From UPSC perspective, the following things are important :
Prelims level : Disinvestment
Mains level : The Finance Minister's Budget speech
The Finance Minister’s Budget speech focuses on claiming credit for a decade of economic growth, moderate inflation, and social welfare. However, the analysis reveals a mix of positives and concerns, emphasizing the need for addressing challenges like employment, wage growth, and dependence on China for industrial inputs.
- The Budget attributes post-COVID growth revival to public infrastructure investment, proposing an 11% rise in capital expenditure.
- Public infrastructure investments, especially in highways and communications, have contributed to GDP growth in the post-pandemic years.
- The Budget extends a 50-year interest-free loan scheme for States and introduces a similar scheme for private sector innovation and R&D with a ₹1 lakh crore corpus.
- The Budget applauds the scheme to set up rooftop solar in 1 crore households.
- The claim of doubled FDI inflow is challenged, highlighting that much of it has gone into services rather than substantial manufacturing.
- Despite positive growth indicators, the employment situation remains grim, with stagnant regular salaried employment and a rise in unpaid family labor.
- Real wages in agriculture have declined, indicating that the benefits of economic growth have not been equitably distributed.
- There is a concern about premature de-industrialization, with a rise in the agriculture workforce and a decline in manufacturing employment share.
- Growing dependence on China for industrial inputs poses a strategic risk, despite initiatives like ‘Make in India’ and ‘Atmanirbhar Bharat Abhiyaan.’
- Crowding-out: The displacement of private investment due to high levels of public investment.
- Disinvestment: The sale or liquidation of government assets in the public sector.
- Geopolitics: The influence of geographical factors on international relations and politics.
- “All is well” – The political message emphasizing optimism about the future.
- “Premature de-industrialization” – A concern that the economy is losing its industrial base too soon.
- “The Budget claimed that FDI inflow during 2014-23 doubled to $596 billion compared to the previous 10 years. This is misleading.”
- “The political message in the Budget was ‘all is well’ and the coming days will be better.”
- “The long term growth of a poor, over-populated economy lies in the structural transformation of its workforce away from rural/agriculture to modern industry and services.”
- “The Budget is an account of the achievements of the last decade of this regime, with a promise to press ahead with the same.”
Key Examples and References:
- The rise in public infrastructure investments contributing to GDP growth.
- The widening trade deficit with China despite ‘Make in India’ initiatives.
Key Facts and Data:
- The FDI inflow ratio to GDP peaked in 2007-08 and has not regained that level.
- India’s industrial output and investment growth rate has decelerated over the last 5-7 years.
The Budget seems complacent about aggregate growth but overlooks concerns such as employment, wage growth, and dependence on China. The focus on claiming credit for past achievements raises questions about addressing existing challenges.
- Prioritize inclusive growth to ensure benefits reach a larger section of the population.
- Address employment challenges by promoting structural transformation from rural to urban sectors.
- Strategically reduce dependence on China for critical industrial inputs.
- Enhance the effectiveness of schemes like interest-free loans for innovation and R&D to boost long-term economic growth.