Interim Budget 2024–25: A Smart Election Speech in a Feel-Good Goldilocks Moment

The vote-on-account budget has been turned by Modi's political machine into an election year progress report.

You may visualise Finance Minister (FM) Nirmala Sitharaman's Interim Budget for 2024-25 like a crossword puzzle in which two acronyms are joined at the top by the letter M.

In the 'across' box, you can read MAGY – for Mahila, Annadata, Garib, Yuva – Hindi for women, farmers, the poor, and the youth. In the 'down' column you can read it as MIFT in plain English – Manufacturers, Investors, Financiers, and Transportation companies.

Between MAGY and MIFT falls the shortest budget speech by an Indian finance minister, and just as well.

Budget Masquerading As Government’s Progress Report

Elections are due in a few weeks and, if current political indications are true, Prime Minister Narendra Modi will return to power, and with him will arrive a new full-year budget for the year to March 2025 – the real deal.

"See you in July!" is the not-so-hidden subtext of the vote-on-account budget meant to keep government finances in order, but in effect, it has been turned by Modi's efficient political machine into an election year progress report.

It oozed details on how all sorts of demographic sections benefited from and will benefit from Modi's rule – as the country transitions from the much sloganised 'development by and for all' (Sabka Saath, Sabka Vikas) to 'a pledge to make India developed by 2047' (Viksit Bharat Sankalp).

You need to see beyond the slogans and a fine laundry list of welfare schemes and initiatives the minister detailed to understand the real import of the budget. A cynic might at this point invoke an old Hindi proverb: "The elephant has different teeth to show and different teeth to chew."

So you have MAGY to draw voters in, and MIFT to unveil economic priorities.

India as a Goldilocks Economy

If MAGY, or the emphasis on women, farmers, the poor, and the youth, is a guiding acronym, the idea is to woo voters in these descriptions in a manner that would sidestep traditional caste vote banks or regional party affiliations – something that Modi's BJP is doing assiduously.

On the other hand, if you look down in the budget's crossword grid, MIFT is where the real numbers are.

Between ambitious infrastructure projects, easy loans for everything from home building to technological innovation, a mega push into logistics on the rails and roads to help manufacturers and traders, and schemes like the Production-Linked Incentive (PLI) that forms part of Modi's "Make In India" initiative, real money is raining on the MIFT brigade.

For those looking at stock markets and overall GDP growth, FM Sitharaman's budget signals a healthy continuity in what they call a 'Goldilocks economy', one in which there is a steady, sustained, decent level of growth, which is currently around 6.5 to 7% based on which forecaster you are looking at.

With bank finances in good shape after the better part of the previous decade suffered hiccups, and with retail price inflation at 5.7%, below the central bank tolerance limit of 6%, we are looking at an economy powered by loans, public spending, and a general feel-good atmosphere for political stability and a huge population driving higher consumption.

Are Modi Government’s Welfare Schemes Self-Sufficient?

The headline factor for growth fetishists is that an 11% increase in capital expenditure is estimated for 2024-25 at ₹11.1 lakh crore. What's more, India's fiscal deficit is expected to dip to 5.1% of the GDP in the new fiscal year, down from 5.8% in the current year.

That is good news for investors seeking macroeconomic discipline.

So, where is the catch? Plenty for those who look beyond the MAGY-MIFT narrative that spins optimism around welfarist headlines and sustained growth.

A lot of the welfare schemes such as the ones for health insurance, crop insurance, and housing are participative in character. The authorities expect beneficiaries to chip in for the government to make a matching contribution.

There is no major independent audit of the outcomes of Modi's welfare blitz. If participants have to steadily make contributions, inflation must be stable, and disposable incomes must be sufficient for poorer sections to make use of conditional handouts offered by the government.

There is also the big question of whether muscular spending by government agencies creates enough jobs in the lower sections of society, especially the unorganised sector, for incomes to grow.

Jobs For Farmers, Income Remain Dicey

Farmers are another big issue. Circa 2016, Modi had promised the doubling of farmers' incomes by 2022. That did not quite happen as his plans to make private players lead the charge through reform laws came apart after angry farm unions opposed the plan. There is no real Plan B in sight, though there are nice-sounding rural infrastructure schemes at work.

Independent studies show that farmers are getting short-changed in the income growth game, lagging behind their urban peers. While at least 50% of the population is depending on agriculture, the sector's contribution to the GDP is estimated at 18%.

This means that a sizeable section of the population must be absorbed in new-age growth jobs or their incomes must rise at the farmgates. That is not quite happening and may well be hiding a time bomb of income inequality.

True, the Modi government has been smartly using loans and welfare schemes to benefit rural artisans and farmers. Ms Sitharaman put the number of MUDRA loans aimed at self-employment at 43 crores.

Even if there are only two jobs per loan, we should be looking at more than half the population employed by these loans. That doesn't seem to be happening at all.

Is there a wave of optimism on unemployment that may come apart? There is no need for pessimism, but we are yet to see verifiable track records that show the creation of jobs on a large scale.

However, it is equally true that basic poverty has come down significantly and low-wage jobs are not difficult to get in large parts of India. Also, it can be argued that non-economic factors like religious sentiments around the government-backed Ram temple at Ayodhya are keeping voters happy enough for them not to crib about future problems arising from stagnant incomes.

Overall, a clearer picture should emerge of whether MAGY India and MIFT India have a harmonious interlinkage or not as time goes by. For the moment, Mr Modi and Ms Sitharaman have every reason to enjoy a Goldilocks moment. Maybe there is an ancient Sanskrit equivalent for that – like the Golden Age of Gupta rule!

(The writer is a senior journalist and commentator who has worked for Reuters, Economic Times, Business Standard, and Hindustan Times. He can be reached on Twitter @madversity. This is an opinion article and the views expressed are the author’s own. The Quint neither endorses nor is responsible for them.)