500 Firms To Be Job Givers
By Shivaji Sarkar
It is a coalition budget with a promise of job creation through the corporate. A tall task alright and an effort to placate the contentious allies with a large package and opening the states to multilateral bank fundings which can become a quagmire.
Politics and coalition have a message of 4 June 2024 becoming the benchmark for at least a visible change in the approach to the economy. Inflation control has emerged as a priority now as the government claims inflation has moderated. The Reserve Bank of India says it remains at 5.1 per cent or above.
Changes in the new income tax rates are welcome but it has also seen the bracket of Rs 20 lakh at the 30 per cent rate getting at Rs 15 lakh, which was under a lower slab. The changes in capital gains tax would cause more outgo in term tax as the process of indexation beyond 2001 has been done away. It could lead to many deals in cash as outgoes between the old rates and new would be heavier. The government should better continue with the system of indexation to plug it.
Agriculture allocation of Rs 1.52 lakh crore is inadequate. There is a large sum of Rs 1.64 lakh crore allocated separately for the free food programme to 81 crore people. The growth rate of agriculture has come down to 1.4 per cent from 4.4 per cent. The fisheries sector has grown 8.9 per cent, a success of the PM Matsya Sampada programme. Gold tax cut to 6 per cent from 15 per cent is good in the pre-weeding season. However, gold would appreciate as it is becoming a global currency.
Two states, Bihar and Andhra expectedly are beneficiaries of the largesse. There will be a boom for construction lobbies in these states. Capital Amaravati, TDP supremo and Andhra Chief Minister Chandrababu Naidu’s dream project, which is to be built, will have many perks for Andhra construction and other industries. It will not only give a boost to Naidu’s clout, but spur activities as there are at least two major industrial corridors envisaged in the state.
Finance Minister Nirmala Sitharaman announced sanction of Rs 58,900 crore to Bihar in the 2024 Union Budget, giving top importance to Chief Minister Nitish Kumar, a key alliance partner of the Narendra Modi government. However, multi-dimensional construction of bridges, other infrastructure and turning Nalanda and Gaya from pilgrim destinations to tourist would see much destruction of old and may be ancient structures as it happened in pilgrim centres of Uttar Pradesh.
A review of Gaya and Nalanda, which have basic infrastructure developed during the last many years can definitely be improved but caution is needed to ensure that the basics are not changed. There are proposals to have industry in Gaya, but it must match ecologically and aesthetically.
Be it Andhra Pradesh or Bihar, development should not be done just to prop up real estate prices. This has happened in some of places in UP, and the cities have seen destruction of habitats without compensation or payment of paltry sums. The focus on Andhra and Bihar has led to rumblings in other states, who too need special care and were demanding special status. At the same time, a window of multilateral institutional window has seemingly been opened. Sitharaman also announced provision of a 50-year-loan to the states that would need to be repaid in 2073. Some states may see this as a bonanza, but it is also a burden on future generations.
The budget continues with the ‘Viksit Bharat’ (developed India) vision built on the pillars of agriculture, employment, inclusive development, manufacturing and services, urban development, energy, infrastructure, innovation-research and next generation reforms. It was the bedrock of the interim budget presented in February last. Finance Secretary Somnathan underscored that the basic focus of the budget has not changed.
The big theme of the budget is a bouquet of jobs or employment, as raised by the opposition INDIA alliance during the election campaign. It envisages an aggregate spending of Rs 2 lakh crore, aimed at incentivising companies to create jobs, and at training people to be ready for jobs, including apprenticeships, at 500 best companies. This is to address the jobless growth that had become a problem even before the NDA government took over in 2014. Importantly, it’s perhaps the first time a budget is focused on employment and creating employability among the youth. The Economic Survey 2023-24 too highlighted the issue.
The government wants to create a crore of jobs a year for the next five years or till the 2029 elections. This means each of the 500 companies, including in critical areas and having issues with safety, such as power plants, refineries, chemical, have to employ 4000 persons as trainees to be eligible to have incentives of Rs 6000 per employee. The companies would have to retain them for 12 months.
The apprenticeship programme was introduced by late Prime Minister Indira Gandhi too, but it had a limited success. In an automated software-controlled operations few companies need large workforce. Part of the expenses are to be met by the Corporate Social Responsibility (CSR) funds. Still employing such large numbers will not be convenient or profitable for many. Thus, though well-intended, actual beneficiaries could be far less. Besides, while Mudra scheme loans have been doubled to Rs 20 lakh, it’s not considered adequate to start a new business, as threshold requirements are high.
The budget is a productive response by the BJP as well as to create a narrative. The government perhaps would do better to do away with Agniveer-like schemes to suit the needs of youth in Haryana, which goes to the polls later this year. The Armed forces recruitment should continue.
Insofar as the farm sector is concerned, it has been further stressed as horticulture and 109 different kinds of 32 varieties are being developed to suit climate change. Horticulture and vegetable production have increased to over 200 lakh tonnes each. An effort is on to ensure whether rice, wheat or vegetables should not see price fluctuations, which leads to high inflation.
On the fiscal side, the government has adopted a cautionary attitude leading the reduction in fiscal deficit to 4.9 per cent. This would also mean the government would be careful in its expenses, including capital expenditure of Rs 11.9 lakh crore. Instead of massive spending it would more selective as it has done for the railways where the largest infra fund would be spent on safety and signalling issues.
Overall, despite continuity from the interim budget, the finance minister has presented a budget that is different in its outlook. It may not contain inflation but aims at creating jobs and strengthening development of the country. — INFA