Budget 2024 Analysis | What did Middle Class get?

 Hello, friends! Every year on February 1st, the country's budget is announced by the finance minister. This announcement provides insights into the government's earnings and expenditures, highlighting how much is spent on various welfare initiatives for the people. As usual, this year too, on February 1st, Finance Minister Nirmala Sitharaman presented the Union Budget 2024.

However, this year's budget was an Interim Budget. "I commend the Interim Budget to this August House. Jai Hind!" An Interim Budget is a temporary budget that provides estimates for the entire year. This is because Lok Sabha elections are scheduled for this year. After the elections, once the new government is formed, the full budget will be presented in July.

This practice is followed in every election year, but it doesn't diminish the importance of the interim budget. It outlines how the government plans to spend money over the next few months and gives an overall strategy and direction. Let's dive into this video to understand what's in this new budget for you, the common people, the promises made in previous budgets, and their results.

Similar to last year, the main focus area of the government in this budget is Capital Expenditure, often abbreviated as CAPEX. This refers to the money the government spends on long-term assets like infrastructure projects, including roads, railways, ports, and large buildings or bridges.

Last year, the government significantly increased this expenditure by 33%, allocating ₹10 trillion. While the government didn't spend the entire ₹10 trillion, actual spending was still a substantial ₹9.5 trillion. This year, the government plans to further increase this by 11.1%, aiming to spend ₹11.11 trillion.

The rationale is straightforward: spending on infrastructure boosts economic growth and creates employment. Large projects like building bridges, roads, and ports generate jobs. The Finance Minister noted that over the past four years, capital expenditure has tripled.

Specifically for railways, ₹2.55 trillion have been allocated, and three new corridors have been announced: the Energy, Mineral, and Cement Corridor; the Port Connectivity Corridor; and the High Traffic Density Corridor. Additionally, more than 40,000 normal rail coaches will be converted to Vande Bharat standards.

This year's railway allocation, ₹2.55 trillion, is higher than last year's ₹2.41 trillion. While last year saw an increase of ₹1 trillion, it is hoped that this year's allocation will also enhance railway safety, as there were several accidents last year, including the tragic train collision in Odisha in June 2023, which resulted in nearly 300 deaths.

In the agriculture sector, the government announced the Atmanirbhar Oil Seeds Abhiyan and focused on fertilizers like Nano-DAP (Nano Di-Ammonium Phosphate), an eco-friendly fertilizer with 8% nitrogen and 16% phosphorus, useful for Green Farming. The Oil Seeds Initiative aims to reduce edible oil imports from 60% to 30%, promoting self-reliance in seeds like mustard, groundnut, soybean, and sunflower. However, fertilizer subsidies saw a budget cut, from ₹1.89 trillion last year to ₹1.64 trillion this year.

Food subsidies were also reduced from ₹2.12 trillion last year to ₹2.05 trillion this year. In education and healthcare, there was some disappointing news. Last year’s promised education spending of ₹1.16 trillion was not met, with only ₹1.08 trillion spent. This year, the education budget saw a slight increase to ₹1.25 trillion.

There were significant cuts in certain areas, such as the University Grants Commission (UGC) budget, which was reduced by 60% from ₹64.09 billion last year to ₹25 billion this year. The budgets for IITs and IIMs were also cut, but allocations for central universities and research and innovation were increased.

In healthcare, last year's allocation of ₹890 billion saw only ₹790 billion spent. This year, the allocation is slightly increased to ₹900 billion, with expansions announced for the Ayushman Bharat scheme and a focus on the cervical cancer vaccine.

The Prime Minister Awas scheme, aimed at providing affordable housing to the poor, received an increased allocation from ₹795.90 billion last year to ₹806.71 billion this year. Additionally, a new scheme will be launched to help middle-class citizens living in rented houses, slums, or unauthorized colonies to build and buy their own homes.

For the overall economy, India's real GDP growth rate for 2023-2024 is projected to be 7.3%. Real GDP accounts for inflation, unlike nominal GDP, which measures the economy's size based on current prices. Last year, India's nominal GDP growth rate was 10.5%, with inflation at approximately 4%, resulting in a real GDP growth rate of 6.5%.

International agencies' estimates for India's GDP growth rate for 2024-25 are similar: the IMF projects 6.3%, the World Bank 6.4%, the OECD 6.1%, and the ADB 6.7%. The IMF has also projected that India will become the third-largest economy by 2027. Data scientists play a crucial role in analyzing such data, making data science a lucrative career option.

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Now, let's move on to the second biggest focus area of this budget: reducing the fiscal deficit. The fiscal deficit is the difference between the government's revenue and expenditure. For this year, India's fiscal deficit is estimated to be ₹17.86 trillion, or 5.8% of GDP, down from last year's target of 5.9%. The target for 2024-2025 is set at 5.1% of GDP.

The Fiscal Responsibility and Budget Management Act, 2003, aims to keep the fiscal deficit at 3% of nominal GDP, a target met only once in 2007-08. The government is gradually reducing the deficit, with a target of 4.5% for FY 2026. This year, the government will spend ₹11.9 trillion on interest servicing for loans, both domestic and international.

The major expenses of the government this year include interest servicing, which has increased by ₹1.35 trillion compared to last year. In terms of revenue, income tax and GST contribute significantly, with income tax at 19% and GST at 18%, followed by corporate tax at 17%.

Despite these contributions, borrowing remains the largest source of income for the government at 28%. The Finance Minister's tagline for this budget is "Viksit Bharat by 2047," aiming for a developed India by 2047 and a $7 trillion economy by 2030.

While these promises sound optimistic, comparing them to previous years’ promises reveals a different story. In 2019, PM Modi promised a $5 trillion economy by 2024, but the current status is $3.7 trillion. Similarly, promises made for 2022, such as doubling farmers' income and introducing bullet trains, have not been fulfilled.

The Finance Minister focused on four main sections of society: the poor, women, youth, and farmers. However, India's ranking in the Hunger Index has fallen to 111 out of 125, youth unemployment is at 45% for ages 20-24, and women's labor participation has been declining, from 32% in 2005 to 19% in 2021. The middle class and the poor have seen their incomes decrease over the last few years.

Access to data has become increasingly difficult, with the government not disclosing uncomfortable statistics, leading to criticism that NDA stands for "No Data Available." For example, there is no data on offshore shell companies, farmers who died in protests, or migrants who faced difficulties during COVID-19.

In summary, this year's Interim Budget provides a glimpse into the government's plans and priorities, with a full budget to be presented in July. The focus areas include capital expenditure, agriculture, and reducing the fiscal deficit, with significant allocations for infrastructure and railways.

If you enjoyed this video, you can check out another one on inflation, where I discuss whether inflation is good or bad and explore the concept of deflation. Thank you very much!