for nations, the budget prioritizes similar beliefs by cultivating a green economy.
Two minor but significant initiatives are taken in Budget 2024 to make India future-ready. The first is the key Mineral Mission, which would allow for the acquisition of key mineral assets abroad as well as local production and recycling. Many of India's energy transformation initiatives rely heavily on the supply of vital minerals including cobalt, gallium, and molybdenum. It also serves as a catalyst for the installation of tiny nuclear reactors. It suggests working in conjunction with the business sector to carry out this. Production Linked Incentive have also been announced that aim to boost domestic manufacturing of electric vehicles (EVs) and related components, supporting India’s transition to sustainable transportation. These are designed to incentivize investments in EV production, battery technology, and advanced automotive technologies, making India a global hub for green mobility.
Having discussed the primary facets of the budget and its relevant stakeholders previously, certain niche initiatives remain to be dissected. One such facet remains the sudden focus on boosting the space economy in collaboration with the Indian VC space.
The One to Question - Space Economy
In 2020, the space sector was reformed to facilitate the participation of private players. This propelled the creation of a number of space startups in India to nearly 200 in 2024 from just 1 in 2022.
One of the most ambitious elements of this year’s budget is the allocation of Rs. 1,000 crore for a venture capital fund aimed at expanding India's space economy by fivefold in the next decade. This bold initiative underscores India’s ambitions to lead in space technology and satellite launches, a sector with significant potential to boost GDP growth. This strategic move could position India as a hub for space-related services, potentially adding billions to the economy and creating high-skilled jobs. India currently accounts for only 2 per cent of the global space market which can exponentially increase to 10% with these investments by 2030. This acts as a catalyst to convert the existing interest by the foreign players into long term investments for the future, propelling growth.
Furthermore, this incentivizes firms to dedicate efforts to the growth of this sector for a long term duration. However, the effectiveness of this funding will hinge on the efficiency of public-private partnerships and the ability to attract global talent and investment.
The New: Next Generation Reforms
Ms Sitharaman places the scope of the next generation of reforms as “facilitating employment opportunities.” The vision for these reforms is to transition from a lower-middle income to an upper-income country and covers financing, regulatory and technology support for MSMEs, and incentives for states to carry out next-generation reforms in the factors of production and technology. Some of the reforms include a Unique Land Parcel Identification Number or Bhu-Aadhaar for all lands, survey of map subdivisions as per current ownership, linkages to the farmers' registries, and taxonomy for Climate Finance.
Conclusion
Mr Sanjeev Sanyal, Member of the Economic Advisory Council to the Prime Minister writes that “if we manage to just maintain our current pace for a generation, India’s GDP will reach the $29-33 trillion range by 2047.” But can we maintain our current pace for a generation with the path that is outlined for us? Many new initiatives have been launched as others improved and few necessary ones are forgotten. Why is there not a permanent solution for the youth and the middle class? Will the agricultural sector face a bleak outlook? Are we investing enough in sustainable growth? Or is this budget simply laying the groundwork for future questions?
Links for Further Reading:
Insights
Agriculture
Space Economy
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