On July 23, 2024, Nirmala Sitharaman, with the presentation of the annual budget for the financial year 2024-25, became the first finance minister in the history of independent India to present seven consecutive budgets – six annual budgets and one interim budget. In doing so, she surpassed the record of former Prime Minister Morarji Desai, who, between 1959 and 1964 as finance minister, had presented five annual budgets and one interim budget.
Applause of the Highest Order
When Covid-19 struck with full force upending the world, the country’s fiscal deficit soared to around 9.2 per cent of GDP in 2020-21. Consolidation since then has been challenging, yet over the years, it was brought down to 6.8 per cent of GDP in 2021-22, 6.4 per cent in 2022-23, and 5.8 per cent in 2023-24.
This progress was appreciable. However, in the interim budget for the financial year 2024-25, Sitharaman targeted a fiscal deficit reduction from 5.8 per cent in 2023-24 to 5.1 per cent in 2024-25—a commendable goal in itself. But she has now upped the ante, targeting the fiscal deficit to 4.9 per cent in 2024-25 to 4.5 per cent in 2025-26, and thereafter keeping it at a level that the net borrowings the central government sees a downward change.
This fiscal consolidation is the crux of the budget for this commentator. Sitharaman deserves the highest applause for this commendable achievement, even if aided by tax buoyancy and dividends from the central bank. She has eschewed populism once again while keeping sufficient cushion in her fiscal war chest to fight any untoward happenings due to hostile external economic headwinds.
Once in A Decade Budget
The Union Budget 2024 is a once-in-a-decade budget. I place this year’s budget in the same category as Manmohan Singh’s 1991 annual budget and P. Chidambaram’s 1997 “dream budget.” Here are my reasons for why I say so-
One, Opposition grudgingly appreciates the budget: When Opposition leaders offer even half-hearted or grudging appreciation for the budget or parts of it, it suggests the budget holds something special for the nation. True to his newly acquired post as Leader of the Opposition in Lok Sabha, Rahul Gandhi has dubbed the budget a “Kursi Bachao Budget.” However, his party colleagues—P. Chidambaram, Jairam Ramesh, and Shashi Tharoor—have grudgingly acknowledged some positive aspects. I humbly say, there is no harm in taking good parts from the Opposition manifesto. Aadhaar, for example, was not Narendra Modi’s idea. However, once in power, he embraced it, expanding its size and impact significantly.
Two, Employment and skilling take centre stage: I humbly posit the problem of unemployment is not the gift of the Narendra Modi regime. India inherited abject poverty and unemployment at independence. Unemployment worsened, first, during the initial Congress Raj, sardonically dubbed the “Hindu Rate of Growth” (the word coined by economist Raj Krishna in 1978), and then under subsequent prime ministers. This is the first budget that has sincerely tried to address the rampaging unemployment bull somewhat.
Suffice it to say here that the Central government cannot dole out jobs — all it can do is create enablers for job creation. The jobs must be created in the private sector largely, and a bigger responsibility for creating enabling conditions lies with the state governments.
Three, Suryodaya – the sun rises in the east: The chorus from the Opposition while commenting on the budget is, “It is a Kursi Bachao Budget”. This charge stems from the government scheme “Purvodaya”—a special focus on the development of the eastern region: Bihar, Jharkhand, Odisha, West Bengal and Andhra Pradesh. (The latter technically belongs to the Southern Region but is contiguous with the Eastern Region.) At independence, these were the poorest states. Afterwards, they grew slowly, while initially better-placed states grew faster. And the gap kept on widening. They remain among the least developed and poorest of Indian states. Andhra Pradesh joined the group after its bifurcation, with its more developed areas, including Hyderabad, going to Telangana.
My question is, why has no government or previous budget seriously considered the development of this region? Only one state – Bihar – if its floods are tackled well, can feed the entire nation. Also, what crime has Sitharaman committed by taking up this mantle? That Bihar and Andhra Pradesh are part of the NDA is beside the point.
Four, Unprecedented urban focus: If my memory serves me right, even in 2006, the website of the Ministry of Urban Development had the utopian headline “India lives in its villages”. Governments, both Central and state, have had an anti-urban bias since independence. For at least the first six decades, government policies focused on the containment of cities and towns, not their inclusive, all-around development.
Soon, by 2030, 60 crore Bharatiyas will reside in cities and towns, and by 2047, half of the country’s projected 160-crore population will be urban. Even today, urban India contributes 66 per cent to the national GDP. By 2030, it will be 75 per cent, and by 2047, when we aim to be Viksit Bharat, the urban contribution to national GDP will be 80–85 per cent. Cities are already unliveable. This is the first-ever budget that at least recognises the problem and lays a pathway for the urban India of today and tomorrow.
Five, Next Generation Reforms: Never before has an NDA government presented such a long list of next-generation reforms. These reforms may not look like Big Bang reforms but are ground-level structural reforms needed to take the growth trajectory beyond 10 per cent. Even if only 50 per cent of the listed reforms are actualised within the next five years, starting with the reform of the income tax code in the next six months, it will be a big leap forward for Viksit Bharat @2047.
Budget Speak
The 58-page budget is undoubtedly pathbreaking. Moreover, the real story lies not just in the finance minister’s speech but also in the annexure and other budget documents. The budget’s relentless focus on transforming the lives of four key groups (the poor, youth, women, and annadatas) revolves around four major themes: employment, skilling, MSMEs, and the middle class. These themes, along with nine focused foundational priorities, distinguish this budget as truly unique.
Here are the budget’s nine key priorities—with sub-priorities within them—that chart a course toward Viksit Bharat @2047. I call them the nine commandments:
- Productivity and Resilience in Agriculture
- Employment & Skilling
- Inclusive Human Resource Development and Social Justice
- Manufacturing & Services
- Urban Development
- Energy Security
- Infrastructure
- Innovation, Research & Development
- Next Generation Reforms
Multipart Analysis
In this multipart analysis of the budget, Part I critically analyses three priority areas—employment and skilling, urban development, and physical infrastructure—in reverse order. Other key priority areas will be thoroughly examined in Parts II and III.
Infrastructure – Numbers Speak
In the annual budget of FY 2013–14, out of a total expenditure of Rs 16.6 lakh crore, Rs 14.3 lakh crore was revenue expenditure, and the remaining Rs 2.3 lakh crore was capital expenditure. Fast forward to 2024: in the 2024–25 budget, capital expenditure has increased more than fivefold to Rs 11.11 lakh crore, out of a total expenditure of Rs 48.21 lakh crore. Additionally, Rs 1.5 lakh crore has been allocated as a long-term, 50-year, interest-free loan to state governments to stimulate infrastructure creation. More funding is available through Viability Gap Funding (VGF) to encourage infrastructure development via public-private partnerships (PPPs). Total infrastructure funding comes close to Rs. 15 lakh crores.
Moving the Nation
After defence—with an allocation of Rs 6.21 lakh crore—the biggest budgetary allocation, at Rs 5.47 lakh crore, is earmarked for moving people and goods—by road, rail, air, ports, and internal waterways. This is an eminently laudable, record outlay. However, there’s a serious fault line in this otherwise commendable story.
One, Port, Shipping and Waterways: The budgetary allocation for the sector is a paltry Rs 2,400 crore. Moreover, looking beyond the headline numbers, the actual capital expenditure in the port sector is a mere Rs 1,000 crore, with Rs 1,300 crore earmarked as revenue expenditure. Inland waterways receive a meagre capital outlay of Rs 40 crore.
This meagre allocation does not bode well for the world’s most populous nation, soon to be the third-largest economy, whose import and export needs will skyrocket if its ambition to displace China as the world’s manufacturing hub is to materialise. Additionally, inland waterways—the cheapest and most environmentally friendly solution for domestic transportation of people and goods—remain the most neglected. In contrast, in 2022, Chinese river ports and seaports handled 5.55 billion and 10.13 billion metric tons of cargo, respectively.
The question is: when will Bharat wake up?
Two, Civil Aviation: India will soon be the world’s third-largest aviation market. It already boasts the world’s third-largest domestic market and is the fastest-growing aviation market globally. Nonetheless, aviation penetration is only 3–4 per cent. The aviation industry faces several structural issues: airports have become an oligopoly, and the airline industry a duopoly (Indigo and airlines owned by the Tata Group). Other airlines have folded or are disintegrating rapidly. Airport facilities are worsening by the day. Regulation and self-accountability are sorely lacking.
Bharat needs massive airport expansion. The United Kingdom, a much smaller nation, has 150 airports, while the USA had 5,100 in 2022. Yet our civil aviation budgetary allocation is a pittance—a mere Rs 2,400 crore. Unless rapid scaling up occurs, Bharat, instead of reaching the sky by 2047, faces the ignominy of literally being stuck on the runway. I humbly posit that unless drastic and swift action is taken, Indian airports (despite the sheen of private airports) will soon rank below railway stations regarding customer-centric facilities.
Three, Whither Indian Railways: The total capital expenditure (capex) budget for Indian Railways (IR) is a hefty, never-before-seen Rs 2,65 lakh crore. In comparison, it was a mere Rs 63,363 crore in 2013-14. IR capex allocation has continuously increased for the last 11 years. This starkly contrasts with previous decades when railways were treated as fiefdoms—gifted as “jagirs” to incumbent railway ministers or as “dowry” to placate boisterous coalition partners. Despite the abolition of a separate railway budget, this singular focus on increasing capex in railways is a significant achievement of the NDA government.
However, as always with capital expenditure, the devil is in the details. The maximum amount is allocated towards black hole items: Manufacturing Suspense (Rs 59,290 crore), Stores Suspense (Rs 25,800 crore), and leased asset capital payments to the Indian Railway Finance Corporation (Rs 24,000 crore). New lines and track doubling share Rs 34,600 crore and Rs 29,300 crore, respectively. Track renewal receives a paltry Rs 17,600 crore, while bridges and signalling get meagre allocations of Rs 4,000 crore each. Customer facilities also receive a paltry allocation of Rs 17,000 crore, while traffic facilities are left with a mere Rs 9,000 crore. In safety-marred railways, there is not even a mention of Kavach- the indigenously developed anti-collision devise.
Worse, the IR is bankrupt. Its capex is largely met through funds from general revenues as gross budgetary support (including the Railway Safety Fund and Rashtriya Rail Sanraksha Kosh), with a meagre Rs 3,000 crore from internal resources. The total capex outlay in the 2024–25 budget estimate of Rs 2,65,200 crore includes Rs 2,52,000 crore from general revenues, Rs 200 crore from the Nirbhaya Fund, and Rs 10,000 crore from extra-budgetary resources.
A question I have here is this: where are the lakhs and lakhs of crores invested in capex going? What is the rate of return? Let’s examine the revenue and expenditure figures. The IR revenue in FY25 is budgeted at Rs 2,73,000 crore (coaching 80000, other coaching 7500, Goods 174500 crore) as against an actual of Rs 2,54,300 crore and budgeted Rs 2,60,090 crore.
The working expenses of IR are budgeted at Rs 117101.54 crore while the other ordinary working expenses are Rs 155898.46 crore, totalling Rs 2,73,000 crore. The IR teeters at the brink, perilously surviving at an operating ratio approximating 100 (number of paisa spent to earn 1 rupee). Even this sad story has been made possible due to creating accounting- railway funds are not fully funded, most critical of them Depreciation Reserve Fund has a token provision of Rs 1000 crore.
And there’s a big red flag: the salary and pension bill for IR already stands at Rs 1.83 lakh crore. When the 8th Pay Commission recommendations are implemented or the Old Pension Scheme is restored, railway finances will go into such a tailspin that even a miracle will not save the IR.
This also leaves me with two critical questions: Why, despite targeted capex and much-improved project execution discipline, is IR rapidly losing modal share in goods transportation to highways and in passenger transportation to both roads and air? And why is this trend worsening so rapidly? I need a more granular analysis of demand grants to arrive at a reasonable answer.
Four, Roads and Highways: Roads and highways have consistently received a disproportionately large allocation in the budget. The FY 2024–25 allocation is a whopping Rs 2.78 lakh crore, substantially up from Rs 2.17 lakh crore in FY 2022–23. While the allocation to the National Highways Authority of India (NHAI) is Rs 1,67,400 crore, other road sectors receive Rs 1,08,520.38 crore. Research and road safety get a token allocation of Rs 256 crore, but the real tokenism is the allocation for women’s safety—a mere Rs 18 crore, drawn from the Nirbhaya Fund.
Roads and highways are the most polluting modes of transport. Moreover, casualties on Indian roads are the highest in the world. Is it not time to ease up on road and highway development, step back from the model of rampant motorisation seen in the USA, and look east to China? China, which lagged behind India in 1950 regarding its rail network, today boasts 159,000 km of route length, including the world’s largest high-speed rail network at 44,000 km.
I humbly posit that it’s time for Bharat to undertake a course correction—towards a more symbiotic development of all four modes of mobility: rail, road, air, and water. And we must act swiftly.
Urban Development
India boasts the world’s second-largest urban population after China. Bharat’s urban population already surpasses the total population of the US and is growing rapidly. In 2030, our urban population will reach 60 crores, and by 2047, it will reach 80 crore—half of the country’s projected population. Urban India is in the grip of myriad problems: crippling traffic congestion, ghettoisation, severe shortages of water and sanitation, a solid-waste management crisis, severe pollution, and much more.
For the first time in the history of independent India, the FY 2024–25 budget attempts to tackle these urban development issues head-on. The budget provisions include:
- Working with states to develop “Cities as Growth Hubs” through economic and transit planning, along with orderly development of peri-urban areas using town planning schemes.
- Facilitating creative brownfield redevelopment of existing cities with a transformative impact, using a new framework of enabling policies, market-based mechanisms, and regulations.
- Implementing Transit-Oriented Development (TOD) plans for 14 large cities with populations exceeding 3 million, along with strategies for implementation and financing.
- Establishing enabling policies and regulations for efficient and transparent rental housing markets with enhanced availability. Constructing 1 crore new houses for low- and middle-income families under PM Awas Yojana Urban 2.0, with an investment of Rs 10 lakh crore. This includes Rs 2.2 lakh crore in central assistance over the next five years, with interest subsidies to facilitate loans at affordable rates.
- Implementing water supply, sewage treatment, and solid waste management projects and services for 100 large cities through bankable projects in partnership with state governments and multilateral development banks.
- Developing 100 weekly “haats” or street food hubs in select cities, building on the success of the PM SVANidhi Scheme in transforming the lives of street vendors.
- Collaborating with state governments to moderate high stamp duty rates for all, with further reductions for properties purchased by women.
These provisions establish a solid platform for year one of NDA 3.0. However, these programs must delve deeper and encompass other crucial areas in the years to come. Nonetheless, it’s a good beginning. Its true effectiveness, however, will be revealed through an analysis of sectoral allocations.
A glance at the Ministry of Housing and Urban Affairs (MoHUA) allocation shows an increase to Rs 82,600 crore in the FY 2025 budget from Rs 69,200 crore in FY 2024. This increase is incremental, not transformational, particularly because the capital outlay is a mere Rs 28,628.26 crore. Moreover, the bulk of this capital expenditure (Rs 24,785.94 crore) is allocated to metro rail projects. Clearly, there’s more to this story than meets the eye. The allocation for urban transformation is in crying need of a transformative leap. Let’s hope next year’s budget addresses this pressing need.
Employment Generation
The Economic Survey (2023–24) conservatively estimated the net annual need for new employment generation in the non-farm sector at 78.6 lakh per year until 2030. These numbers are conservative because there is significant underemployment in the agricultural sector. The Survey also red-flagged possible loss of jobs through the value chain due to the Fourth Industrial Revolution and AI. The survey also rightly stated that most employment generation must occur in the non-government sector, and state governments must play a substantial role in creating enabling policies.
That said, the Central government must act as a catalyst in employment generation. The 2024 budget makes a bold start—possibly a first in the history of budget-making in independent India. Employment generation and skilling are one of the budget’s four themes, embedded in each of its nine priorities. Here are the specific provisions that demonstrate the budget’s clear focus on employment:
One, three special schemes aimed at employment generation:
- Scheme A (First Timers): Provides a one-month wage to new entrants in all formal sectors, paid in three installments up to Rs 15,000. This scheme is expected to benefit 210 lakh youth.
- Scheme B (Job Creation in Manufacturing): Linked to first-time employees, this scheme offers incentives to both employees and employers for EPFO contributions at specified scales for the first four years. It’s expected to benefit 30 lakh youth.
- Scheme C (Support to Employers): The government will reimburse EPFO contributions made by employers up to Rs 3,000 per month for two years for all new hires. The budget projects this scheme will generate 50 lakh jobs.
Two, Prime Minister’s Internship Scheme: A potential game-changer, this scheme will provide internships with a monthly allowance of Rs 5,000, plus Rs 6,000 for incidentals, to skill one crore youth over five years. India’s top 100 companies will participate in this program. It’s applicable to youth between 21 and 24 who are not employed or engaged in full-time education. Companies will contribute an additional Rs 6,000 per month to interns from their CSR funds and bear the training costs from their CSR funds as well.
Three, measures to facilitate higher participation of women in the workforce include setting up working women’s hostels in collaboration with industry and establishing crèches.
Four, loans up to Rs 7.5 lakh with a guarantee from a government-promoted fund. It’s expected to help 25,000 students every year.
Five, financial support for loans up to Rs 10 lakh for higher education at domestic institutions to 1 lakh students annually. Support is provided through direct e-vouchers with an annual interest subvention of 3 per cent.
Six, Skilling Programme: This program aims to skill 20 lakh youth over five years. It includes upgrading 1,000 Industrial Training Institutes (ITIs) in hub-and-spoke arrangements, focusing on outcome orientation and aligning course content and design with industry skill needs.
I believe these programs, along with the employment generation plans integrated into the other eight budget priorities, will help curb growing unemployment to some extent. However, this is just a modest beginning. Much more needs to be done. And the action lies everywhere – Central government, state governments, organised and unorganised corporate sector, manufacturing and services, NGOs and all types of formal and non-formal jobs. Finally, though, the die is cast. If these plans are well-executed, they will lead to much-needed progress.
To be continued
The author is Multidisciplinary Thought Leader with Action Bias, India Based International Impact Consultant, and key watcher of changing national and international scenario. He works as President Advisory Services of Consulting Company BARSYL. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect News18’s views.
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