Modi Govt should prioritise welfare and manufacturing sector in Budget 2024, says Kaushik Basu

Basu pointed out that technological advancements are reducing global labor demand.

Former World Bank chief economist Kaushik Basu has called on the Modi government to focus on the welfare of ordinary citizens and allocate more funds to the manufacturing sector in the upcoming Budget to boost small businesses and job creation. In an interview with PTI, Basu stressed the importance of shifting attention to ground-level economic welfare.

Basu said he hopes that the Union Budget for 2024-25, which Union Finance Minister Nirmala Sitharaman is set to present in the Lok Sabha on July 23, will prioritise the welfare of ordinary citizens rather than solely aim to increase aggregate GDP.

"I believe that the rich can afford to pay higher taxes, and using this money to incentivise the manufacturing sector can go a long way in boosting demand for labor, helping small businesses, and raising the income of ordinary people," he said.

While acknowledging that India's overall GDP growth over the last two years has been strong, he highlighted two critical issues: rising inequality and high unemployment, particularly youth unemployment, which is among the highest in the world. He noted that the inflation experienced by poor families is much higher than the national average of 5.08 percent and the inflation faced by wealthy households. Retail inflation was recorded at 5.1 percent in June.

The Reserve Bank of India (RBI), tasked with maintaining inflation at 4 percent (with a 2 percent margin on either side), primarily considers the Consumer Price Index (CPI) in its monetary policy decisions.

Opining on the effectiveness of coalition governments versus single-party majority governments, Basu said that single-party majority governments are typically more efficient in policymaking. However, he cautioned that if a single-party government prioritises GDP growth at the expense of ordinary citizens, a coalition government could be more beneficial by tempering such policies.

The Narendra Modi-led National Democratic Alliance (NDA) secured a majority in the recent Lok Sabha elections, with support from N Chandrababu Naidu's TDP and Nitish Kumar-led JD(U), among other allies.

Addressing high unemployment, Basu noted that political parties have a vested interest in high youth unemployment due to the availability of cheap labour for political volunteering. He urged political parties to implement policies in national interest, emphasising that job creation should be the most important policy focus despite global challenges.

Basu also pointed out that technological advancements are reducing global labour demand. However, he asserted that middle-income countries like India, where labour is still relatively inexpensive, can continue to increase labour demand, citing Vietnam as a successful example.

A recent International Labour Organization (ILO) report indicated that in 2022, nearly 83 percent of India's unemployed population were youths.

(With inputs from PTI)