Budget in Brief

A Correspondent

In the first full budget of Modi 3.0 Finance Minister Nirmala Sitharaman has made income up to Rs 12 lakh tax-free. Along with this, the benefit of standard deduction of Rs 75,000 will be available. Those who are cheering about Modi’s middle-class friendly budget simply fail to read between the lines. The budget does not offer a realistic road map to resolve the critical problems of unemployment, poor pay packages and under-skilling.

With the Bihar assembly elections due at the end of the year, Modi’s ‘budget bonanza’ for the middle class could not have been better timed. Then Bihar gets extra attention in project allocation because Modi’s party is in alliance with JD (U), both at the centre and in the state.

Sitharaman’s budget document shows that the allocation priority that should be given to the social sector is missing–particularly in respect to merit goods such as quality school education, good healthcare, and adequate nutrition that benefit society as well as individuals.

For the 2025-’26 financial year, social services account for only 6% of the budget, at an allocation of Rs 1.98 lakh crores. The allocation for education at Rs 78572 crore, down from Rs 81,000 crore allocated in 2023-’24.
The allocation for sanitation has dropped to Rs 26,000 crore for 2025-26 from Rs 64,000 crore this year, as per the annual financial statement of the budget.

For a country where 35.5% of children suffer from stunting and around 57%, of women suffer from anemia, the allocation for the Poshan 2.0 scheme to battle malnutrition and improve health, wellness, and immunity through community engagement, outreach, behavioural change, and advocacy has barely increased–to Rs 21,960 crore from Rs 21,200 crore this year as per the Annual Financial statement.

This flies in the face of the finance minister’s claim in the speech where she said that “the cost norms for the nutritional support of 80 million children, 10 million pregnant and lactating women under the Poshan 2.0 programme will be enhanced appropriately”.

The gap between rhetoric and reality is glaring in social sector allocations.

While the personal tax collection in 2024-’25 increased by 19%, from the previous year, in the case of corporate tax, the increase was only 7%. Concessions to big businesses and corporate tax incentive in the past few years have not spurred private investment and led to job creation.

 Neither has the promised upgrade of 1,000 Indian Institutes of Technology started. This is a serious setback to enhancing the skills of workers, which would be critical to improving their compensation package.

The CMIE’s last report in December puts the unemployment percentage at 7.8%. The India Employment Report 2024 noted that casual workers, who constitute 25% of the workforce, get a monthly wage of about Rs 4,712. Those in the self-employed category (who form 42% of the workforce) earn around Rs 6,843 per month. Then Gig workers are not recognised as workers; they are ‘partners’. In other words they have no legal protection as per labour laws.

What is needed is to change in allocation priority towards human capability development, greater investment in education, and a big push to skilling to complement the massive allocation the government has been making in economic infrastructure, spending nearly 23 % of the budget.

Free food grains for the poor, sops for farmers and tax cuts for the middle class may bring Modi a political dividend but his claimed goal of Viksit Bharat will not be realised.

Meanwhile, foreign direct investment limits for the insurance sector have been increased from 74 percent to 100 percent and insurance employees are panicked as they fear further curtailment of job opportunities in this sector.  

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Frontier
Vol 57, No. 34, Feb 16 - 22, 2025