By Pooja Misra
With the 2024 general elections, having given the mandate to a coalition NDA government, it is now important that policymakers go back to the drawing board and delve deep into the intricacies involved in framing the Union Budget 2024-25. The good news being that in FY 24, the Indian economy outperformed all economic projections and grew at 8.2 percent and as per the World Bank’s Global Economic Prospects Report released earlier this month, the nation is predicted to grow at an average rate of 6.7 percent for three fiscal years beginning FY 25. However, while having inherited the fastest-growing major economy globally is an advantage to Modi 3.0, focusing on inclusive growth is the call of the day.
The Periodic Labor Force Survey (PLFS) – Quarterly Bulletin for January – March 2024 shows that the unemployment rate in urban areas in India stands at 6.7 percent as against a global unemployment rate of 5.1 percent (World Bank, 2023). Labour Force Participation rate and Female Labour Force Participation in urban areas in India has increased to 50.2 percent and 25.6 percent respectively in January – March 2024 as against 48.5 percent and 22.7 percent in January – March 2023.
However, the World Bank data shows that at a global level the Labour Force Participation Rate was at 66.3% in 2022 and Female Labor Force Participation stood at 49 percent in 2023. Thus, while the painting on the canvas of the Indian economy looks rosy, there are shades of grey in it and there are ample opportunities for decision-makers to design and undertake employment-generating policy measures. The government needs to single-mindedly focus its energy and attention on increasing employment opportunities for both genders, maybe with slightly more emphasis on female participation, the Lakhpati Didi scheme being one such initiative.
So what are some of the key areas that Modi 3.0 policymakers can focus their energy on? To begin with, there needs to be a continued focus on government capital expenditure as it has a higher multiplier effect than revenue expenditure and encourages crowding in of private capital expenditure.
Increased Capex
Increased capex results in boosting growth and gives rise to employment opportunities for skilled, semi-skilled, and unskilled persons. With capacity utilisation numbers of India Inc being in the region of 74 percent (RBI), the logical next step would be increased private capital expenditure. The Government has been moving in the right direction with its China + 1 policy, PLI schemes etc. However, for the same to fructify, with ease of doing business as its central focus, next-generation structural and economic reforms are needed not only to be devised, but also implemented and executed especially in the context of land and labour policies. Given that MSMEs contribute to around 30 percent of the country’s GDP, providing assistance in terms of technology improvement, infrastructural support and skill development will have an upward spiralling effect on this sector.
Skill Development
Skill development initiatives with a keen eye to close the gap between industry and academics needs to be undertaken. Training and skill development programs aligning with industry needs have been the call of the day for quite some time now. Skills that make individuals more employable and adaptable to changing job requirements and consequently bringing down structural unemployment should be worked upon.
Education and Healthcare
Additionally, policymakers need to allocate a higher percentage of GDP to education and healthcare. The Interim budget 2024-25 had an allocation of approx. 2.9 percent and 1.2 percent of GDP to education and healthcare as against advanced economies such as United States allocating 5.44 percent to education and 16.6 percent to health respectively in 2022. Not to forget, the National Education Policy (NEP), 2020 has advocated a budgetary allocation of 6 percent of GDP to education, however a higher allocation is still to see the light of the day. Free health cover for 70 years & above can give a further impetus to social cover. Education and health are two crucial sectors for the sustained growth and well-being of any nation. Enhanced education and health infrastructure can reshape the socio-economic structure, diminish levels of inequality, foster inclusive growth, and contribute to nation-building.
Also read: Budget 2024: Will the prices of medicines go down after Nirmala Sitharaman’s announcement?
Sustainable Infrastructure
With 68 percent of the world’s population projected to live in urban areas by 2050 (United Nations, 2018), and India, China and Nigeria are expected to account for as high as 35% of the projected growth of the global population between 2018 and 2050, investing in building of sustainable urban infrastructure is a head that cannot be ignored. Strategically designed sustainable infrastructure facilitates long-term sustainable urban expansion, while minimising resource depletion and mitigating environmental damage.
India spends 0.7 percent of GDP as against United States and China spending approx. 2.8 percent and 2.1 percent of GDP resp. in research and development. This is extremely low when compared to developed and developing countries. Rather, the sad part being that the weightlifting in R&D spend is being done by the Government and public sector units and not by the private sector. Thus, if India wishes to reposition itself in the global economic order and ensure that its products meet global standards, it must invest more in research and development.
Talking in terms of a near-term solution, while there are signs of green shoots in the rural economy and expectations of a better-than-expected monsoon pointing towards a pick-up in rural consumption the Government also needs to boost productivity and fortify the agricultural sector. Keeping in mind that approx. 45.76 percent of the workforce is dependent on agriculture and allied sector (2022-23), GVA for agriculture, livestock, forestry & fishing was a disappointing 1.4 percent in FY 24 as against 4.7 percent in FY 23. Thus, devising policies with renewed energy and innovative thinking along with single-minded communication and implementation at the ground level is much needed for this sector.
Last, but most importantly, it has now been a much-discussed fact time and again, that the nation needs to fire on all its growth engines especially Private Final Consumption expenditure. This can be done by not only bringing down inflation levels in the economy but also increasing money in the hands of people to spend especially the middle and lower-income strata of society. An out-of-the-box thinking in the context of leaving more money in the hands of people be it in terms of income tax or bringing petrol and diesel under the GST ambit can give the much-needed thrust to the economy.
(The author is the Area Chair, Economics & International Business, BIMTECH. Views expressed are the author’s own and not necessarily those of financialexpress.com.)
