New Delhi, February 7, 2024: In the recent interim budget presentation, Indian Finance Minister Nirmala Sitharaman offered a comprehensive review of the economic strides made under Prime Minister Narendra Modi’s government over the past decade. As the country gears up for the upcoming general elections, Sitharaman’s budget has been perceived as a testament to the government’s achievements, setting a positive tone for the ruling party’s campaign.
The budget, meticulously analyzed by experts, showcases a significant shift in the Indian economy’s dynamics, moving from traditional agricultural subsidies to bolstering manufacturing and infrastructure development. Saumya Roy, in a report for Al Jazeera on February 5, highlighted that the food subsidy was marginally reduced from 2.12 trillion rupees ($25.5 billion) in the current fiscal year to 2.05 trillion rupees ($24.6 billion) for 2025, alongside a cut in the fertilizer subsidy. However, capital expenditure remains robust at 1.3 trillion rupees ($15.6 billion), underscoring the government’s commitment to infrastructure development.
A notable announcement was the reduction of the fiscal deficit to 5.1 percent for the year ending March 2025, surprising many with its ambition. This move, lower than the market expectations of 5.3 to 5.4 percent, reflects the government’s fiscal prudence and has been lauded by Suman Banerjee, chief investment officer at Hedonova, a global hedge fund. Banerjee also pointed to the subsidy cut as indicative of India’s pivot from an agrarian economy to one focused more on manufacturing.
Under Modi’s leadership, significant strides have been made in alleviating poverty, with Sitharaman noting that over 250 million people have been lifted out of poverty, real income has increased by 50%, and India has ascended to become the world’s fifth-largest economy. These achievements, however, have not gone unchallenged, with the opposition Congress party critiquing the government’s handling of the economy, citing the adverse impacts of COVID-19 and the implementation of the Goods and Services Tax (GST) on the poor and small businesses.
The budget also emphasized the growth of private investment, with sectors like steel, cement, renewable energy, and infrastructure development witnessing a surge in capital expenditure. This, coupled with enhanced tax collections from expanded luxury taxes, including restaurant charges, has enabled the government to maintain its capital expenditure levels while managing the fiscal deficit effectively.
India’s public infrastructure development has been unprecedented, with significant investments in roads, metros, and ports, driving economic growth and urban development. However, concerns remain about the rural economy and the disparity in growth benefits between urban and rural populations. Sitharaman’s budget addresses these concerns with initiatives aimed at strengthening the rural economy, including rural housing projects, free food for the poor, and support for aquaculture.
Moreover, the budget outlined several plans to boost women’s skills development and entrepreneurship, aiming to transition women from agricultural labor to manufacturing jobs. This focus on women’s empowerment is critical, considering India’s low female labor force participation rate, which stood at only 37% in 2023. The government’s efforts to increase women’s enrollment in higher education and STEM fields are commendable steps toward bridging the gender gap in employment.
As India projects a 7.3% economic growth for the year ending March 2024, the budget reflects a strategic balance between fiscal responsibility and the need for sustained investment in growth drivers. While the opposition’s critique underscores the challenges ahead, the government’s initiatives to foster urban-rural economic integration and empower marginalized sections, including women, signal a comprehensive approach to national development.
The interim budget of 2023 marks a pivotal moment in India’s economic trajectory, highlighting the government’s endeavors to reshape the economy for inclusive growth. As the nation moves towards the general elections, the budget’s implications on Modi’s legacy and the ruling party’s electoral prospects remain a focal point of discussion among policymakers, economists, and the general populace.
