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Modi's 3.0 Budget: A Blueprint for Inclusive Growth or Corporate Favoritism?

 

 

The Modi 3.0 Budget, presented by Finance Minister Nirmala Sitharaman on July 23, 2024, has sparked considerable debate among economists and analysts regarding its potential impact on India's growth trajectory. While it promises significant investments and job creation, critical voices raise concerns about whether these measures genuinely serve the broader population or primarily cater to corporate interests.

A Balancing Act: Growth vs. Corporate Interests

At its core, the Modi 3.0 Budget aims to address pressing economic issues, particularly the widening gap between the rich and the poor. The government has proposed a fiscal deficit target of 4.9% of GDP, down from previous estimates, reflecting a commitment to fiscal discipline. However, economists like Nikhil Inamdar from the BBC emphasize that while infrastructure investments have surged, the benefits have not been equitably distributed, particularly in rural areas where unemployment remains a critical challenge. The budget allocates INR 2 lakh crore to create 4.1 crore jobs over the next five years, focusing on skilling and employment. Yet, experts caution that these initiatives are designed more as medium- to long-term strategies rather than immediate solutions to the unemployment crisis. Sachchidanand Shukla, Chief Economist at Larsen & Toubro, notes that while the budget aims to enhance employability, the immediate impact on job creation may be limited, with significant structural challenges persisting in the economy.

Tax Reforms: A Double-Edged Sword

The budget introduces several tax reforms intended to simplify the tax structure and attract foreign investments. For instance, the abolition of the angel tax and a reduction in corporate tax rates for foreign companies are steps aimed at improving the ease of doing business in India. However, the increase in long-term capital gains tax from 10% to 12.5% and the rise in short-term capital gains tax from 15% to 20% have raised concerns among investors, potentially dampening market sentiment and affecting the investment climate. While these tax reforms may benefit large corporations and foreign investors, they have left many middle-class taxpayers feeling overlooked. The anticipated relief for salaried individuals has not materialized as expected, with many feeling that their financial burdens remain unchanged. This disconnect raises questions about the budget's commitment to inclusive growth, as highlighted by economists who argue that without addressing the needs of the middle class, the economic recovery may be uneven.

Collaboration for Sustainable Growth

The budget emphasizes the need for collaboration between the government and the private sector to foster economic growth. By investing in infrastructure and promoting labor-intensive manufacturing, the government aims to create a conducive environment for job creation and economic stability. However, this approach must be coupled with strict regulations to prevent corporate monopolies and ensure that the benefits of growth are widely shared. Experts argue that the government needs to take a proactive role in guiding private sector investments to align with national interests. This includes incentivizing sectors that can create jobs for the informal workforce, which constitutes a significant portion of India's labor market. Initiatives targeting textiles and agri-food processing, for example, could cater to domestic demand while enhancing job opportunities in rural areas.

A Path Forward

In conclusion, the Modi 3.0 Budget presents a mixed bag of opportunities and challenges. While it lays the groundwork for potential growth through strategic investments and tax reforms, the effectiveness of these measures in addressing the needs of the poor and middle-class taxpayers remains to be seen. The government must ensure that its policies foster an inclusive economy where all citizens benefit from growth, rather than merely serving corporate interests. As India navigates this complex economic landscape, the question remains: will the Modi 3.0 Budget succeed in bridging the gap between urban prosperity and rural distress, or will it further entrench existing inequalities?

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