25 July 2024 : The Hindu Editorial Analysis

1. Budget 2024 — long on intent, short on details

(Source – The Hindu, International Edition – Page No. – 8)

Topic: GS3 – Indian Economy

Context

The FY25 Union Budget focuses on long-term goals for Vikisit Bharat@2047, fiscal stability, and employment generation. It continues fiscal consolidation efforts while introducing measures to stimulate demand and support MSMEs. However, it lacks significant initiatives for key sectors like industry, education, and health, impacting the broader development vision.

Key Aspects of the FY25 Budget Speech

• Vision for Vikisit Bharat@2047: The Union Finance Minister’s short Budget speech clearly outlines intentions and long-term goals through nine priority areas. This vision is intended to guide future Budgets, with a focus on achieving the ambitious goals set for 2047.
• Recognition of Unemployment: The Budget acknowledges the challenge of unemployment, dedicating substantial effort to outline initiatives aimed at generating jobs. This is a significant area of focus given the ongoing struggles with employment creation.
• Coalition Government Compulsions: The speech reflects some of the constraints and compromises inherent in a coalition government, although these are often concealed within specific details. These factors have influenced the strategy and approach of the Budget.

Continuity in Fiscal Policy

• Fiscal Deficit Targets: The Budget continues with fiscal consolidation efforts, reducing the overall fiscal deficit to 4.9% from the 5.1% target in the interim Budget. The use of surplus from the Reserve Bank of India has supported fiscal prudence. The fiscal deficit is expected to decrease to below 4.5% of GDP by FY2026.
• Budget Size and Borrowing: The Budget size has increased only slightly, with overall borrowing remaining almost unchanged. Although borrowing has decreased marginally, it is less than what might have been achievable with higher revenue collections.
• Expenditure Trends: There is a marginal increase in overall expenditure, but capital expenditure remains steady. Some troubling trends include minimal increases or declines in key expenditure areas, such as commerce, industry, and energy. Revised estimates for 2023-24 indicate a reduction in expenditure for social welfare and scientific departments.
• Capital Expenditure Decline: Effective capital expenditure, which includes grants for creating capital assets, has decreased compared to revised estimates for 2023-24. This suggests potential inefficiencies in government spending that could undermine expected economic benefits.

Measures for Demand and Employment

• Stimulating Demand: The Budget aims to boost demand and private consumption through changes in the new income-tax regime, providing slightly more disposable income to some taxpayers. The increase in indirect tax collections allowed room for income-tax reliefs, which could have further stimulated demand and improved household savings.
• Employment Initiatives: The Budget introduces measures to enhance employment, including an internship scheme and incentives for first-time employees. However, these measures may not fully address broader labour market challenges or the impact of technological changes. The effectiveness of these schemes in creating sustainable employment is uncertain.
• Support for MSMEs: The Budget includes initiatives to revive the Micro, Small, and Medium Enterprises (MSME) sector, such as a credit guarantee scheme and collateral-free loans. Assistance to states like Andhra Pradesh, Bihar, Odisha, and Jharkhand aims to boost investment and employment. However, providing only credit without a conducive operational environment may limit the growth potential of MSMEs.

Notable Omissions

• Lack of Industrial Sector Focus: The Budget notably lacks significant measures for the industrial sector. Key areas such as Railways, the Production Linked Incentive (PLI) Scheme, Gati Sakthi, and the Census are not addressed.
• Education and Health Sector Absence: There are no substantial initiatives outlined for the education and health sectors, which are crucial for tapping into the demographic dividend. This absence could impact the vision for 2047 and the overall development strategy.
• Urban vs. Rural Balance: The Budget does not adequately address the need to balance growth between urban and rural areas or distinguish between job creation and internships. The absence of bold steps and detailed planning for the journey to 2047 raises concerns about the adequacy of the proposed measures.

Conclusion

• The FY25 Budget reflects a commitment to fiscal stability and strategic goals for 2047 but reveals limitations in addressing key sectors and challenges.
• While it maintains fiscal consolidation and introduces measures to stimulate demand and employment, notable omissions and a lack of bold, detailed initiatives may impact the realisation of long-term objectives.

PYQ: One of the intended objectives of Union Budget 2017-18 is to ‘transform, energise and clean India’. Analyse the measures proposed in the Budget 2017-18 to achieve the objective. (250 words/15m) (UPSC CSE (M) GS-3 2017)

Practice Question:  Assess the key measures introduced in the FY25 Union Budget for fiscal consolidation, employment generation, and sectoral support. Discuss any notable omissions and their potential impact on achieving the long-term vision for 2047. (250 Words /15 marks)

2. An outlining of urban transformation strategies

(Source – The Hindu, International Edition – Page No. – 8)

Topic: GS3 – Indian Economy –  Infrastructure

Context

The FY25 Budget underscores urban development by focusing on housing, infrastructure, and city planning. It proposes new investments in housing and infrastructure, supports the Smart Cities Mission and digital urban management, and addresses solid waste and street vendor issues. Effective implementation and citizen engagement are crucial for success.

Urban Population Growth and Need for Investment

• India’s urban population, approximately 50 crore, represents 36% of the total population, growing at 2% to 2.5% annually.
• The FY25 Budget acknowledges the importance of cities as growth hubs and outlines a strategic vision for their development.

Housing Initiatives

• The Pradhan Mantri Awas Yojana (Urban) has been in effect since 2015, providing 85 lakh housing units for Economically Weaker Sections (EWS) and Middle Income Groups (MIG) with an investment of ₹8 lakh crore.
• The Budget proposes the construction of an additional one crore housing units in urban areas, with a total investment of ₹10 lakh crore.
• Central assistance for this initiative amounts to ₹2.2 lakh crore over the next five years, with ₹30,171 crore allocated for the current year.
• New rental housing for industrial workers will be developed in public-private partnership (PPP) mode with Viability Gap Funding (VGF) support of 20% from the central government and potential matching support from State governments.

Core Infrastructure Investments

• Core infrastructure needs for cities include water supply, sanitation, roads, and sewerage systems.
• The Atal Mission for Rejuvenation and Urban Transformation (AMRUT) provides ₹8,000 crore, with the VGF window available for projects undertaken in PPP mode.
• The Budget allocates ₹11.11 lakh crore for overall capex, including infrastructure, with ₹1.50 lakh crore provided to States as interest-free loans for infrastructure development, which could benefit urban areas.

Smart Cities Mission and New Initiatives

• The Smart Cities Mission budget has decreased from ₹8,000 crore in 2023-24 to ₹2,400 crore in 2024-25.
• However, the new National Urban Digital Mission (NUDM) has been introduced with ₹1,150 crore allocated for digitising property and tax records, and GIS mapping, aiding urban local bodies in better financial management.

City Planning and Transit Development

• The Budget emphasises planned city development with a Finance Commission Grant of ₹25,653 crore and ₹500 crore allocated for incubating new cities.
• Enhanced focus is given to economic and transit planning, encouraging transit-oriented development around transit hubs.
• Funding of ₹1,300 crore is provided for electric bus systems, aiming to make public transport more economical and eco-friendly.

Solid Waste Management (SWM)

• Solid waste management is highlighted as a critical issue. The Budget introduces special measures to develop bankable SWM projects in collaboration with State governments and financial institutions, utilizing the VGF where applicable. Indore, Madhya Pradesh, serves as an example of successful SWM implementation.

Street Vendors and Public Spaces

• The Budget proposes the development of 100 weekly ‘haats’ or street food hubs in select cities to support street vendors, building on the Street Vendors Act, 2014, which regulates street vending and aims to make it a safe and viable option for vendors and consumers.

Challenges and Call to Action

• Despite the Budget’s provisions, there is a call for cities and municipalities, guided by State governments, to demonstrate vision and determination to utilise the resources effectively.
• Citizen participation is essential for the success of urban development strategies.

Conclusion

• The FY25 Budget provides a comprehensive framework for urban development, focusing on housing, infrastructure, city planning, and waste management.
• The success of these initiatives will depend on effective implementation, collaboration with State governments, and active citizen involvement.

PYQ: Q.1 How is efficient and affordable urban mass transport key to the rapid economic development of India? (250 words/15m) (UPSC CSE (M) GS-1 2019) Q.2 What are ‘Smart Cities’? Examine their relevance for urban development in India. Will it increase rural-urban differences? Give arguments for Smart Villages’ in the light of PURA and RURBAN Mission. (200 words/12.5m) (UPSC CSE (M) GS-3 2016)

Practice Question:  Discuss the key urban development measures announced in the FY25 Union Budget, highlighting their implications for housing, infrastructure, and city planning. (250 Words /15 marks)

3. A Budget that places health on the margins

(Source – The Hindu, International Edition – Page No. – 11)

Topic: GS2 – Social Justice – Health

Context

The Union Budget, post-COVID-19, emphasised economic growth through infrastructure and employment but fell short on health sector investments. Despite some positive steps like promoting climate-resilient agriculture and waiving customs duties on anti-cancer drugs, there were minimal increases in health funding and missed opportunities for broader drug price controls and workforce development.

Economic Growth and Health Sector Focus

• Economic Growth Emphasis:
  • With the worst of the COVID-19 pandemic behind us, the Union Budget shifted focus towards economic growth drivers like infrastructure and employment.
  • It was anticipated that the recognition of population health as a critical factor for accelerating and safeguarding economic growth would lead to continued investment in strengthening health systems.
• Health Initiatives from Interim Budget:
  • The Interim Budget had announced plans to promote HPV vaccination for girls to prevent cervical cancer, create a U-WIN programme to improve routine immunisation coverage, and include ASHA and Anganwadi workers under the Pradhan Mantri Jan Arogya Yojana (PMJAY).
  • These initiatives, however, were not elaborated upon or itemised in the main Budget presented on June 23.

Budgetary Comparisons and Allocations

• Comparative Analysis:
  • To assess increases in programme allocations, comparisons should be made between the Budget Estimates (BE) for the current and previous years rather than the Revised Estimates (RE), which reflect actual spending rather than needs.
  • Comparing this year’s BE with last year’s RE shows a 12% increase for the health sector, but this is misleading as it reflects actual spending, not intended increases.
• Actual Increases:
  • Comparing the Budget Estimates (BEs) for 2023-24 and 2024-25 shows only a 1.98% increase for the overall Health Ministry budget, 1.16% for the National Health Mission (NHM), and 1.4% for PMJAY.
  • These increases are modest given the need to expand coverage and enhance the impact of flagship programmes like Ayushman Bharat.
• Need for Enhanced Funding:
  • The NHM is crucial for strengthening primary care and district hospitals, and its funding should reflect the urgency of issues like child immunisation, tuberculosis elimination, and non-communicable diseases.
  • The modest increase in PMJAY’s budget is insufficient to extend coverage to all elderly persons as recently announced.

Missed Opportunities in the Budget

• Healthcare Workforce Investment:
  • The Budget mentioned an increase in new medical colleges but did not address the need for a comprehensive, multi-layered, multi-skilled healthcare workforce.
  • The push for employment and skill-building should recognize the health sector as a significant area of opportunity, especially for young people.
• Drug Pricing and Procurement:
  • Waiving customs duties on three anti-cancer drugs is a positive step, but broader price controls are needed for many other drugs.
  • Establishing pooled procurement mechanisms could significantly lower drug prices for both public and private healthcare institutions accredited to government-funded health insurance schemes.

Climate-Resilient Agriculture Investment

• Climate-Resilient Agriculture:
  • The Budget’s commitment to climate-resilient agriculture is timely, addressing the impact of global warming on staple crops.
  • Diversifying agriculture to include climate-resilient crops will enhance nutrition security and contribute to climate-smart practices by reducing water, pesticide, and energy use, and lowering greenhouse gas emissions.

Conclusion

• Overall, while the Budget shifted focus to economic growth and infrastructure, it fell short in addressing key health sector needs and missed opportunities to implement mechanisms for better drug pricing and a more robust healthcare workforce.
• The emphasis on climate-resilient agriculture is a positive step, aligning with the need to adapt to environmental changes.

PYQ: In order to enhance the prospects of social development, sound and adequate health care policies are needed particularly in the fields of geriatric and maternal health care. Discuss. (150 words/10m) (UPSC CSE (M) GS-2 2020)

Practice Question:  Discuss the implications of the recent Union Budget’s focus on economic growth and infrastructure post-COVID-19, while noting its shortcomings in health sector investments and drug price controls. How can the government address these gaps to achieve a more balanced approach to economic and health development? (250 Words /15 marks)

4.  Prioritising inclusivity and fiscal prudence

(Source – The Hindu, International Edition – Page No. – 11)

Topic: GS3 – Indian Economy

Context

The Union Budget, as the new government’s first major policy move, emphasised economic growth, inclusivity, and strategic focus on agriculture, employment, MSMEs, and sustainability. It aimed to align with the Viksit Bharat@2047 vision while maintaining fiscal discipline, though implementation will be crucial to achieving its goals.

Anticipation and Vision:

• The Budget was highly anticipated as the first major public policy announcement of the new government.
• Expectations included a plan for the next five years aligned with the national vision of Viksit Bharat@2047.
• The Budget aimed to address immediate challenges while focusing on long-term growth, inclusivity, and opportunity creation.

Focus on Agriculture:

• Climate change has significantly impacted agriculture globally, necessitating efforts to develop climate-resilient seed varieties.
• The Budget emphasises a review of agri-research to enhance productivity and introduce such varieties.
• National missions for pulses and oilseeds will be strengthened, and large-scale vegetable production clusters near consumption centres will be established.
• These measures aim to build self-reliance, stabilise farmers’ incomes, and reduce price volatility due to import dependence and supply chain issues.

Employment and Skilling:

• A comprehensive package includes three schemes offering employment-linked incentives to boost job creation in manufacturing and services sectors.
• Plans to set up additional working women hostels and creches with private sector collaboration will support greater female workforce participation.
• Increased female labour force participation is seen as a growth lever, aligning with FICCI’s suggestions for strengthening the care economy.

Support for MSMEs:

• The Budget introduces a new credit guarantee scheme for MSMEs in the manufacturing sector and directs public sector banks to develop internal credit assessment models based on digital footprints.
• Mechanisms to ensure credit flow to MSMEs during periods of stress are included.
• Changes are expected to improve underwriting models and reduce the cost of credit for MSMEs.
• The annual turnover threshold for registration on the TreDS platform has been lowered from ₹500 crore to ₹250 crore, reflecting FICCI’s recommendations.

Sustainability Measures:

• The Budget promotes small modular reactors for nuclear energy and continues support for the national rooftop solar program.
• It includes projects for water supply, sewage treatment, and solid waste management in large cities.
• A Critical Minerals Mission will be established to secure access to essential minerals for sustainability goals.

Partnership with States:

• The Budget highlights the need for collaboration with State governments on factor market reforms, including land, labour, and power.
• FICCI supports this approach as it affects production costs and overall national development.

Fiscal Management:

• The projected fiscal deficit for 2024-25 has been revised down to 4.9% from 5.1%, demonstrating the government’s commitment to fiscal consolidation.
• This adjustment is expected to positively influence India’s external ratings.

Implementation Focus:

• The Budget sets a clear vision and priorities for continued growth and development.
• The next step is effective implementation to achieve the outlined goals.

Practice Question:  Discuss the key focus areas of the Union Budget under the new administration and evaluate how effectively it aligns with the vision of Viksit Bharat@2047. Consider the impact on agriculture, employment, MSMEs, and sustainability. (250 Words /15 marks)