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(GIST OF YOJANA) Public Finance and Development: Evaluation of India’s budgetary Priorities

(SEPTEMBER-2024)

Public Finance and Development: Evaluation of India’s budgetary Priorities

Context:

The core of the 2024-25 budget focusses on the ‘Garib’ (poor), ‘Mahilaayeri (women), ‘Yuva’ (youth), and Annadata’ (farmer). Key areas of emphasis include employment generation, skilling. Micro, Small, and Medium Enterprises (MSMEs), and the middle class. The budget proposals aim to create a virtuous cycle of economic growth and employment, provide ample opportunities for all, facilitate balanced regional development, and benefit the most vulnerable sections of society.

Priority 1: Productivity and Resilience in Agriculture

Agriculture plays a pivotal role in the Indian economy, providing livelihood support to 42.3 per cent of the population and contributing 18.2 per cent to the country’s GDP.
Recognising its critical importance, the budget rightly focusses on transforming India’s agricultural sector to ensure food security, enhance farmers’ income, and make agriculture more productive, sustainable, and resilient to climate change.
The agriculture and allied sectors have received a generous allocation of Rs 1.52 lakh crore in the budget.

Key initiatives announced to enhance productivity and resilience in agriculture are as follows:

Transforming Agricultural Research:

Achieving a quantum leap in agricultural productivity requires transforming research to enhance productivity and develop climate- resilient varieties.
The government has decided to comprehensively revamp the country’s agricultural research setup. The budget also proposes to provide funds for agricultural research in a challenge mode for both the public and private sectors.
Additionally, it aims to provide 109 new, high-yielding, and climate-resilient varieties of 32 field and horticultural crops to farmers.

Promotion of Natural Farming:

Natural farming, or Bhartiya Prakratik Krishi Paddhati, is rooted in Indian tradition and relies on desi-cows and locally available resources, avoiding chemical fertilisers and pesticides. It is climate-resilient, cost-effective, rejuvenates soil health, reduces water requirements, and produces safe and healthy food.
The budget proposes to initiate and support one crore farmers across the country in natural farming over the next two years, setting up 10,000 need-based bio input resource centres and supporting farmers through certification and branding.

Self-Sufficiency in Pulses and Oilseeds Production:

Pulses are environmentally friendly crops that put minimal pressure on natural resources and fix atmospheric nitrogen in the soil. They are also crucial for nutrition and health. Currently, there is a gap of 4.4 million tonnes between the demand and supply of pulses, met by imports. Similarly, India heavily depends on imports to meet its edible oil requirements.
The budget emphasises achieving self-sufficiency in the production of pulses and oilseeds by strengthening their production, storage, and marketing.

Vegetable Production and Supply Chains:

India, with a production of 256 MT (Metric Tonnes), is the second-largest producer of fruits and vegetables globally. However, significant post-harvest losses occur due to inefficient supply chains, inadequate infrastructure, transportation issues, and poor market linkages.
To address these challenges, the Finance Minister announced plans to develop large-scale clusters for vegetable production near major consumption centres and promote Farmer Producer Organisations (FPOs), cooperatives, and startups for vegetable supply chains.

Digital Public Infrastructure for Agriculture:

Digital Public Infrastructure (DPI) will enable the development of innovative, farmer-centric solutions and services to improve agricultural productivity and profitability.
It will assist in providing relevant information services on crop planning and health, improve access to farm inputs, credit, and insurance, aid in crop estimation and market intelligence, and support the growth of the Agri-Tech industry and startups.
The budget proposes that the central government implement DPI in agriculture in partnership with states, with a digital crop survey for Kharif to be conducted in 400 districts in the current fiscal year. Additionally, the details of 6 crore farmers and their lands will be included in the farmer and land registries.

Priority 2: Employment and Skilling

India’s demographic dividend offers a significant advantage, but challenges like skill mismatches, regional disparities in job opportunities, underemployment, and unemployment must be addressed to realise this potential. Employment and skilling are thus central objectives of the budget.

Employment Linked Incentive Scheme-A (for First Timers):

This scheme targets 2.1 crore youth entering the workforce with salaries up to Rs 1 lakh per month. The government will pay one month’s salary, up to Rs 15,000, directly to the employee’s bank account in three instalments. All formal sectors are covered, but employers must refund the subsidy if employment ends within 12 months of recruitment.

Employment Linked Incentive Scheme-B (Job Creation in Manufacturing):

Benefiting 30 lakh youth, this scheme promotes he substantial hiring of first-time employees in manufacturing. Incentives are provided if employers hire at least 25 per cent more EPFO employees compared to the previous year or at least 50 previously non-EPFO workers. The government will pay 24 per cent of the wage or salary for the first two years,16 per cent in the third year, and 8 per cent in the fourth year. The scheme covers employees with salaries up to Rs 1 lakh per month, but incentives for those earning over Rs 25,000 are capped at Rs 25,000/month.

Employment Linked Incentive Scheme-C (Support to Employers):

This scheme is expected to incentivise the employment of 50 lakh people and cover additional employment in all sectors. Employers with fewer than 50 employees who increase their EPFO employees by at least two, and other employers who increase EPFO employees by five are eligible for incentives.

The government will reimburse up to Rs 3,000 per month for two years towards EPFO contributions for each additional employee. This subsidy is in addition to Scheme-A but is not available for employees under Scheme-B.

Skilling

Enhancing employability is another focus of the budget. For this, the government plans to introduce advanced skill training programs and upgrade Industrial Training Institutes (ITIs) in collaboration with the industry. Key skilling schemes include:

New Scheme for Skilling and Upgradation of ITIs:

Internship at Top Companies

The Prime Minister’s Internship Scheme will skill one crore youth,aged 21-24, over five years through internships at India’s top companies. Interns will receive a Rs 5,000 monthly allowance for one year, with the government covering Rs 54,000 annually towards the allowance and Rs 6,000 for incidentals. Companies will contribute Rs 6,000 monthly and bear training costs through CSR funds.

Priority 3: Inclusive Human Resource Development and Social Justice

The budget for fiscal 2024-25 underscores the government’s commitment to comprehensive and inclusive development, particularly for farmers, youth, women, and the poor. Human capital development and social justice ensure growth that benefits all sections of society. Key initiatives in this direction include:

Saturation Approach to Promote Social Justice: The government will ensure all eligible people are covered in various programs for education, health, and other sectors. Accelerated implementation of schemes will support economic activities for craftsmen, artisans, self help groups, scheduled castes, women entrepreneurs and street vendors.
Women-Led Development: The budget allocates over Rs 3 lakh crore for schemes benefiting women and girls, emphasising their role in economic development. Enhanced funding targets their health, nutrition, and education.
Pradhan Mantri Janjatiya Unnat Gram Abhiyan; To improve the socio-economic conditions of tribal communities, the government will launch this initiative, covering tribal families in tribal-majority villages and aspirational districts. Over five crore tribal people in 63,000 villages will benefit.
Enhanced Coverage of India Post Payment Bank: To expand banking services and spur economic growth in the North East, more than 100 branches of India Post Payment Bank will be opened in the region.
Increased Funding for Education, Healthcare, and Housing: The budget raises the allocation for education by 12 per cent to Rs 1.2 lakh crore, aiming to improve quality and expand access to digital learning tools. Healthcare funding has increased by 15 per cent to Rs 3.8 lakh crore. To address housing needs, the central government will support constructing three crore additional houses under the PM Awas Yojana.

Priority 4: Manufacturing and Service

Revitalising the manufacturing and service sectors to boost economic growth and create jobs is a key priority of the budget. Special attention has been paid to promoting MSMEs and labour-intensive manufacturing.

Credit Guarantee Scheme for MSMEs: The government will introduce a credit guarantee scheme to facilitate term loans for MSMEs to purchase machinery and equipment without collateral or third-party guarantees. An amount of Rs 9,812 crore is allocated in the budget for the scheme. This will enable small businesses to expand, improve credibility, and create more jobs.
Credit Support to MSMEs During Stress Periods: For MSMEs in the ‘special mention account’ (SMA) stage, a new mechanism will facilitate the continuation of bank credit through a government-promoted fund guarantee, helping them avoid NPA (Non Performing Asset) status.
Enhanced Scope for Mandatory Onboarding in TReDS: The budget reduces the turnover threshold for mandatory onboarding on the TReDS (Trade Receivables Discounting System) platform from Rs 500 crore to Rs 250 crore, unlocking working capital for MSMEs by converting trade receivables into cash. This measure will bring 7,000 more companies onto the platform.

Priority 5: Urban Development

Urban development is a key priority of the budget, with a range of initiatives proposed to revitalise cities, including creative redevelopment, transit-orientated development, and incentives for urban renewal projects.

Cities as Growth Hubs: The Union government will collaborate with state governments to develop cities as growth hubs through economic and transit planning and the orderly development of peri-urban areas using town planning schemes.
Creative Redevelopment of Cities: The government will design a framework for enabling policies, market-based mechanisms, and regulations to facilitate the creative brownfield redevelopment of existing cities with transformative impacts.
Transit-Orientated Development: Development plans, implementation, and financing strategies for transit-orientated development will be formulated for 14 large cities with populations over 30 lakh.
Urban Housing: The government will invest Rs 10 lakh crore to build 1 crore houses for urban poor and middle-class families over the next five years, addressing housing needs. The scheme also envisages a provision of interest subsidies to facilitate loans at affordable rates.

Priority 6: Energy Security

Ensuring energy security is crucial for sustaining economic growth and reducing dependence on fossil fuels. The budget underscores the government’s commitment to high, resource-efficient economic growth and energy security. Key initiatives announced are:

Energy Transition: The government will introduce a policy on energy transition pathways, balancing employment, growth, and environmental sustainability. Rs 1.5 lakh crore has been allocated for renewable energy projects, including solar, wind, and green hydrogen.
Pumped Storage Policy: A policy will be introduced to promote pumped storage projects for electricity storage, facilitating the integration of renewable energy with its variable and intermittent nature.
R&D of Small and Modular Nuclear Reactors: Nuclear energy is set to play a significant role in the energy mix for Viksit Bharat. The government will partner with the private sector, providing R&D funding for Bharat Small Reactors and Bharat Small Modular Reactors, along with new nuclear technologies.
Advanced Ultra Super Critical Thermal Power Plants: India has developed indigenous technology for Advanced Ultra Super Critical (AUSC) thermal power plants. Fiscal support will be provided for setting up an 800 MW commercial plant using AUSC technology as a joint venture between NTPC and BHEL.

Conclusion:

As India navigates a rapidly changing global economic landscape, the budget for 2024-25 sets the course for a resilient and sustainable future. The success of these initiatives will depend on effective implementation, continuous monitoring, and adaptability to evolving circumstances.