What are we going to get in this budget? People want straight and simple answers. It is not difficult to make a close-to-accurate guess if one first addresses some key questions. What is a budget? Who are its architects? Which segment of people ~ poor, rich, middle classes, employed, unemployed, farmers, gig workers, etc. is seeking answers? First things first. The budget is the government’s estimated income and expenditure for the financial year ~ a financial statement.

It is a constitutional requirement (as detailed under Articles 112, 114, 266, 266(2), and 270) of the executive to take the approval of the legislature, in other words of the people through their elected representatives in Lok Sabha to spend their money from the Consolidated fund of India. The budget not only deals with income and expenditure estimates for the budget year but provides the space to the government to announce related decisions, policies, programmes, taxes and concessions, etc.

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It allocates money for various purposes including expenditure on salary and allowances to its own employees, armed forces et al. It earmarks spending on other essential items like interest payment on borrowed money, allocations to states and union territories of their tax share, grants etc. Then the government proposes spending in various other areas like health, education and other social sector components and subsidies. All this suggests that the allocations to various sectors would be commensurate with the size of the budget, in other words higher the budget size, higher would be allocations for the people’s welfare.

Unfortunately, the size of the Union budget as a percentage of the GDP has been shrinking over the years; it has come down from 17.43 per cent of the GDP in 2009-10 to 14.76 per cent in 2024-25. The upcoming budget is not going to be different given the government’s excess concern with fiscal consolidation and lower-than-expected GDP growth. We can make a rough estimate of the size of the budget taking the expected GDP in 2025- 26. The GDP was estimated at Rs. 326 lac crore in the 2024-25 budget; later it was brought down to Rs. 324 lac crore with no minal growth 9.7 per cent lower than the budget estimate of 10.5 per cent growth.

Presuming the estimate of Rs.356 lac crore again with about 10 per cent increase forecast, and assuming that the budget size would be 14.5 per cent of the GDP, the budget size will be in the range of Rs. 51.62 lac crore against the current year’s Rs 48.20 lac crore, representing about a 7 per cent increase, which is not a big sum after adjusting for current inflation. The reason for the shrinking budget size is in alignment with the economic policies of the budget architects.

The present government’s neo-liberal economic policies vehemently oppose the increasing fiscal deficit which means the focus will be on spending cuts and tax increases. The 2024-25 fiscal deficit was 4.9 per cent of the GDP. The Finance Minister, Mrs Nirmala Sitharaman, has said her aim is to bring it down to 4.5 per cent in the 2025-26 budget and to keep on reducing it in successive budgets hereafter. The same liberal economic policies that have a penchant for a low fiscal deficit ~ that is low spending ~ believe in the theory that economic growth is more important because its proponen ts feel that growth trickles down in benefits to the poor and middle classes.

So, the approach is to help industry and commerce rather than giving sops to the poor. Based on income levels, the country has 134 million (9.7 per cent of the population) poor ~ with less than $2 a day income ~ as per the Pew Research Centre’s compilation. Similarly, 1,162 million (84 per cent) are in the low-income category with earnings between $2 and $10 per day; 66 million (4.8 per cent) are middle-income group people with $10 to $20 income; 16 million (1.2 per cent) are uppermiddle-class persons earning $20 to $50 a day and 2 million (0.1 per cent) are high-income individuals earning above $50 a day. Most people’s expectations in India are understandable with the poor and low-income categories accounting for 93.7 per cent of the population. Whatever be the claims of growth and prosperity of the country, the gap between the rich and poor has been widening.

The Gini coefficient of 0.410 in 2023 compared to 0.371 in 1955 as per a study of the People Research on India’s Consumer Economy (PRICE), shows the present worsening situation, worse than in the 1950s. The World Inequality Lab (March 2024) similarly says that by 2022- 23, the top 1 per cent of people accounted for 22.6 per cent of the country’s income and 40.1 per cent of its wealth. Undoubtedly there has been growth but its fruits are not trickling down to the bottom but concentrating at the top whereby the number of billionaires and their wealth has been on the rise. Forbes billionaires’ data show an increase in their number from just one in 1991 to 52 in 2011 and a further increase to 162 in 2022. Unfortunately, the government’s tax reliefs also benefit the rich and super-rich more than the ordinary.

Not going into too many details, some reportage recently in reputed media showed Rs.3 lakh crore worth of tax concessions garnered by the largest corporates since 2019, while the revenue foregone by the government since 2012-13 was Rs.8 lac crore. A course correction is imminent in this background with a practical approach as we do not expect any ideological shift from a government committed to neo-liberal economic policies. A tax relief to middle classes and low income can be a big relief but not a big burden on the government since the revenue coming from people with incomes below Rs.10 lakh is only 6.22 per cent while those with above Rs.50 lakh brought 76 per cent.

The government may be happy with the increased filing of returns ~ 8.09 crore in 2023- 24 (against 6.48 crore in 2020), but it should not ignore the fact that 4.9 crore of them were nil income returns which only increases the work burden of both the IT Department and the citizens. Another ground to exclude this segment totally from the tax fold is the falling consumption expenditure which is not even in the economic interest of the affluent and corporates because low consumption demand leads to lower sales volumes and profits. Similarly, the middle classes expect no tax on the interest of their bank deposits since they are their sources of income.

The government should rather enco – urage more deposits into the system and should learn how to use them productively instead of discouraging them with taxes on the interest earnings. Naturally the rich want more sops. They want ease of doing business, simplified labour compliance, single window system, transparency etc. as listed in the CII’s ten-point wish list. As for others, the unemployed youth want employment and quality employment. Although some employment growth is shown, what is conveniently forgotten is its quality. Most of the employment generated has been in the informal sector; more than 90 per cent of employment in the country is in the informal sector. Then there are the woes of the farmers and their poor incomes.

A high 92 per cent of farm holdings are small and marginal. The monthly average farmers’ family income is Rs 10,695. Of this, crop production provides Rs 5,298 and the rest comes from wage labour and from allied activities as per the NSS Survey 2019. Similarly, everyone knows about the neglect of health and education, their poor quality and inadequacy. It may be concluded that the budget, poor in size due to ex cessive concern of limiting the fiscal deficit to 4.5 per cent of the GDP, coupled with the gov er nment’s commitment to neo-liberal economic policies cannot be a pro-poor budget in reality. So, the majority of the population, cannot expect any drastic changes in the tax regime or other concessions except some paltry benefits here and there.

(The writer is a development economist and commentator on economic and social affairs)