Budget 2024: The political lurks behind the fiscal in Sitharaman's budget

Finance Minister Nirmala Sitharaman has presented a prudent budget observing fiscal discipline without surrendering to the urge to please different constituencies. But politics lurks beneath her fiscal discipline. Defence, railways, infrastructure and women, some of the big themes of Sitharaman's past budgets are not as prominent in her Budget. One reason could be the interim budget she presented in February which had announcements related to these themes for the current fiscal year.

The most conspicuous part of her budget is the announcement of special projects for Bihar and Andhra, ruled by the JD(U) and the TDP, the allies which propped up the BJP-led government at the Centre after the party failed to win a majority in the Lok Sabha elections.

It was widely expected that the budget will have special benefits for these two states since the BJP is beholden to the two allies for supporting its government at the Centre.


Special treatment for Andhra and Bihar
Sitharaman announced development of several road projects in Bihar: Patna-Purnea and Buxar-Bhagalpur Expressways; Bodhgaya, Rajgir, Vaishali and Darbhanga spurs; and an additional 2-lane bridge over river Ganga at Buxar at a total cost of Rs 26,000 crore. Power projects, including setting up of a new 2400 MW power plant at Pirpainti, will be taken up at a cost of Rs 21,400 crore. New airports, medical colleges and sports infrastructure in Bihar will be constructed. An additional allocation to support capital investments will be provided. The requests of Bihar Government for external assistance from multilateral development banks will be expedited.

Besides these, the Centre will support the development of an industrial node at Gaya on the Amritsar-Kolkata Industrial Corridor and will also help develop tourism at Bodh Gaya and Nalanda.

Sitharama said the Centre will facilitate special financial support through multilateral development agencies of Andhra. In the current financial year Rs 15,000 crore will be arranged, with additional amounts in future years. The Centre, she said, is fully committed to financing and early completion of the Polavaram Irrigation Project, which is the lifeline for Andhra Pradesh and its farmers. Besides, funds will be provided for essential infrastructure such as water, power, railways and roads in Kopparthy node on the Vishakhapatnam-Chennai Industrial Corridor and Orvakal node on Hyderabad-Bengaluru Industrial Corridor. An additional allocation will be provided this year towards capital investment for economic growth. Grants for backward regions of Rayalaseema, Prakasam and North Coastal Andhra will also be provided.

While the Narendra Modi government ignored extravagant demands of both the allies, such as a special status for Bihar, these announcements clearly point at the government's need to keep the allies in good humour. Congress leader Rahul Gandhi accused the government of appeasing the NDA allies and cronies through the Budget. Terming the first Budget of Modi 3.0 as “Kursi Bachao” Budget, the Congress leader said, “Kursi Bachao” Budget. Appease Allies: Hollow promises to them at the cost of other states."

Yet, it seems these projects are spread out over several years and much of the developmental work could be funded through loans which means Sitharaman could have managed to not dole out a big bonanza for the allies. She did not let the political get the better of the fiscal.

Carving out a new constituency
Sitharaman's budget had an unpredicted emphasis on skilling and employment. She announced an employment-linked incentive scheme for new employees as well as employers. She announced a Rs 2 lakh crore package for five schemes which are aimed at creating jobs and providing skilling to 4.1 crore youth in the country.

"Our govt will implement three schemes for employment-linked incentives as part of the Prime Minister's package. These will be based on enrollment in the EPFO and focus on recognition of the first time employees and support to employees and employers, " Sitharaman said in her Budget speech. Sitharaman announced one month wage to all persons newly entering the workplace in all formal sectors and direct benefit transfer (DBT) of one month salary in three instalments to first-time employees as registered in the EPFO up to Rs 15,000. The eligibility limit will be a salary of Rs 1 lakh per month. The scheme will benefit 210 lakh youth.

She also announced an internship scheme offering one crore youth opportunities in 500 top companies over five years. The interns will gain real-life business experience and receive Rs 5,000 monthly allowance.

Such a major thrust on skilling and employment, while utterly necessary for India if it has to take benefit of its demographic dividend, could also be aimed at appeasing a new constituency of voters: the youth, who form the majority of the population in India today.

This could be in response to Congress leader Rahul Gandhi's all-out efforts to attract youth voters, especially from poor segments. The Congress has claimed that Sitharaman has copied the scheme from its Lok Sabha election manifesto, This shows the intense competition to woo a segment, which includes new voters too, who must be actively addressed and targeted.