Budget Eyes Middle Class
By Dhurjati Mukherjee
Notwithstanding that the Union budget is viewed as middle-class oriented, this commentator would have been happier if the thrust had been equally given to the rural sector and the economically weaker sections. Though agriculture has received due attention as also textiles, to some extent, the problems of generating employment remain as the government did not think it fit to give any incentive specifically to labour-intensive industries.
Majority of the population of the country still resides in rural areas, 55 to 60%, and, as such, the thrust areas should be in this sector. But unfortunately, a deep analysis of the Budget over the years reveals that a major share of the investment has been availed by the middle class and urban sector. Obviously, the justification would be that since the latter sector contributes more than half of the GDP, the allocation has accordingly been done in this way.
India’s economic momentum has been slipping with nominal GDP growth for the current fiscal with an Rs 2.25 trillion shortfall in projected output. This is because the economy grapples with shrinking consumption, weak wage growth and sluggish private investment. As household savings have fallen, discretionary spending has been low. Besides, capital expenditure, a critical driver of infrastructure-led growth, has lagged. Between April and November 2024, the government spent only Rs 5.13 trillion of its Rs 11.1 trillion capex budget – 46.2% compared with over 58% during the same period last year.
Additionally, there is distressing unemployment and underemployment scenario. Though the apprenticeship programme, launched last year, needs to be applauded the sector urged for enhanced reimbursement rates for stipends as well as a simplification of the approval process for hiring interns under government schemes. These have not been looked into and the skilling as also the demand to drive workforce growth and talent mobility, encourage diversity and close skill gaps one is reminded of the fact that with labour costs increasing, there is a trend towards mechanisation, resulting in reduced job creation.
As per an ILO study of graduate employment stands at over 29%, demonstrating a mismatch between education and job availability. Highly skilled persons as well like engineers and technicians are not finding proper employment. It’s strange there’s no mention of this in the Budget and the demand of starting an unemployment allowance, at least for skilled personnel, has been overlooked. Only intensive skill development of youth may not lead to employment opportunities.
The finance minister rightly put thrust on the agricultural sector, but other measures do not touch the root of the problems. A major section of middle class is relatively well-off and tax exemption from Rs 7 lakh could have been put to Rs 10 lakh rather than Rs 12 lakh, as resources are a key factor in augmenting development expenditure. The needs in an emerging economy like ours are massive. If the tax cut had not happened, expenditure would have gone up by Rs 4.4 lakh crore, enough to boost consumption growth. Moreover, if the tax cut was needed why not impose a wealth tax of just 1% on the super-rich?
The emphasis on enhancing agricultural productivity, five-year mission for pulses towards achieving atmanirbharata and Pradhan Mantri Dhan Dhyna Krishi Yojana, expected to benefit 1.7 crore farmers, are steps in the right direction. Also, comprehensive programme for fruits and vegetables, 5-year mission to boost cotton production and creation of a Makhana Board, National Institute of Food Technology, may go a long way in aiding farmers and development of food processing and other allied sectors. However, despite all this, it has to be ensured that incomes of small and marginal farmers increase in tune with market conditions.
Though the budget allocation for Agriculture Ministry has been reduced to Rs 1.37 lakh crore from revised estimate of Rs 1.41 lakh crore in last fiscal, the Ministry of Fisheries witnessed a 37% increase to Rs 7544 crore. The country is the second largest producer of fish and aquaculture with seafood exports worth Rs 60,000 crore and the hike may help sustainable fishing practices and give a boost to rural sector. Also, food budget has been pegged at Rs 2.03 lakh crore, up by 3% from Rs 1.97 lakh crore in FY25.
The social infrastructure in rural areas is appalling. While there is talk of IIT capacity expansion and addition of 6500 students plus 50,000 government schools provided with Atal tinkering labs, more central schools are needed– at least two in eachdistrict of which one should be in a rural or semi-urban area. The setting up of 5 national centres of skilling is welcome but more such centres are needed. However, spread of both school and higher education is not possible with just Rs 1.3 lakh crore, slightly up from Rs 1.1 lakh crore in 2024-25.
Insofar as health sector, the setting up of day-care cancer centres in all districts within 3 years has been announced with 200 centres to be operational by 2025-26 itself, there was need to set up at least one wellness centre in each district. The government would do well to convert these day-care centres into integrated wellness centres in the long run.
The Economic Survey predicted there are presently 13.86 lakh doctors which convert into current availability for entire population in ratio of 1:1263, against WHO recommendation of one doctor per 1000 people. This the government may try to achieve by 2030 as medical seats are to be doubled in the next five years with 10,000 such seats expected to be added in next fiscal. However, health sector’s share has fallen from 2.31% in 2019 to 1.9% in 2025-26, making it one of the lowest among major economies.
The problem lies in inadequate infrastructure in block and even sub-divisional hospitals and reluctance of doctors to serve in rural areas. With the states starved of funds, the Centre could have given funds to some such hospitals towards improving infrastructure and/or purchase of basic equipment. The exemption of customs duty for 36 living-saving drugs will benefit people but only those who can afford treatment of cancer.
The MSMEs, which number around one crore and employ 7.5 crore people, have rightly been given special focus with 2-2.5 times increase in investment and turnover limits based on their classification. Significantly, a Rs 5 lakh limit for micro enterprises registered in the Udan portal and 10 lakh cards has been introduced and is likely to be issued in the first year. The focus was necessary as MSMEs contribute around 45% of nation’s exports and have potential to generate more jobs.
Another announcement of 50-year interest free loan to states along with allocation of Rs 1. 5 lakh crore funds to states for capital expenditure and an Urban Challenge Fund (UCF) for new age cities has been a good decision as most states, being cash-starved, must struggle in finding resources to carry forward their development plans. The redevelopment of cities is vital at this juncture due to the high population density of most cities because of migration from rural areas. But should not the rural areas get such a fund for their development, is a big question? — INFA