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How does the Union Budget impact politics?

Jul 24, 2024 01:32 AM IST

What this budget has not tried to do is undertake the exercise of correcting what could’ve been a mistake.

The most interesting counterfactual as far as the 2024 election results are concerned is whether they would have been different had the interim budget been different. The 2019 comparison is what makes this a very tempting question to ask. The BJP lost the 2018 assembly elections in Madhya Pradesh, Rajasthan and Chhattisgarh in the penultimate round before the 2019 general elections. Rural distress and worsening terms of trade for farmers was seen as a big reason for these losses. The 2019 interim budget announced a direct income transfer scheme for farmers with retrospective effect to nullify this rural anger. While elections are rarely driven by just one factor, the BJP increased its seat tally between 2014 and 2019. The 2024 interim budget, which came in the backdrop the BJP winning in these three states in 2023. did not do much with an eye on the elections. The BJP saw its seat tally fall from 303 to 240 between 2019 and 2024.

Union finance minister Nirmala Sitharaman. (HT/Arvind Yadav)
Union finance minister Nirmala Sitharaman. (HT/Arvind Yadav)

What this budget has not tried to do is undertake the exercise of correcting what could’ve been a mistake -- not doing enough for the elections in the interim budget presented in February. There is no major populist announcement in this budget which can generate low-hanging political fruits for the government in the short term. What the budget has tried to achieve politically is cater to the changed political reality after the 2024 elections. There are two aspects to this political reorientation.

The first is to make sure that the National Democratic Alliance is intact. The BJP, after all, does not have a parliamentary majority of its own. The current NDA government in critically dependent on the support of two of its allies, the Janata Dal (United) and the Telugu Desam Party (TDP), which have 12 and 16 MPs in the Lok Sabha respectively. Another six MPs from Bihar (five from the LJP and one from HAMS) is what brings the NDA to the halfway mark of 272 in the Lok Sabha. The budget has done its best to cater to the demand of these parties to grant more resources to their states. The finance minister spent a lot of time detailing projects that will be undertaken in both Bihar and Andhra Pradesh.

Bihar, from the optics of the speech, has been given priority given the fact that it goes to polls next year itself. The fact that Bihar and Andhra Pradesh have been prioritised over the poll-bound states of Haryana, Maharashtra and Jharkhand underlines the importance the BJP is giving to keeping the NDA intact even at the cost of suffering potential losses in states where it is in power currently.

To be sure, the budget is not just about keeping the allies in good humour. Another lesson which the 2024 election results have taught the BJP is that political returns from its asset generation-focused welfare programmes are subject to the law of diminishing marginal political utility. Among the most important headwinds for the BJP in these elections was from India’s educated unemployed who have been struggling to land well-paying jobs.

The budget, in keeping with the Economic Survey’s prognosis, has once again hinted that the mainstay of job-creation will have to be in the realm of the private sector and not the public sector. Where the budget makes a new beginning is in suggesting that the State will subsidise job-creation in the private sector by not just facilitating skill-enhancement but also sharing a part of the burden of salaries of new recruits. It has not shied away from incorporating some of the ideas from the Congress’s manifesto as well such as facilitating internships for young workers. This is in a way the biggest nudge by the government to encourage job-creation in the formal sector.

The budget speech has set itself a target of “facilitate[ing] employment, skilling and other opportunities for 4.1 crore youth over a five-year period”. The number is almost in sync with the Economic Survey’s prescription of the need for generating 7.5-8 million jobs every year.

Will this focus on job-creation help the BJP cultivate a new cohort of “labharthis” or beneficiaries in the labour market before the 2029 general elections? This is the most important political bet in the budget.

To be sure, achieving this objective will be much more difficult than delivering first-generation assets such as LPG cylinders, toilets and piped water to poor households. The biggest reason for this is that the government is expecting (what is at the moment) a demand-deficient private sector to play ball in its job-creation strategy. Also, there is good reason to believe that a large majority of job seekers in India still see low-paying government jobs as the more desired option than blue-collar private sector jobs.

Will the budget’s newfound focus on employment generation be able to the counter the Opposition’s push for rolling back reforms such as the Agnipath scheme, which has largely done away with permanent jobs in the armed forces or a renewed push for increasing reservations for other backward classes (OBCs) in government jobs? Will these policies generate enough traction for the BJP to do well in the state elections before the 2029 general elections? The BJP is clearly hoping that they will.

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