Editorial     

Published: February 15, 2025
Updated: February 15, 2025

Budget favours votes over growth

Though Finance Minister Nirmala Sitharaman (paraphrasing Abraham Lincoln) described her record eighth consecutive budget as a ‘budget for the people, by the people, of the people’, for all practical purposes this fiscal exercise is a pure vote-catching endeav our. Stunned by the unexpected setback in the Lok Sabha elections where the ruling Bharatiya Janata Party could not garner a majority on its own, the Modi government has changed its war room strategy with an eye to winning elections at any cost.

Little wonder that in order to fight the forthcoming New Delhi (February 2025) and Bihar (November 2025) elections, Prime Minister Narendra Modi and his lieutenants seized the oppor tunity to use the Union budget, presented on February 1, as voter-influencing ammunition.

And the government did what it had not dreamt of doing in the last 10 years. It scaled up the income-tax exemption to — hold your breath — Rs 12 lakh per annum. In other words, middle-class tax filers who earn up to Rs 1 lakh a month need not pay a single paisa as tax. No other party or government could have come up with such a seemingly radical gesture.

But it is clear that in pursuit of a vote-catching exercise, Mr Modi has sacrificed his pet programme of ‘Viksit Bharat’ at the altar of electoral success in Delhi and Bihar. Ms Sitharaman did refer to ‘Viksit Bharat’ but proposed no big-ticket measures or incentives for private sector investment to revive a sagging economy. Allocations for boosting infrastructure development, manufacturing, healthcare and exports were nowhere near the desired level. Unbelievably, at a time when the economy is sagging and the global economic situation too is far from satisfac tory, a developing country like India, which is targeting a $ 5 trillion economy, will miss out on an income tax- foregone revenue of Rs 1 lakh crore when it needs to raise a huge amount of resources from different avenues. This is even more urgent at a time when foreign investment is on the decline, exports are falling, and the import bill is on the rise on account of the firming up of crude oil prices and the absence of import restrictions.

In such a scenario, can the ruling dispensation’s desperate need to win state assembly elections put the pace of economic growth of the country at stake? Little wonder that the stock market did not zoom despite the huge increase in the income-tax exemption limit, which is tantamount to putting Rs 1 lakh crore in the hands of the middle class to ostensibly boost consumption.

Of course, there are certain welcome aspects of the budget too. The fiscal deficit target of 4.4 per cent signals a firm commitment towards consolidation without throttling the economy’s growth momentum.

As far as the massive tax cut is concerned, though the step may have been taken with an eye on the elections as a large number of middle-class people live in Delhi, putting Rs 1 lakh crore in the hands of the public will go a long way in relieving the woes of the middle class, which is finding it difficult to make ends meet during the current inflationary price spiral, which the government has neither the inclination nor the capacity to tame. It is also likely that private consumption will rise in areas like consumer goods, automobiles, textiles and travel & tourism, and will contribute in reviving the economy.

Again, Ms Sitharaman has proposed a welcome initiative of an ‘urban challenge fund’ of Rs 1 trillion, with the current year’s allocation being Rs 10,000 crore. This measure, if properly implemented, could go a long way in improving the life of urbanites via develop ments in civic areas like drinking water and sanitation.