This is not the Budget that Viksit Bharat ordered

The Indian economy faces serious problems on both international and domestic fronts today. That is the reality on the ground, versus the vision of ‘Viksit Bharat (developed India)’.

With the 2047 deadline to realise the Viksit Bharat dream less than 25 years away, one expected another 1991 moment in the Union Budget presented on 1 February 2025. However, this budget has been disappointing.

While one’s disappointments with this budget are many, there still are some high points, one being the relaxation in income tax rates: no tax up to Rs 12 lakh of personal income. This will hopefully increase demand and give the economy a push towards growth. About Rs 1 lakh crore should be added to the economy through this tax relaxation, which may well have a multiplier effect.

However, the impact will be limited within our Rs 330 lakh crore economy. Just about 3.5 crore of income tax-payers (a total population of 17.5 crore) cannot make radical changes to demand.

Another positive point of the budget may be its focus on agriculture as “the key driver of the economy”. Programmes like the national mission on high-yielding seeds, Dhan-Dhanya Krishi Yojana, the promotion of pulses and the cotton mission, etc., are proposed in the budget. However, the funds allotted to agriculture have increased only marginally. The impact of these new programmes will therefore also be only marginal, if anything at all.

Again, the focus on “investing in people” in the budget is also welcome and desirable. However, the funds allotted to health and education have not shown any significant increase.

Though several schemes have been presented, funds to match were not made available. 

In the case of education, Rs 1,25,638 crore was allotted in the 2024–25 budget and Rs 1,28,650 crore for the year 2025–26. This shows a decline in real terms, taking inflation into account.

Similarly, the increase in the budget for health by just Rs 9,8311 crore also implies only a marginal increase in real terms.

Though covering gig workers under insurance and increasing seats in medical education are good steps in the right direction, without additional funds, these programmes may not be effective.

It also must be added that the government’s focus on insurance has resulted in the neglect of public health services. What people want are good public health services, not just insurance, which is accessible only when there is hospitalisation.

As regards primary health services, the budget allocation to primary health and the National Health Mission has declined in real terms. It is argued that state governments are expected to spend more on these two sectors; however, the reality is that most states are not spending enough on these sectors.

In addition, without strong investment in human capital, economic growth on the one hand and the well-being of the people on the other hand will suffer badly. 

A careful scrutiny of the budget shows that funds allotted for tribal development, social welfare and rural development — including schemes like MGNREGA — have declined in nominal or real terms.

Also, funds allotted to the PM Poshan Yojana, Swachch Bharat Mission, PM Gram Sadak Yojana, fisheries, the Jal Jeevan mission, PM Awas Yojana (Urban) and many other schemes and programmes that concern the upliftment of poorer and weaker segments of our society have declined in nominal or real terms.

In retrospect, the funds allotted to these programmes also appear to be highly underspent. This clearly reveals the actual lack of concern from the government for these pro-poor programmes.

***

The government has not been very successful in the field of providing productive employment either.

It took a positive step in the last budget by announcing apprenticeship programmes, along with internships. But the government could spend only Rs 300 crore out of the Rs 2,000 crore allotted to this scheme last year.  This perhaps reveals the government’s low commitment and capacity.

This year again, the government has decided to promote the scheme. Let us hope that they are more committed to it this year.   

Given the financial constraints on the one hand — arising from huge financial incentives to the corporate sector, writing off their debts and frequently their tax evasion — and pressure to reduce the fiscal deficit on the other hand, the budget has announced a fiscal deficit of 4.4 per cent this year.

It is clear that the government will have to change radically to expand fiscal space in the economy. Or else, the financial constraints will limit public expenditure on social sectors, including employment, and on development.

Overall, India needs 7–8 per cent growth for 25 years continuously to become a developed economy. This does not seem to be plausible or possible at present.

It appears that the government is neither able to define the term ‘Viksit Bharat’ clearly and in detail, nor has been able to design the pathway to ‘Viksit Bharat’.

For India to move from a per capita income of US $2,697 today to a per capita income of $23,380 (ILO’s benchmark) requires a different growth path. A ‘more of the same’ approach will not work.

The Economic Survey has highlighted a trust deficit as a major obstacle to our development, but the budget has nothing to say about how this deficit is to be removed.

The government wants to ensure that “no one should be left behind”, but there is nothing in the budget to assure us of this either. The rising inequalities in the country have been blatantly ignored. The concerns of a smaller, more affluent section have been covered, while everyone else — including the poorest — are subject to indirect taxes, since income tax is reformed, but we have no idea how GST will treat us! 

The problem really is that there is no open and free discussion on any policy or programme; there are no objective evaluations of these policies and programmes by experts.

Without this openness, we will never know what exactly is meant by ‘Viksit Bharat’ or how to get there.

Views are personal.

Indira Hirway is a professor of economics at the Centre For Development Alternatives, Ahmedabad, and associate, Levy Economics Institute of Bard College, New York.

This article is courtesy The Billion Press.