Thankfully, the government is in a relatively comfortable position resource-wise, thanks to a significant increase in tax collection and a large RBI dividend payout.
Tax collection for fiscal 2024-25 has crossed Rs 4.6 trillion, a 20.99% growth over the previous year.
Additionally, the RBI declared a record dividend payout of Rs 2.1 trillion.
However, the Budget could face resistance from a stronger opposition, complicating the passage of Budget sops and economic reforms.
Why job creation is such a big priority
The disappointing Lok Sabha election results, with significant vote shifts in strongholds like UP and Karnataka, were mainly due to factors such as falling income levels, consumer price escalation, and lack of employment opportunities.
The CSDS-Lokniti survey of over 20,000 voters after the Lok Sabha results revealed that economic turmoil, particularly inflation and unemployment, created a strong anti-incumbency factor. According to the survey, about 30 percent of the surveyed voters were worried about inflation and 27% showed their frustration over unemployment.
The Centre for Monitoring Indian Economy (CMIE), meanwhile, reported an unemployment rise from 7.4% in March to 9.2% in June 2024. While the RBI jobs report painted an upbeat picture, realities on the ground cannot be wished away, at least in the budget.
According to sources, the government is likely to allocate a substantially higher budget for the National Rural Employment Guarantee Act (NREGA), aimed at giving a boost to the disposable income of people in the rural region.
With this, the government can kill three birds with one stone: ensure job creation, provide increased income levels to those most worried about rising prices, and boost consumption to support the economy as well as satisfy the industry.
Welfare schemes and freebies
Other welfare schemes that Nirmala Sitharaman might announce could include increased cash handouts to farmers and enhanced rural housing subsidies.
Insurance for unorganised workers, including taxi, truck, and three-wheeler drivers, could also be part of the Budget sops.
State-sponsored welfare schemes and incentives, despite their toll on the public exchequer, have proven politically beneficial. The Modi 3.0 government’s first budget is expected to attempt to milk this sentiment.