Why Budget 2024 will rank as a good budget

Union Finance Minister Nirmala Sitharaman, holding a folder-case containing the Interim Budget 2024. (Source: PTI Photo)

Ceteris paribus, a boring budget is a good budget and this one definitely fits the bill. The impressive part was the resistance on part of the government to introduce any big, populist measures aimed at strengthening their position before the upcoming elections. As the name suggests, this is an interim plan until the real deal in July 2024, which the Finance Minister seemed very confident of being the one to present. The interim budget speech by the Finance Minister for 2024-25 sounded largely like a report card of past achievements rather than a plan proposal for the upcoming year.

Some of these claims were genuinely good achievements – like the decrease in multidimensional poverty, provision of housing, reduced leakages due to Direct Benefit Transfer. While some others were slightly suspect in nature - the entire claim on Nari Shakti leading to an increase in Female Labour Participation Rate is not borne out by data by CMIE and still remains one of the lowest among comparable countries.

Though it should be understood that the budget speech is not the time for announcing big reforms, the lack of it stood out. While there was plenty of talk about helping the Annadata (farmers) through financial assistance, crop insurance, increased MSP, etc, there was no mention of any agricultural reforms, or introducing any parts of the failed farm law reforms. Reforming land use will be crucial in achieving the increase in investment in food processing and other post-harvest activities that the government wants to encourage.

The part of the budget for railways was interesting – upgradation of nearly 40,000 bogies to Vande Bharat standards and more importantly dedicated freight corridors and improved port connectivity. Currently, only about 20 percent of freight is moved through the rail network in 2022, as against 60 percent in the 1980s.

The average speed of a goods train has been stuck at 25 kmph for many years, which needs to improve, along with its punctuality, for it to become a viable option. In addition, the railways’ cargo handling capacity must increase, which requires a doubling of its fleet of wagons. We need to start thinking of bringing in private players in the railway network – allow private trains on the tracks for freight to begin with.

Infrastructure spending gets a further boost – an increase of 11.1 percent in outlay to 11.1 lakh crores, amounting to 3.4 percent of GDP. Just to note that the maximum return to society from government spending comes from capex and not revenue expenditure – on that count, this increase in outlay is good news.

One of the exciting parts of the budget was also the announcement of the creation of a Rs 1 lakh crore corpus with 50 year interest-free loan for tech-savvy growth. There are obviously a lot of unknowns here on the exact functioning of this corpus, but if done well, this can boost research and development and innovation in the country. The ticket size for the loans have to be big enough for it to be meaningful.

Finally, while there was no big announcement that harmed the fiscal consolidation path, fiscal deficit still remains stubbornly high. At 5.8 percent of GDP, the borrowing space for private players is extremely low and thus, has been crowded out by public borrowing. This explains the worryingly low levels of private investment.

P.S: One of the best things about the budget came almost like a post-script, which was the withdrawal of all petty demands (utpo Rs 25,000 till 2010 and Rs 10,000 till 2015) of direct taxes from the people. 

Anupam Manur is a Professor of Economics at the Takshashila Institution, an independent think tank and school of public policy. Views are personal, and do not represent the stand of this publication.