In Wes Andersen’s acclaimed movie, The French Dispatch, a character says of another, “We have to accept it. His need to fail is more powerful than our strongest desires to help him succeed. I give up.” A lot of us felt that when we were listening to the budget speech. There was a tacit acknowledgment of government’s failures over the last decade but despite that, no course correction. How much economists and opposition try to help, the government is bent upon failing the economy. Let us start with the employment question. The Union finance minister must be commended for adopting major policy proposals from Congress’s 2024 manifesto. Employment-linked incentives and apprenticeship provisions have been announced. These are good ideas that will alleviate some pain. What the government must have asked itself is: are these solutions to the fundamental problems? The honest answer would have been ‘no’. The touted New Employment Generation scheme has been allocated Rs. 10,000 crore and New Internship Program Rs. 2,000 crore. The lack of self-confidence is palpable. As it did with the Atmanirbhar Bharat package, government is principally relying on supply side measures to solve issues that are predominantly driven by lack of demand in the economy. On an average, every company will be taking on 20,000 interns, a non-starter. The government is promising to finance a portion of the recruitment expense. But if demand does not pick up and production capacity remains the same, which company will risk reducing profit margins by adding more workers? The finance minister has offered palliatives when the diagnosis called for a surgery.In financial year 2024, private consumption (household spending) growth fell to a 20-year low, barring the fall induced by COVID-19 pandemic. The Reserve Bank of India (RBI) estimates that household savings have fallen to 47-year low as net financial savings fell to 5.1 percent of the GDP. RBI’s latest consumer confidence survey (May 2024) shows growing pessimism amongst people. It is a sad reality, but Indians are facing a generational income crisis, and the budget failed to address that. A short-term solution to raising consumption could have been exemptions in personal income tax. The revision in slabs that has been announced is only applicable to the new tax regime that does not allow deductions. Take for example a middle-class family with two earning members and two school going young adults decides to take a home loan to buy a flat. If they have adopted for the new tax regime, they will not be able to seek deduction of the interest component in their EMI. With food prices rising steadily, private education and healthcare becoming expensive, the family might defer the purchase. Such household decisions when clubbed contribute to a demand slump nationally. Inflation remains a big concern for most families. The finance minister glossed over the problem by claiming price rise was within the target and non-core inflation was low. In June, food inflation crossed 9.5 percent. Vegetable and fruit prices are beyond the reach of common people. After ten years, people expect more than platitudes about strengthening supply chain to counter price rise. Analysis of household consumption survey shows that more than 80 percent people are spending less than Rs. 200 per day, while almost 34 percent people spend less than Rs. 100 per day. This vast population has nothing to gain from this budget. A glance at the budget’s expenditure on major items is enough to show the government is keen on failing. Food and fertiliser subsidies have been reduced. Defence budget has also seen a marginal cut while expenditure on pensions has been marginally increased. MGNREGS budget has been kept stagnant when this financial year 5.8 crore people have demanded jobs already and 25 lakh new persons have been included in the job cards. Crop insurance scheme, urea subsidy, and nutrient based subsidy have all been reduced. Like MGNREGS, allocation for PM Kisan has not been increased despite more people becoming eligible each year. Beyond the empty assertions of prosperity, the highlight of this year’s budget was what a X user referred to as ‘extra 2ab’, alluding to PM’s speech years ago where he rhetorically asked, “where does the extra 2ab come from?” The 2ab (Andhra and Bihar) comes from coalition compulsions. There were moments it felt that we had been transported from parliament to legislative assemblies of Andhra Pradesh and Bihar. Such brazen appeasement shatters PM’s image of a strongman. We must look at the current budget in historical context. Tomorrow, July 24, is the anniversary of Dr Manmohan Singh’s maiden budget, delivered in 1991. Back then, reforms were unpopular and opposed by most political parties, including some senior members in Congress. Yet, Dr. Singh boldly embraced the “idea whose time has come” and announced long-term structural economic reforms that set India on the path of high economic growth. In 1991, Congress had won 232 seats, like BJP’s 240 in 2024. In 1991, the nation had to mortgage its gold. In 2024, Indians are facing a generational income crisis. The similarities end there. While Rao and Singh risked political power to ensure long-term prosperity for Indians, the current PM and FM duo chose to leverage the budget to consolidate its weakening hold over its political allies. The government had a golden opportunity to eschew political compulsions and set the tone for economic recovery. It intentionally let it slip. Akash Satyawali is a public policy professional and National Coordinator, AICC Research Department.
