After an unexpected loss of majority in the elections, the temptation to deliver a pro-welfare or a populist Budget could have run high for the ruling party. But on D-Day, finance minister Nirmala Sitharaman chose to keep her moves mixed.
The top priority, it appeared, was to cut fiscal deficit, thanks to a generous revenue windfall from the Reserve Bank of India (RBI). This created space for some relief for taxpayers—but the increase in budget size when compared with the interim budget was minimal, especially for some sectors related to the most vulnerable Indians.
The Centre is aiming the spending–revenue gap at 4.9% of GDP, 20 basis points lower than the goal set in February. That’s thanks to an additional ₹1.39 trillion received in the form of “dividends and profits”—that includes the RBI bonanza.
Nearly half of this gain will go towards higher revenue spending. This raises the revenue spending-to-capital spending ratio marginally: though not ideal, it’s not worrisome enough, either. (Since revenue spending goes on day-to-day operations, and capital spending goes to building assets, a lower ratio is desirable.)
Capital expenditure, the holy grail of the Centre’s post-pandemic rebuilding strategy, was left unchanged, at ₹11.11 trillion. But the break-up of capex shows the Centre has actually passed the baton to the states, while cutting down on its own share. Public sector enterprises also have an increased burden of this spending.
The highlight of the budget was the relief to taxpayers, which will result in just a 16% growth in income tax collections, down from 22.6% the previous year. Also, what may either point to a conservative estimation or the possibility of a slowdown indeed, the government is also projecting slower growth for corporate tax and goods and services tax (GST) collections.
Mixed bag
The attempt to ensure macroeconomic stability and woo the middle class comes, partly, at the cost of rural India. A tight monetary policy and soaring inflation had squeezed the budgets of millions in the past couple of years, and hopes were high for relief. But several rural development initiatives grappled for a larger slice of the budgetary pie.
Among key schemes, only the one on housing secured a substantial elevation in funding: allocations increased 70% since 2023-24 to ₹54,500 crore. The outlay for the National Livelihood Mission – Ajeevika was up only marginally by 6.5%.
Meanwhile, the allocation for the crucial rural jobs scheme has been left unchanged at ₹86,000 crore, and the estimated spend on the rural roads scheme has come down to ₹12,000 crore from the revised estimate of ₹17,000 crore in the previous year.
The government has earmarked ₹1.52 trillion for the agriculture-related sectors in 2024-25, about 8% up over 2023-24. (The segment also saw a 3.4% increase over the amount provisioned in the interim budget.) A massive boost came to the Rashtriya Krishi Vikas Yojna, which was increased 23% to ₹7,553 crore, but other major schemes in the sector saw flat or reduced funding.
The budget skipped raising allocations in two flagship schemes: Pradhan Mantri Kisan Samman Nidhi (PM-Kisan) and Pradhan Mantri Fasal Bima Yojana. The Modified Interest Subvention Scheme (which offers farmers concessional short-term agri-loans up to ₹3 lakh for crop cultivation and related activities) was the lone exception: its funds rose 22% to ₹22,600 crore.
Elsewhere in Budget
Meanwhile, spending on other key areas got a limited boost, with states’ coffers and gender budgeting witnessing a significant push. The gender budget saw a near-19% rise in its outlay to ₹3.3 trillion, while transfers to states (the money the Centre shares with them out of its tax revenue) saw an 18% surge to ₹3.2 trillion since 2023-24.
Education and health saw an increase of 15.4% and 12.7%, respectively. Further, on account of the encouraging pace of the post-pandemic economic recovery, the subsidy budget, which includes food, fertilizer and petroleum subsidies, was reduced from ₹4.1 trillion to ₹3.8 trillion.
The budget overall pointed towards policy continuity–the trend of choosing fiscal prudence over higher welfare spending–as India’s inclusion in global bond index will increase scrutiny over debt and borrowing levels. Welfare, once again, has been left for another day, as and when the demand arises.
Shuja Asrar, Payal Bhattacharya, Nandita Venkatesan, and Manjul Paul contributed to the data analysis and charts.
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