While presenting the Union Budget in 2020, Union Finance Minister Nirmala Sitharaman spoke for 162 minutes—besting her own record of 137 minutes in the previous Budget. The entire document could not be presented as she began to feel unwell, but even so, the February Budget for 2020 goes down as the longest. Paradoxically, her long Budget speeches are often criticised for being short on detail.

The 2024 Union Budget speech lasted for exactly 58 minutes, the shortest by her record, and rightly so. As is practice and form, in an election year the government does not present the full Budget and instead prepares an interim Budget for the rest of its tenure and leaves the task of framing the full Budget to the incoming dispensation. The interim Budget generally includes estimates of expenditure, revenue, fiscal deficit, financial performance, and projections for the upcoming financial year of the incumbent government. However, it cannot, and should not, include any major policy announcements. At least, if one goes according to the Election Commission’s code of conduct, which states that an interim Budget cannot include any major schemes as it may influence voters.

In terms of announcements, this Budget speech was an exercise in treading water albeit with the clear confidence of an electoral win for the current government in the upcoming general election. In her speech, the Finance Minister said: “People are living better and earning better, with even greater aspirations for the future. Average real income of the people has increased by 50 per cent. Inflation is moderate. People are getting empowered, equipped and enabled to pursue their aspirations.”

A 50 per cent rise in average real incomes is an astounding figure to quote. Let us use the interim Budget then, as a good place to examine the journey so far. For the sake of simplicity and in the order of their importance, let us “stress test” the Budget for just two key parameters: unemployment and inflation. They are, in the Minister’s own words, crucial for India and its economic future.

In her speech this year, the Finance Minister referred to employment seven times; from development of tourist centres to infrastructure development, from food and agri-processing to rooftop solarisation. All these areas, the government believes will create and foster jobs. Essentially, from her words, job creation has been a prime consideration for the Union government. How have we fared on that account? Before answering the question, it must be pointed out that one frustration of gauging trends in employment is the fact that there is no clear view on what can count as dependable employment data.

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In June 2018, the Labour Ministry discontinued the highly regarded National Sample Survey Office’s Employment-Unemployment Surveys conducted once every five years. For most economy watchers, this survey was a crucial data source on employment trends. It was replaced by the Periodic Labour Force Survey (PLFS). The findings for 2023’s survey are that the unemployment rate in the country has shown a decrease between April and June 2023. Similarly, the Labour Force Participation Rate for persons of age 15 and above and the Worker-Population Ratio have also improved during the period. This national survey processed details from 5,639 first-stage sampling units and 1,67,916 people from 44,190 urban houses.

Women roll beedis in Muchkur village, Bheemgal mandal of Nizamabad district. Beedi rolling is the second major employment avenue in northern Telangana districts after agriculture. Many women depend on it for their daily livelihood.
| Photo Credit:
Nagara Gopal

However, when you scratch beneath the surface, many other truths are revealed. First, as a Business Standard report pointed out, “The quality of employment has deteriorated in 12 of the 21 major States and Union Territories, as the proportion of workers in regular or salaried jobs declined between July 2022 and June 2023 compared to the previous year, according to a Business Standard analysis of the latest Periodic Labour Force Survey released by the National Statistical Office.”

The “usual status” measure of employment, which classifies a person according to the type of work they would have engaged in during a one-year reference period, showed an increase in self-employment and casual work in these States during this period. Regular wage or salaried work, where workers receive fixed wages at regular intervals, is generally considered a better form of employment than casual work or self-employment, which consists of working as unpaid household help, as labour in agricultural fields, or owning a small informal enterprise. The move from the structure of regular wages or salaried work towards casual labour or self-employment indicates an increasing number of unpaid and vulnerable workers, mainly women.

At the national level, the share of workers in regular wage work has actually declined to 20.9 per cent from 21.5 per cent. Also, the share of women in regular wage jobs fell sharply to 15.9 per cent in 2022-23, from 21.9 per cent in the pre-pandemic period of 2018-19. There are other red flags too; sectoral distribution of jobs shows a shift from high-productive, high-paying manufacturing to low-productive, low-paying agriculture during the same period of 2017-18 to 2022-23. Manufacturing jobs were down from 12.1 per cent to 11.4 per cent while agriculture jobs rose from 44.1 per cent to 45.8 per cent. Services jobs rose from 41.7 per cent to 44.4 per cent.

Juxtapose this against the Centre for Monitoring Indian Economy (CMIE) data. The CMIE’s findings say the unemployment rate in India (among persons aged 15 and above) fell just a fraction to 8.7 per cent in December 2023 from 8.9 per cent in the previous month. Although the unemployment rate eased in December, it was coming off an elevated rate of 9.2 per cent in November and 9.4 per cent in October. The CMIE believes an uncomfortably high unemployment rate of 8 to 9 per cent is the “new normal” in India.

Job seekers in Kochi attend an event organised by the district employment office and the Vocational Higher Secondary Department at SRV Government Vocational Higher Secondary School in 2023.
| Photo Credit:
Thulasi Kakkat

What is more, data from December point to a growing hole in the premium segment of the employment market. According to the Naukri JobSpeak Index, white collar hiring in India witnessed a sharp 16 per cent decline in December compared to the year-ago period. Cautious hiring sentiment is now visible in important job sectors like information technology, BPO, education, and retail. The survey also found that key metros like Chennai, Bengaluru, Hyderabad, Pune, and Kolkata saw drops as high as 23 to 24 per cent. These are all sectors the Finance Minister pointed to in her speech, but the industry seems to be pointing another way.

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Do people care about this issue? Evidently, they do. A report released by Lokniti-CSDS in August 2023 found that more than one in three (36 per cent) Indians between the ages of 15 and 34 believe unemployment is the biggest problem in the country. When compared with a similar survey conducted in 2016, the proportion of Indians who identified unemployment as the biggest problem had increased by 18 percentage points. As many as 40 per cent of educated respondents (graduate and above) identified unemployment as the biggest challenge.

Lest these are seen as less stringent barometers of formal employment trends, in November 2023, the number of new monthly subscribers under the Employees’ Provident Fund, a formal indicator of job creation, stood at 7,36,015. It was not just the lowest reading for the financial year, it was also the lowest level in over two years.

If that is a sombre fact, consider the state of job opportunities for India’s women, a powerful voting force, now bridging the gender gap in voter turnout across many States. The Finance Minister referred to “increasing participation of women in workforce”, but seemed to miss sharing any numbers bearing that out.

Because the numbers we do have at hand show that India’s female labour force participation increased to just under 33 per cent in the aftermath of the COVID-19 pandemic, an abysmally low figure. Even that, as detailed by the Azim Premji University’s State of Working 2023 report, is an increase primarily fuelled by self-employment, possibly influenced more by distress than by economic growth.

While no one expected sweeping job creation programmes in the vote on account, perhaps the country’s Finance Minister could answer a few simple questions. First, how many people are working in India? Second, which sector is producing jobs and which sectors are axing jobs? And finally, given that we now have almost six years of data to look back on, how many jobs have been created annually since the first PLFS report was released in July 2017?

Retail inflation’s four-month high

Next on the roster is inflation. In December 2023, retail inflation surged to a four-month high of 5.69 per cent, driven by higher prices of food items such as pulses, spices, fruits, and vegetables. Core inflation has been easing, but remains vulnerable to global oil prices—India imports more than 80 per cent of its oil requirements and lower global crude oil prices is credit positive for the Indian economy.

The “Roti Rice Rate”, CRISIL’s monthly indicator of food plate cost, published in January 2024, found that on a year-over-year basis, the cost of a vegetarian thali rose 12 per cent—led by heavy increases of 82 per cent and 42 per cent in the prices of onion and tomato, respectively. The prices of pulses, which account for about 9 per cent of the thali cost, have also increased 24 per cent year-on-year. By its own description, this report covers the average cost of preparing a thali at home and is calculated on the basis of input prices prevailing in north, south, east, and west India.

While some economists may point to a high base effect feeding into high food prices, it is also true that despite the RBI raising rates since April 2022, it has been 50 consecutive months of retail inflation bubbling above the mark of 4 per cent medium-term inflation, a target set by the RBI. In the central bank’s own words: “The objective of aligning inflation with the target on a durable basis is far from assured.”

In December 2023, retail inflation surged to a four-month high of 5.69 per cent—driven by higher prices of food items such as pulses, spices, fruits, and vegetables.
| Photo Credit:
Amit Dave/Reuters

The RBI will have to submit a report to the government stating the reasons for the failure to contain prices. It could, of course, cite a runaway dollar and its impact on a soaring imports bill. Or it could speak about lingering low rural consumption that has been the cause for concern for the fast moving consumer goods industry.

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A few questions on inflation then. Does it look like India may struggle with the 4 per cent medium-term inflation target for much longer than it reckoned? Will the government then double down on critical rural support schemes like the Mahatma Gandhi National Rural Employment Guarantee Act, 2005? Will the Union government’s move to extend the free foodgrains scheme for the next five years see an increase in beneficiaries and reach—to those without ration cards and Aadhaar numbers—in a scenario where the prices of pulses and vegetables are running away?

These questions can be answered from some of the financial details of this year’s Budget. Capital expenditure targets were not met (the capex target was set at Rs.10 lakh crore but the Data for Revised Estimates shows that it stands at Rs.9.5 lakh crore). Health and education both saw underspending—Rs.1,16,417 crore was pencilled in for education but Rs.1,08,878 crore was spent. Health saw a budgeted expenditure for Rs.88,956 crore but only Rs.79,221 crore was used. In fact, five critical schemes that support rural workers, women, children and vulnerable sections of our country, that is, the National Rural Employment Guarantee Act, the Midday Meal Scheme, the Integrated Child Development Services, the National Social Assistance Programme, and the Pradhan Mantri Matru Vandana Yojana do not absorb even 0.5 per cent of India’s GDP anymore.

The pandemic effect

What does inflation and unemployment prevent us from doing and who does it affect? The 2021 findings from Pew Research Center are that the middle class in India is estimated to have shrunk by 32 million in 2020 as a consequence of the downturn, compared with the number it may have reached without the pandemic. The number of people who are poor in India (with incomes of $2 or less a day) is estimated to have increased by 75 million because of the COVID-19-induced recession.

While two-wheelers have seen some recovery year on year, it is still an uphill climb; sales of two-wheelers have been lagging behind passenger vehicles for the last three years now. For passenger vehicles as well, the Federation of Automobile Dealers Associations is putting up a brave face, but the numbers are less hopeful. There has been a 75 per cent increase in unsold inventory in January 2024 and waiting periods have shrunk considerably—higher production and decrease in pent-up demand. Even as inventory piles up in showrooms, companies like Maruti Suzuki have pressed ahead with price hikes, no doubt feeling the pressure of inflation themselves.

RBI data showed that the country’s household financial savings rate hit a 47-year low of 5.1 per cent of GDP in FY23. Spend less, save less.

The fastest-growing major economy

The counter to these two parameters will be this—India forecast an annual growth of 7.3 per cent in fiscal 2023-24, the highest rate of any of the major global economies. An S&P Global Ratings report said India will remain the fastest-growing major economy for at least the next three years, setting it on course to become the world’s third largest economy by 2030.

But let me lay forth a road map on how we get there. India’s growth is now in a “riptide economy,” where things seem quite robust on the surface even as problematic fault lines begin to open and widen below.

The UNDP’s 2024 Asia-Pacific Human Development Report, released in November 2023, finds that India has emerged among the top countries with high income and wealth inequality: “Amidst rapid growth but persistent disparity, the income distribution has become more skewed. The top 10 per cent of the population get 57 per cent of national income and the top 1 per cent get 22 per cent—one of the most unequal income distributions. There are similar gaps in wealth: the top 10 per cent of the population controls 65 per cent of the nation’s total wealth. There is growing evidence of a strong rise in wealth inequality, mainly in the post-2000 period.”

The Oxfam Inequality Report, which notes that “India faces rising industrial concentration especially by the top five firms”, acknowledges the deep inequalities that the Indian economy has sunk into. In an irony of ironies, Goldman Sachs proclaims that the segment of “affluent” Indians (those earning Rs.8.3 lakh per annum of income) has grown at a much faster pace than the rest of India. The investment banking firm, and the business networks reporting this, would do well to note that the government’s own economically weaker section threshold is currently set at Rs.8 lakh per annum. From “economically weak” to “affluent”, what a leap indeed.

Jobs, employment, and income inequality. On those three measures, one was once again left wondering what the full picture is. And, just as we were taught in every mathematics class, show us your workings, Finance Minister.

(This article was updated on February 3, 2024, to include information from the Finance Minister’s 2024 interim Budget speech.)

Mitali Mukherjee is a political economy journalist with more than two decades of experience. She is currently director, journalist programmes at the Reuters Institute for the Study of Journalism, University of Oxford.