Open Forum

New Delhi, 5 February 2025

Budget Eyes Middle Class

WHAT ABOUT RURAL INDIA?

By Dhurjati Mukherjee 

Notwithstanding that the Union budget is viewed as middle-class oriented, this commentator would have been happier if the thrust had been equally given to the rural sector and the economically weaker sections. Though agriculture has received due attention as also textiles, to some extent, the problems of generating employment remain as the government did not think it fit to give any incentive specifically to labour-intensive industries. 

Majority of the population of the country still resides in rural areas, 55 to 60%, and, as such, the thrust areas should be in this sector. But unfortunately, a deep analysis of the Budget over the years reveals that a major share of the investment has been availed by the middle class and urban sector. Obviously, the justification would be that since the latter sector contributes more than half of the GDP, the allocation has accordingly been done in this way. 

India’s economic momentum has been slipping with nominal GDP growth for the current fiscal with an Rs 2.25 trillion shortfall in projected output. This is because the economy grapples with shrinking consumption, weak wage growth and sluggish private investment. As household savings have fallen, discretionary spending has been low. Besides, capital expenditure, a critical driver of infrastructure-led growth, has lagged. Between April and November 2024, the government spent only Rs 5.13 trillion of its Rs 11.1 trillion capex budget – 46.2% compared with over 58% during the same period last year. 

Additionally, there is distressing unemployment and underemployment scenario. Though the apprenticeship programme, launched last year, needs to be applauded the sector urged for enhanced reimbursement rates for stipends as well as a simplification of the approval process for hiring interns under government schemes. These have not been looked into and the skilling as also the demand to drive workforce growth and talent mobility, encourage diversity and close skill gaps one is reminded of the fact that with labour costs increasing, there is a trend towards mechanisation, resulting in reduced job creation. 

As per an ILO study of graduate employment stands at over 29%, demonstrating a mismatch between education and job availability. Highly skilled persons as well like engineers and technicians are not finding proper employment. It’s strange there’s no mention of this in the Budget and the demand of starting an unemployment allowance, at least for skilled personnel, has been overlooked. Only intensive skill development of youth may not lead to employment opportunities. 

The finance minister rightly put thrust on the agricultural sector, but other measures do not touch the root of the problems. A major section of middle class is relatively well-off and tax exemption from Rs 7 lakh could have been put to Rs 10 lakh rather than Rs 12 lakh, as resources are a key factor in augmenting development expenditure. The needs in an emerging economy like ours are massive. If the tax cut had not happened, expenditure would have gone up by Rs 4.4 lakh crore, enough to boost consumption growth. Moreover, if the tax cut was needed why not impose a wealth tax of just 1% on the super-rich? 

The emphasis on enhancing agricultural productivity, five-year mission for pulses towards achieving atmanirbharata and Pradhan Mantri Dhan Dhyna Krishi Yojana, expected to benefit 1.7 crore farmers, are steps in the right direction. Also, comprehensive programme for fruits and vegetables, 5-year mission to boost cotton production and creation of a Makhana Board, National Institute of Food Technology, may go a long way in aiding farmers and development of food processing and other allied sectors. However, despite all this, it has to be ensured that incomes of small and marginal farmers increase in tune with market conditions. 

Though the budget allocation for Agriculture Ministry has been reduced to Rs 1.37 lakh crore from revised estimate of Rs 1.41 lakh crore in last fiscal, the Ministry of Fisheries witnessed a 37% increase to Rs 7544 crore. The country is the second largest producer of fish and aquaculture with seafood exports worth Rs 60,000 crore and the hike may help sustainable fishing practices and give a boost to rural sector. Also, food budget has been pegged at Rs 2.03 lakh crore, up by 3% from Rs 1.97 lakh crore in FY25. 

The social infrastructure in rural areas is appalling. While there is talk of IIT capacity expansion and addition of 6500 students plus 50,000 government schools provided with Atal tinkering labs, more central schools are needed– at least two in eachdistrict of which one should be in a rural or semi-urban area. The setting up of 5 national centres of skilling is welcome but more such centres are needed. However, spread of both school and higher education is not possible with just Rs 1.3 lakh crore, slightly up from Rs 1.1 lakh crore in 2024-25.  

Insofar as health sector, the setting up of day-care cancer centres in all districts within 3 years has been announced with 200 centres to be operational by 2025-26 itself, there was need to set up at least one wellness centre in each district. The government would do well to convert these day-care centres into integrated wellness centres in the long run. 

The Economic Survey predicted there are presently 13.86 lakh doctors which convert into current availability for entire population in ratio of 1:1263, against WHO recommendation of one doctor per 1000 people. This the government may try to achieve by 2030 as medical seats are to be doubled in the next five years with 10,000 such seats expected to be added in next fiscal. However, health sector’s share has fallen from 2.31% in 2019 to 1.9% in 2025-26, making it one of the lowest among major economies. 

The problem lies in inadequate infrastructure in block and even sub-divisional hospitals and reluctance of doctors to serve in rural areas. With the states starved of funds, the Centre could have given funds to some such hospitals towards improving infrastructure and/or purchase of basic equipment. The exemption of customs duty for 36 living-saving drugs will benefit people but only those who can afford treatment of cancer.   

The MSMEs, which number around one crore and employ 7.5 crore people, have rightly been given special focus with 2-2.5 times increase in investment and turnover limits based on their classification. Significantly, a Rs 5 lakh limit for micro enterprises registered in the Udan portal and 10 lakh cards has been introduced and is likely to be issued in the first year. The focus was necessary as MSMEs contribute around 45% of nation’s exports and have potential to generate more jobs. 

Another announcement of 50-year interest free loan to states along with allocation of Rs 1. 5 lakh crore funds to states for capital expenditure and an Urban Challenge Fund (UCF) for new age cities has been a good decision as most states, being cash-starved, must struggle in finding resources to carry forward their development plans. The redevelopment of cities is vital at this juncture due to the high population density of most cities because of migration from rural areas. But should not the rural areas get such a fund for their development, is a big question? ---INFA 

(Copyright, India News & Feature Alliance)

Open Forum

New Delhi, 28 January 2025

City Development

HOLISTIC VIEW CRITICAL

By Dhurjati Mukherjee 

Urbanisation in India has emerged as a big problem as most cities are expanding in an unplanned manner, adding to congestion and pollution. It is understood that the urban population is poised to grow to 600 million by 2030 and the estimated contribution of urban areas may be over 70 percent to the country’s GDP. In fact, big cities in the country have among the largest population density per sq. km in Asia and decongesting these remains a big challenge. 

As India marches towards urbanisation, it is estimated that around 416 million people will be added as urban dwellers in the country between 2018 and 2050. The urban system consists of 7933 settlements, comprising statutory towns and census towns, mostly governed by municipal corporations or municipalities. There are around 3892 census towns which are classified as urban as they meet the criteria of minimum population of 5000, at least 75 percent of the main workforce engaged in non-agricultural activities and a density of population of at least 400 persons per sq. km. But most of the towns have been expanding in an unplanned, unscientific manner and though some may have master plans to guide growth, these are not implemented due to the financial crunch of the municipalities. 

Against this backdrop, at a recent review meeting of the Ministry of housing and urban development, Prime Minister Modi is understood to have suggested more focus on creating facilities, amenities and better transportation networks in zones in cities which naturally attract people and businesses, rather than developing new cities that push horizontal growth.  Certain areas or zones in existing cities that have potential for growth need to be better connected. According to him, connectivity was more important than building new cities. Following these suggestions, the ministry will start work on a better framework for transit-oriented development (TOD) for cities. 

Thus, the emphasis would be on vertical development through transit corridors and ensure decongestion to create open space. However, with population growing in metros and big cities, areas have extended and horizontal growth too is clearly manifest. Mention may be made of Hyderabad, Delhi and Kolkata in this connection. But experts feel that strengthening the transport corridor is very important at this juncture. 

While a lot depends on states as land use is under the State List, the Centre is expected to formulate the policy framework and be prepared to give funds for making this a reality. Apart from this, there will be need to permit higher floor area ratio (FAR) for vertical growth when development takes place. Big metros like Stockholm, Hong Kong, Tokyo and Singapore have followed this model years ago where TOD has been deployed effectively. In India, also all the metro cities have metro rail connections to facilitate travel. 

However, the question is how much money the Centre can give to the states to establish a strong transport network. In most of the big cities, government buses are on the decline and the private sector has taken over. But most of the private buses are not well maintained, causing much pollution to the city, with Kolkata being one such example. Whether state governments subsidise private transport or increase number of government buses remains to be seen. However, it requires urgent attention to get a viable solution. 

Air pollution has been hitting headlines as it’s a major concern in the metros and even suburban cities. Despite various efforts made at reducing such pollution, the results continue to be dismal. The national capital, Delhi, leads in air pollution but Kolkata and Mumbai have equally dangerous levels. It may be mentioned here that air pollution has also kick-started a vicious circle of poverty as research by the Proceedings of the National Academy of Sciences found that children exposed to high levels of pollution are less likely to escape poverty in adulthood, as the environment factor impacts their future earnings. 

It is in this context that city development calls for upgradation of slums and slummish type settlements. In formulating any policy for city development, the most important is the need for slum renovation so that the basic facilities of potable water and sanitation are available to them. The government could also start a programme of upgradation of the settlements that are in a dilapidated condition by providing loans at very cheap rates, say around 4 percent per annum so that the residents could repair and upgrade their tenements. Sanitary toilets need also to be built both in recognised and unrecognised slums. 

The upgradation of slums in cities and ensuring a pollution-free atmosphere in these places is of utmost importance. And while there’s a lot of discussion on providing houses in rural areas, there is no scheme of upgrading slums in metros and big cities. Can one deny the necessity of upgrading slums in a phased manner, rehabilitating those who live in slummish type settlements or near railway tracks in suburban areas? Planners and urban development bodies need to investigate the matter on a priority basis to make the city a clean place to live in. 

It is interesting to note that AAP convenor and Delhi’s former Chief Minister Arvind Kejriwal has in a bid to woo voters stated recently that rival BJP would demolish all jhuggi-jhonpri(slum) colonies, if voted to power. However, as the ruling party he should be asked what he has done for improving the slums? Acquiring slum land without providing proper rehabilitation, and not far from where they live, would equally affect the poor and economically weaker sections. It’s high time that all metros and not just Delhi seriously prepare a thorough plan of action to provide houses to slum dwellers. 

The feeling of neglect amongst the poor and marginalised sections gets more pronounced as the gap between them and the rich continues to grow. For example, developers will have ready buyers for flats costing crores of rupees, but there will be people sleeping on the streets, with the sky being their only roof! While infrastructure development needs priority, the government must simultaneously develop modules for ameliorating conditions of the extremely backward and those struggling for an existence, in this development. 

Additionally, while states would have revised master plans of cities, the resource crunch would be a drawback. Therefore, the Centre should provide additional funds for overall development, not just of metros but all big cities which are steadily getting overpopulated. Urbanisation must be handled with overall development.---INFA 

(Copyright, India News & Feature Alliance)

Open Forum

New Delhi, 28 January 2025

City Development

HOLISTIC VIEW CRITICAL

By Dhurjati Mukherjee 

Urbanisation in India has emerged as a big problem as most cities are expanding in an unplanned manner, adding to congestion and pollution. It is understood that the urban population is poised to grow to 600 million by 2030 and the estimated contribution of urban areas may be over 70 percent to the country’s GDP. In fact, big cities in the country have among the largest population density per sq. km in Asia and decongesting these remains a big challenge. 

As India marches towards urbanisation, it is estimated that around 416 million people will be added as urban dwellers in the country between 2018 and 2050. The urban system consists of 7933 settlements, comprising statutory towns and census towns, mostly governed by municipal corporations or municipalities. There are around 3892 census towns which are classified as urban as they meet the criteria of minimum population of 5000, at least 75 percent of the main workforce engaged in non-agricultural activities and a density of population of at least 400 persons per sq. km. But most of the towns have been expanding in an unplanned, unscientific manner and though some may have master plans to guide growth, these are not implemented due to the financial crunch of the municipalities. 

Against this backdrop, at a recent review meeting of the Ministry of housing and urban development, Prime Minister Modi is understood to have suggested more focus on creating facilities, amenities and better transportation networks in zones in cities which naturally attract people and businesses, rather than developing new cities that push horizontal growth.  Certain areas or zones in existing cities that have potential for growth need to be better connected. According to him, connectivity was more important than building new cities. Following these suggestions, the ministry will start work on a better framework for transit-oriented development (TOD) for cities. 

Thus, the emphasis would be on vertical development through transit corridors and ensure decongestion to create open space. However, with population growing in metros and big cities, areas have extended and horizontal growth too is clearly manifest. Mention may be made of Hyderabad, Delhi and Kolkata in this connection. But experts feel that strengthening the transport corridor is very important at this juncture. 

While a lot depends on states as land use is under the State List, the Centre is expected to formulate the policy framework and be prepared to give funds for making this a reality. Apart from this, there will be need to permit higher floor area ratio (FAR) for vertical growth when development takes place. Big metros like Stockholm, Hong Kong, Tokyo and Singapore have followed this model years ago where TOD has been deployed effectively. In India, also all the metro cities have metro rail connections to facilitate travel. 

However, the question is how much money the Centre can give to the states to establish a strong transport network. In most of the big cities, government buses are on the decline and the private sector has taken over. But most of the private buses are not well maintained, causing much pollution to the city, with Kolkata being one such example. Whether state governments subsidise private transport or increase number of government buses remains to be seen. However, it requires urgent attention to get a viable solution. 

Air pollution has been hitting headlines as it’s a major concern in the metros and even suburban cities. Despite various efforts made at reducing such pollution, the results continue to be dismal. The national capital, Delhi, leads in air pollution but Kolkata and Mumbai have equally dangerous levels. It may be mentioned here that air pollution has also kick-started a vicious circle of poverty as research by the Proceedings of the National Academy of Sciences found that children exposed to high levels of pollution are less likely to escape poverty in adulthood, as the environment factor impacts their future earnings. 

It is in this context that city development calls for upgradation of slums and slummish type settlements. In formulating any policy for city development, the most important is the need for slum renovation so that the basic facilities of potable water and sanitation are available to them. The government could also start a programme of upgradation of the settlements that are in a dilapidated condition by providing loans at very cheap rates, say around 4 percent per annum so that the residents could repair and upgrade their tenements. Sanitary toilets need also to be built both in recognised and unrecognised slums. 

The upgradation of slums in cities and ensuring a pollution-free atmosphere in these places is of utmost importance. And while there’s a lot of discussion on providing houses in rural areas, there is no scheme of upgrading slums in metros and big cities. Can one deny the necessity of upgrading slums in a phased manner, rehabilitating those who live in slummish type settlements or near railway tracks in suburban areas? Planners and urban development bodies need to investigate the matter on a priority basis to make the city a clean place to live in. 

It is interesting to note that AAP convenor and Delhi’s former Chief Minister Arvind Kejriwal has in a bid to woo voters stated recently that rival BJP would demolish all jhuggi-jhonpri(slum) colonies, if voted to power. However, as the ruling party he should be asked what he has done for improving the slums? Acquiring slum land without providing proper rehabilitation, and not far from where they live, would equally affect the poor and economically weaker sections. It’s high time that all metros and not just Delhi seriously prepare a thorough plan of action to provide houses to slum dwellers. 

The feeling of neglect amongst the poor and marginalised sections gets more pronounced as the gap between them and the rich continues to grow. For example, developers will have ready buyers for flats costing crores of rupees, but there will be people sleeping on the streets, with the sky being their only roof! While infrastructure development needs priority, the government must simultaneously develop modules for ameliorating conditions of the extremely backward and those struggling for an existence, in this development. 

Additionally, while states would have revised master plans of cities, the resource crunch would be a drawback. Therefore, the Centre should provide additional funds for overall development, not just of metros but all big cities which are steadily getting overpopulated. Urbanisation must be handled with overall development.---INFA 

(Copyright, India News & Feature Alliance)

Economic Highlights

New Delhi, 27 January 2025

FM Basket Full, Trumpism A Barb

FARM, JOBS, TRADE ARE FOCUS

By Shivaji Sarkar 

The 2025-26 budget presents a formidable challenge for Finance Minister Nirmala Sitharaman, as she grapples with pressing issues such as curbing inflation, boosting consumption, stimulating private investment, and steering India’s development amid concerns over a slowing economy. 

On the global front, she must also address potential economic headwinds from the policies of the newly-elected US President Donald Trump, which could result in higher petrol prices and a stronger dollar, adding to India’s economic complexities. 

Domestically, urban consumption—long a reliable growth driver—has weakened, and private investment remains subdued. India's growth rate has fallen to a two-year low of 5.4 percent, with annual growth estimates for 2024-25 at 6.4 percent, a sharp decline from 8.2 percent in 2023-24. Yet, the Reserve Bank of India remains optimistic, asserting that the country’s structural growth drivers are intact. 

Simultaneously, the rural economy and agriculture sector demand urgent attention. Indian farming faces a myriad of challenges, including a growing population, shrinking land resources, climate change, rising nutritional demands, labour shortages, mechanisation, pricing dilemmas, and environmental concerns. Balancing these factors will be crucial to achieving inclusive and sustainable growth. 

The government plans to increase agricultural spending by 15 percent to $20 billion in the new budget, aiming to boost rural incomes and curb inflation. The funds will prioritise developing high-yield crops, enhancing storage and supply chain infrastructure, and promoting pulse, oilseed, vegetable, and dairy production. However, the immediate impact remains uncertain, as many of these initiatives take time to deliver results. 

Agriculture continues to be the backbone of the Indian economy, necessitating targeted interventions to enhance productivity, build resilience, and create alternative income sources for small and marginal farmers. 

The Food and Agriculture Organisation (FAO) report, Regional Overview of Food Security and Nutrition 2023, revealed that 74.1 percent of Indians were unable to afford a healthy diet in 2021, slightly improving from 76.2 percent in 2020. The 2024-25 budget, however, made limited progress in addressing these challenges. 

RBI Governor Sanjay Malhotra, in the bi-annual report, expressed optimism that the Indian economy would gain momentum by the end of the current fiscal, despite global uncertainties. Deloitte India also noted cautious optimism, citing the government's focus on infrastructure development as a potential growth booster. 

The latest NSSO Household Consumption Expenditure survey highlights a stark disparity in rural and urban incomes, with average rural MPCE (Monthly Per Capita Consumption Expenditure) at just 58 percent of urban MPCE. While reforms aimed at increasing rural income have been implemented in recent years, progress has been gradual. Over the past five years, the government has allocated an average of 3 percent of total budgeted expenditure to the Ministries of Agriculture, Fisheries, Animal Husbandry, and Dairying, underscoring the need for more robust support. 

The farmers still are facing problems of small and fragmented land holdings, poor adoption of mechanisation, inadequate irrigation facilities. Some major problems faced by farmers in India include, soil fertility depletion, and inadequate access to crop insurance schemes. 

Small and marginal farmers, who constitute over 82 per centof the farming population, rely heavily on agriculture for their livelihoods. Expanding funding for allied activities such as agroforestry, animal husbandry, and fisheries can provide much-needed additional income streams. Investments in cattle farming, poultry, sheep rearing, and small-scale fisheries, including shrimp farming, can contribute significantly to rural incomes. 

Encouraging natural and organic farming through certification, branding, and the provision of bio-inputs via dedicated resource centres can further align agricultural practices with sustainability goals. Increased budgetary support for organic fertilizer production, utilising resources like cow dung, will promote self-reliance in farming inputs while reducing dependency on chemical fertilizers, a government aim. 

It's easier said but bringing down the use of urea and DAP, nitrogen, phosphate, potash has its problem, much of which is imported. Despite rise in prices, the government has announced subsidy of Rs 3850 per tonne of DAP and has put prices pinned three years ago at Rs 1350 despite actual prices of Rs 2000 for 50 kg bags. 

Agriculture employs 54 percent of India’s workforce but contributes 18 percent to India’s GVA. This highlights the need for increasing productivity in the sector. As per an IMF paper, India’s labour productivity (PPP adjusted) in agriculture is only 12.2 percent of the median productivity in advanced economies and 43 percent of the median productivity in emerging markets. Addressing the problems of farmers and contacting them for adopting new technology in remote areas has become a problem along with marketing and remunerative prices. Agriculture, totally in private sector, has to bear the vagaries of nature. Food is one item that the US has been subsidising heavily for decades. 

The government has to do balancing tricks. The debt burden is high. Infrastructure investments, including roads have benefited corporate but tolls and rise in input costs have made Indian farming difficult. Road projects have also caused loss of 50 lakh hectare of arable land. 

The government has also to address new Trumpism that is likely to put lot of pressure on the international market, petrol prices, change in alternate energy policies, Indian exports and the employment. So, it has to go beyond agriculture. The IT and AI developments are impacting Indian enterprises causing further job issues. Banks, though the RBI says are in good health, have problems of thawing deposits. 

Manufacturing and other sectors are constricted by low purchasing capacity of individuals. The Finance Minister has to think of a new policy to keep manufacturing costs low so that inflation remains under check. A relook at GST is desirable. This may remain pipedream. 

The Finance Minister has little scope to play with taxation. People want a relook at income tax since the government brought down corporate taxes to 22 percent. She may do some rejig but bringing down the rates may not be easy. The railway fares and commuting cost are rising. Would she be able to check? 

Agriculture may be the backbone of the Indian economy, but balancing its needs with those of other sectors remains a critical challenge. While the budgetary process generates significant curiosity, it is unlikely to introduce groundbreaking changes. Post-budget, the country must redefine its economic vision, focusing on becoming a low-cost, fast-growing economy. Simply boasting about achieving "trillions in record economic size" will not alter the nation’s trajectory.----INFA 

(Copyright, India News & Feature Alliance)