Budget 2024-25 is marginally contractionary, and lacks any meaningful income/consumption booster. This is even as data suggest a prolonged sluggishness of consumption and an income crisis that pervades everybody, except those at the top of the pyramid. The Budget, and the Economic Survey, foresee GDP expansion of around 6.5% in FY25, sharply down from 8.2% in the last fiscal. To be sure, a “low” GDP deflator too may be jacking up the real GDP growth. The Budget strategy, however, seems to be to retain the fiscal space for somewhat robust public capital spending and avoid a big slide in near-term economic growth rate. The proposed shift in fiscal policy to public debt surveillance, from the one anchored around 3% fiscal deficit target, is in step with this goal.

However, the Budget only grudgingly accepted the Survey’s prescription that a way out of the situation, partly caused by an unhelpful external world, would be to balance the interests of capital and labour better. While the government questions (grim) employment data from private agencies, official data is sparse and outdated. The conduct of census, the primary source labour surveys rely on, is inordinately delayed. Meanwhile, a recent International Labour Organization report said that youth account for 83% of India’s unemployed workforce, and the share of youngsters with secondary/higher education in the total unemployed youth doubled to 65.7% in 2022 from 35.2% in 2000. Using public capex for growth is an ad hoc strategy employed during exigencies; it cannot go on ceaselessly. With the medium-term global economic prospects being uncertain, one would practically need to search for growth drivers. That means structural reforms of the economy aimed at boosting household income and savings cannot be delayed any longer. These reforms may lead to deceleration of growth in the near term, while enhancing productivity for a longer period thereafter.

While the finance minister did speak of reforms covering all factors of production and a new economic policy framework, the “how” and “when” of the strategy is unclear. A clutch of schemes for job creation is the sole budgetary response to the income issue. These incentives are mostly in the nature of direct and indirect subsidies to employers for new recruitment/skilling. However, the deeper issue of under-funding of school and higher education, and the need to revamp it in tune with job market realities, is given a complete miss. While the education policy formulated by the Centre envisages 6% of GDP to be invested in education, the actual share is less than half that, and public investment is languishing at 1%.

Corporates may try and internalise the incentives under the new job schemes, after a cost-benefit analysis. For instance, they would absorb the `15,000 salary support to “new employees”, and simultaneously retrench existing workforce. It is quite unlikely that incentives per se would create substantial net employment addition. Firms augment their payrolls only when they really need to do so, that is when their businesses grow and expand in an economy, with strong demand pull. The scheme to facilitate internship opportunities for the yet-to-be-employed in “top 500 companies” could help the intended beneficiaries to cross the entry barrier. However, the target of 10 million in five years is unrealistic, given these firms’ current bench strength and increasing automation. The scheme should be extended to the micro, small, and medium enterprises, and labour-intensive sectors, where India could achieve a higher level of global competitiveness.