Budget expectations: Will the government prioritise the poor?

The size of the Union budget, as a percent of the gross domestic product, has been shrinking—from 17.43% in 2009-2010 to 14.76% in 2024-2025. This downward trend is unlikely to change due to the government’s focus on fiscal consolidation and lower-than-expected GDP growth.

People want straight and simple answers: What will this budget deliver? It is not difficult to make a close-to-accurate guess if other questions are addressed: What is a budget? Who are its architects? And which groups—poor, rich, middle classes, employed, unemployed, farmers, gig workers, etc.—are asking these questions? 

A budget is the government’s estimate of income and expenditure for a financial year—a financial statement. As detailed under Articles 112, 114, 266, 266(2), and 270 of the Constitution, the executive must seek approval from the legislature, the people’s representative in the Lok Sabha, to allocate funds from the consolidated fund of India. 

The budget not only outlines financial estimates but also serves as a policy document, announcing decisions on programmes, taxes, concessions, and allocations. It accounts for salaries, allowances, interest payments on debt, tax shares to states and union territories, and grants. It also earmarks funds for essential sectors like health, education, and subsidies.

The size of the Union budget, as a percent of the gross domestic product, has been shrinking—from 17.43 per cent in 2009-2010 to 14.76 per cent in 2024-2025. This downward trend is unlikely to change due to the government’s focus on fiscal consolidation and lower-than-expected GDP growth. 

For 2025-2026, with a projected GDP of Rs 326 lakh crore (assuming 10 per cent nominal growth), the budget size is expected to be around Rs 51.62 lakh crore—an increase of just 7 per cent from Rs 48.20 lakh crore in 2024-2025, barely enough to adjust for inflation. 

The reduced budget size aligns with the government’s neoliberal economic policies, which prioritise low fiscal deficits over increased public spending. The fiscal deficit for 2024-25 was 4.9 per cent of the GDP. Union Finance Minister Nirmala Sitharaman said her aim was to bring it down to 4.5 per cent in the 2025-26 Budget and further in subsequent budgets. These policies emphasise economic growth over welfare spending, operating on the belief that growth will “trickle down” to benefit lower-income groups. 

Based on income levels, the country has 134 million (9.7 per cent of the population) poor with less than $2 a day income, according to the Pew Research Centre. 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) middle-income group persons with $10 to $20 income; 16 million (1.2 per cent) upper-middle-class persons with $20 to $50 a day; and two million (0.1 per cent) high-income individuals with above $50 a day. 

Most people’s expectations in India are understandable, with poor (9.7 per cent) and low-income (84 per cent) categories accounting for 93.7 per cent of the population. 

Despite claims of economic growth, inequality is worsening. The Gini coefficient rose from 0.371 in 1955 to 0.410 in 2023, as per a People Research on India’s Consumer Economy (PRICE) study, indicating increased income disparity.  By 2022-23, the top 1 per cent of Indians owned 22.6 per cent of the country’s income and 40.1 per cent of its wealth (World Inequality Lab, March 2024). Meanwhile, the number of billionaires has surged from one in 1991 to 52 in 2011 and a further increase to 162 in 2022.

Tax policies also disproportionately benefit the wealthy. Reports suggest that since 2019, India’s largest corporates have enjoyed Rs 3 lakh crore in tax concessions, while the government has foregone Rs 8 lakh crore in revenue since 2012-13.

A practical approach is essential, given the government’s commitment to neoliberal economic policies. Tax relief for the middle class and low-income groups is crucial but offers a limited revenue impact. Individuals earning below Rs 10 lakh annually contribute only 6.22 per cent, while those earning above Rs 50 lakh contribute 76 per cent. However, many of the 8.09 crore income tax filings in 2023-24 were nil returns (4.9 crore), creating unnecessary administrative burdens. 

Another ground to exclude this segment totally from the tax fold is the falling consumption expenditure, which is not in the economic interest of the big because low consumption demand leads to lower sale volumes and profits. 

Similarly, the middle classes expect no tax on the interest of their bank deposits since they are their poor sources of income. The government should rather encourage more deposits into the system and should learn how to use them productively instead of discouraging them with taxes on the interest earnings. The rich want more sops: ease of doing business, simplified labour compliance, a single-window system, transparency, etc., as listed in the CII’s 10-point wish list. 

As for others, the unemployed youth want employment and quality employment. Although some employment growth is visible, its quality raises concerns. Over 90 per cent of employment gnerated in the country is in the informal sector. 

Further, the woes of the farmers and their poor incomes remain unaddressed. About 92 per cent of the farm holdings are small and marginal. The monthly average of farmers’ family income is Rs 10,695. Of this, the crop production provides Rs 5,298, and the rest comes from wage labour and from allied activities as per the NSS Survey 2019. 

Similarly, health and education too need more attention as they are poor in quality and inadequate. 

It may be concluded that the poor budget, poor in size due to excessive focus on limiting the fiscal deficit to 4.5 per cent of the GDP, coupled with the government’s commitment to neoliberal 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) 

Union Budget 2025 | Nirmala Sitharaman, who continues to be Finance Minister, will present her record 8th Union Budget this time. While inflation has burnt a hole in the pockets of 'aam janata', reports suggest there might be a tax relief for those making up to Rs 15 lakh per year. Track the latest coverage, live news, in-depth opinions, and analysis only on Deccan Herald. Also follow us on WhatsApp, LinkedIn, X, Facebook, YouTube, and Instagram.