Modi 3.0’s first budget addressed two concerns of the electorate that pushed the BJP to fall short of majority and ended up as a true coalition government headed by Narendra Modi.
Although the retail CPI inflation on average has been hovering between 5% and 6% in the Modi 2.0 era, the food inflation, which constitutes 50% of the CPI inflation, has been relatively much higher. Although retail inflation affects the broad-based middle- and low-income groups, which constitute about 80% of the income pyramid, Either the significant rise of vegetables, cooking oil, pulses, or other essential food commodities that are in use on a daily basis did not go well with the electorate, especially given the setback in the income increase for two years during the COVID.
Even the pollsters and the senior brass of the BJP believed that the “good image” that the Prime Minister enjoys among more than 50% of the population would allow the BJP to win with more than a simple majority, despite the fact that this was recorded statistically and qualitatively by them. It didn’t take place. The entire 2024–2025 budget now includes a dampener. Unable to control food inflation has been caused by seasonal shortages, which can be attributed to climate-related problems, natural cycles of higher and lower yields, or spatially uneven agricultural production.
Due to a shortage of one or more of the major agricultural commodities, food inflation remained high for the majority of the year. Such a shortage in supply ought to have, at the very least, somewhat helped the farmers. But, in an effort to control inflation, the government banned exports whenever prices surged. This was unpopular with farmers, who had a unique chance to export at higher prices and earn more money. Even while a ban on exports of this kind lowered prices, its effect was quite moderate.
The solution lies in increasing productivity across various production clusters so that transportation and logistics costs remain low. The budget wanted to take a comprehensive review of the agriculture research setup to improve productivity and climate-resilient crops. Although substantial progress has been continuously made in producing seed varieties and increasing productivity with modern agriculture practices, a coherent and cogent approach, thereby bringing synergy across various institutions, would bring transformative solutions. Although the government’s efforts to increase the crop area of oil seeds and pulses have partially succeeded over the last ten years, the shortfall is substantial, requiring major imports. Unless the government increases the Minimum Support Price (MSP) of pulses and oil seeds substantially over grains in the coming years until the inflection point to bring more cultivable area under pulses and oil seeds, it is not possible for the government to rein in the prices of these commodities.
When the agriculture commodities, especially vegetables have been cultivated in one region predominantly as in the case of onions in Nashik, Ahmednagar, Pune, Solapur, and Aurangabad of Maharashtra, whereas the consumption is all across the nation, any climate impact in these districts would have a telling effect on onion prices. Moreover, the transportation and logistics costs would add up to the prices substantially. The decision to create large scale vegetable clusters closer to the consumption centres would go a long way in reducing the cost of vegetables to the end consumers. Extending the Digital Public Infrastructure (DPI) to agriculture that would cover the farmers and their lands in 3 years would also facilitate the initiative on agriculture produce.
According to recent statements made by the prime minister, the administration has created 8 crore employment in the previous three to four years. The significant rise in EPF enrolment supported his claim that, as a result of significant investments in public infrastructure over the past ten years, more employment have been created in the unofficial sector, where workers are paid on a “remuneration for deliverable” basis rather than a monthly pay. The youth, however, are not content since they prioritise government employment above everything else, regardless of grade of employment.
The second choice is to work for an organisation in an official capacity with an appointment letter, regular pay, and benefits like paid time off and gratuity. It would not be fiscally feasible for the federal government or state governments to implement such policies, nor could the DPI offer significantly better services to the populace than ordinary personnel. Neither the central government nor the state governments need to employ such a big workforce.
Creating formal work in the private sector is the answer. The government endeavoured to integrate the informal economy into the formal economy with the GST and encouraged the private sector to create more formal jobs with the three Employment Linked Incentive schemes.
The government’s first initiative, which provides INR 15,000 in three installments to those starting formal work in the private sector, is an attempt to get the private sector to hire more people in formal jobs. It is unclear how the private sector will react to this plan, despite the budget’s assumption that it will generate 210 lakh employment for people entering the workforce for the first time.
The private sector should be encouraged to use their current capacity to manufacture more and create additional manufacturing capacity by the second scheme, which offers 30 lakh youth entering the manufacturing industry an EPF contribution for the first four years of employment from both employers and employees. A large portion of low-skill manufacturing work has been done by contract workers. This program needs to, at the very least, offer formal employment for a workforce with some degree of competence. In the upcoming years, the government may decide to expand the recipients based on how well this program works.
The third scheme of subsidising the EPF contribution of employers up to INR 3000 per month for up to 2 years to those who are newly added to the workforce within the monthly salary of INR 1 lakh would enable well-equipped youth to get high-quality jobs.
A multifaceted strategy is needed to increase employment chances because the process can be hindered by a mismatch between what the private sector demands and what candidates can offer. The private sector would be able to find suitable employees from the women’s skill development program, the women’s hostel program, the upskilling of ITI students, the Model Skill Loan Scheme, and education loans up to INR 10 lakh at a subsidised interest rate for 1 lakh students who have not benefited from any scheme or policies.
The post-poll, full-fledged budget presented by the Finance Minister addressed the two major reasons for disgruntlement by a section of the electorate against the Modi 2.0 regime. This shows the government is in reboot mode to gain the confidence of the section of the electorate that has voted against Modi 2.0 and who otherwise supports the Modi regime.
The author is a Public Policy Expert