budget analysis 2025 – News Analysis India https://newsanalysisindia.com The news you need to know, explained Sun, 02 Feb 2025 00:00:00 +0000 en-US hourly 1 https://wordpress.org/?v=6.9.4 Union Budget 2025: Another missed opportunity for meaningful economic reform https://newsanalysisindia.com/politics/union-budget-2025-another-missed-opportunity-for-meaningful-economic-reform/ Sun, 02 Feb 2025 00:00:00 +0000 http://newsanalysisindia.local/union-budget-2025-another-missed-opportunity-for-meaningful-economic-reform/ The budget was expected to provide a roadmap for economic recovery, job creation, and social welfare. Instead, it has exposed the government’s inability to address real challenges: unemployment, stagnating wages, declining public expenditure, and a weakening industrial sector. This budget, with its preoccupation with fiscal optics, is another missed opportunity for meaningful economic reform.The government’s claims of economic performance fail to hold against employment figures. Data from the Centre for Monitoring Indian Economy shows youth unemployment reached 45.4% in FY2022-23. Failure to generate employment opportunities pushed more young workers into informal jobs. An International Labour Organization study found that graduate unemployment stands at 29.1%, demonstrating a mismatch between education and job availability. Even more concerning is the shift back of labour force to agriculture from manufacturing and services sectors. Between 2004-05 and 2011-12, workers in agriculture declined from 58.5% to 48.9%, as manufacturing and service industries grew. Since 2018-19, workers in agriculture increased from 42.5% to 46.1% of the workforce. This shows lack of job opportunities in industrial and service sectors. While corporate profits soared, real wages for Indian workers stagnated or declined. Reports suggest that between 2014-15 and 2022-23, agricultural labourers saw wage growth of just 0.8%, non-agricultural workers earned only 0.2% more, and construction workers faced negative wage growth.The government’s failure to provide meaningful wage growth mechanisms worsened income inequality. The wealthiest 1% earn 22.6% of the nation’s total income, while the bottom 50% struggle with just 15%. Indirect taxes – like GST and fuel taxes – continue to disproportionately impact the poor, widening the economic divide. The government’s focus on big businesses and industrial policies failed to translate into actual growth in manufacturing and small enterprises. Under UPA-II (2009-14), the number of factory employees grew at 5.6% annually.

Now, this has dropped to 3.1%, indicating an economic slowdown. In the informal sector, between 2015-16 and 2021-22, around 24 lakh small businesses shut down, leading to a loss of 81 lakh manufacturing jobs. While the government touts record FDI, its share of GDP has fallen to just 0.8% in 2023.

Instead of expanding social spending, the government shrunk its commitments in crucial sectors. Education: Budgetary allocation for school education dropped from 3.16% of total expenditure in 2013-14 to 1.55% in 2025-26; higher education allocations dropped from 1.6% to 0.99%. Karnataka is spending 10% of total expenditure for school education and 2% on higher education over the years. Healthcare: The health sector’s share of the budget has fallen from 2.31% in 2019-20 to 1.9% in 2025-26, making the healthcare budget one of the lowest among major economies. Karnataka is spending nearly 5% of the total expenditure for health care over the years.

Rural Employment: Despite rising demand for work under MGNREGA, government has reduced its funding. Its share of the total budget dropped from 2.15% in 2019-20 to 1.33% in 2023-24, with allocations remaining stagnant in recent years.

The government’s obsession with fiscal deficit reduction – without considering economic growth strategies – resulted in misguided austerity. The fiscal deficit target of 4.4% of GDP is being met by cutting capital expenditure rather than boosting revenue or rationalising non-essential expenditure. Capital expenditure increased from ₹11.11 lakh crore in 2024-25 to ₹11.21 lakh crore in 2025-26 (0.9% growth).

Accounting for inflation, the real capital expenditure reduced compared to 2024-25. In the 2024-25 revised estimates, there is a shortfall of 8.3% in capital spending against the target of ₹11.21 lakh crore. No additional provisions were made for state-specific capital projects, leaving infrastructure initiatives underfunded. The ‘Special Assistance to States for Capital Projects’ remains unchanged at ₹1.5 lakh crore. The budget appears to be Bihar-centric, significant allocations made for projects such as a Makhana Board, National Institute of Food Technology, and additional support for IIT Patna, while the demands of other states, including Karnataka, were ignored.

Fiscal Consolidation Over Economic Growth: The budget estimates gross tax revenue of ₹42.70 lakh crore, of which ₹14.22 lakh crore is devolved to states as tax devolution. Karnataka’s share of total tax devolution is estimated at ₹51,877 crore. On the expenditure side ₹39.44 lakh crore is estimated as revenue expenditure and ₹11.12 lakh crore on capital expenditure.

In the revised budget for 2024-25, capital expenditure was reduced, indicating that the government may have delayed due to economic challenges. With fiscal deficit pegged at 4.4% of GDP and revenue deficit at 1.5%, the government’s priority appears to be to stabilise its finances at the cost of economic expansion.

The budget is not a roadmap for economic recovery. It has failed to address fundamental economic challenges.(The writer is Chief Minister of Karnataka)

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