The union budget presented this week had seen over 7 percent increase in the total allocation compared to the budgetary allocation in 2023-24. However if one accounts for the inflation which was over 5 percent as of June, 2024, the inflation adjusted budgetary allocation increase will be much less than 7 percent.
The composition of the budget has seen a change over time with an increase in the share of capital expenditure since the last two budgets and subsequently, a decline in the share of revenue expenditure. However one needs to note that the revised estimates of 2023-24 of capital expenditure was actually less than that of budgetary allocation of 2023-24. This surge in capital expenditure is generally regarded as a welcome step as this has the ability to crowd in more private investments and hence led to job creation.
Capital expenditure by the government goes into the creation and maintenance of assets like schools, colleges, hospitals, roads, bridges, dams, railway lines, airports and seaports. So this can lead to crowding in private investments and lead to more jobs
One of the most important aspects of the budget is allocation of funds to existing government sponsored schemes which might have been initiated with different economic and social objectives and also announcements of newer such schemes.
It needs to be noted here that over the years the share on budgetary allocation for the government sponsored schemes have been declining as we can see in the table below. This share of allocation of state grants, interest payments, transfers have increased over time.
One of the key aspects of the budget is how much money is allocated on key areas. It needs to be noted here that the agriculture sector had seen a very minimal growth in FY24 and with over 45 percent people reliant on this sector it has significantly impacted the overall consumption demand growth.
A lot of focus was expected for this sector. This sector actually saw a marginal drop in the share of allocation as compared to last year’s budgetary allocation as well as revised estimates. Coupled with this there has been a further decline in fertilizer subsidy which can impact the farmers adversely.
Health and education has been the most important social sector focus area for the country as this not only has an impact now, it also has a significant inter-generational impact. Another important aspect is drinking water and sanitation. This has been a focus area as there have been vast areas of the country which remain vastly drought affected. The other focus in the social sector is tribal growth and women & child development as both these segments need dedicated focus.
The social sector needs dedicated focus from the government and a significant increase in allocation as it is this sector which impacts the masses. However there has been an overall decline in the share of allocation in this sector in this budget in the key heads mentioned above as compared to the last budget and the revised estimates. The total allocation share was roughly 7.2 percent of the total budgetary allocation and 7.4 percent of the revised estimates ( with differing proportions of individual heads) in the last financial year. The same share declined to 6.9 percent of the total budget in FY 2025.
Among the individual heads, the maximum drop has been in the share of allocation of education as compared to the revised estimates of last year. The major drop of this comes from the share of allocation in higher education. The share of other key heads ( health, drinking water, tribal affairs, women and child development) have remained mostly in similar range as compared to the last budget with some small changes.
Another important factor is the share of allocation of MNREGA. The share of allocation in this front saw a marginal decline in FY 25 as compared to the revised estimates of FY 24 with no change in budgetary allocation value in this area. Moreover as per data provided by the Ministry of rural development, Government of India, the actual allocation in FY 24 will be much more than the revised estimates and hence this can be a significant under allocation of the budget in this area.
Overall the increase in the share of capital expenditure remains a welcome step of this budget. The drop in the share of government sponsored schemes is an area of concern. The other big area of concern remains the lack of focus in agriculture in terms of the share of allocation. Also the share of the social sector declined.
Indian Political Debate 