Finance minister Nirmala Sitharaman on Tuesday unveiled plans to spend ₹2 lakh crore over the next five years to create jobs for 4.1 crore youths as the Narendra Modi government tried to blunt criticism from the Opposition for failing to generate employment in the world’s fastest-growing economy.

The Modi government has had to battle voter ire over the rising unemployment and deep distress in the rural hinterland before regaining power for the third time — and has been under pressure to come out with tangible targets that go beyond pie-in-the-sky promises to quell a swelling tide of resentment.

“This year, I have made a provision of ₹1.48 lakh crore for education, employment and skilling,” Sitharaman said in her 83-minute budget speech.

Political compulsions have also prompted the Modi government to dole out a sackful of lollies for Bihar and Andhra Pradesh to keep its two regional alliance partners happy. Bihar will get ₹37,500 crore in the form of various infrastructure projects while Andhra Pradesh has been promised financial assistance worth ₹15,000 crore.

The government also tried to reach out to angry farmers with the promise to create a rural land registry that would be linked to a separate registry on farmers. There is also a proposal to assign unique land parcel identification numbers or Bhu-Aadhaar cards, which could pose a challenge since rural land ownership is either masked or not clearly established.

Farm economist Ashok Gulati had suggested to the government a need to recognise the tenancy rights of tillers who do not actually own the land. The plan to create a digitised cadastral map and survey to establish “current ownership” could also potentially drive a wedge between rich farmers and the workers who stay on
their farms.

Sitharaman increased the size of her seventh budget to ₹48.2 lakh crore but still managed to bring down the fiscal deficit to 4.9 per cent of the GDP from the 5.1 per cent in the interim budget back in February. The fiscal deficit in 2023-24 had come in at 5.6 per cent.

The finance ministry aims to trim it further to 4.5 per cent in the next fiscal.

The Centre has capped its capital expenditure at ₹11.1 lakh crore — the level set in the interim budget — which clearly indicates that the government has no desire to pump prime the economy.

The stock markets, however, swooned on Tuesday after the government raised the short-term capital gains tax to 20 per cent from 15 per cent and the long-term capital gains tax to 12.5 per cent from 10 per cent. These rates came into effect immediately.

There will be only two holding periods — 12 months and 24 months — to determine whether investors will have to pay a long- or short-term capital gain tax. Mutual fund investors stand to benefit as the three-year holding period for mutual fund units has now been cut to two years.

In a widely anticipated move, Sitharaman cranked up the securities transaction tax (STT) on futures and options trade from October 1 in an attempt to discourage retail investors from shovelling cash into a risky instrument.

Both market regulator Sebi and the Economic Survey for 2023-24, released on Monday, have expressed deep concern over the casino-style wagers that investors had started to make in anticipation of outsized returns.

The Sensex, which tumbled by over 1,000 points at one stage, clawed back the losses to end at 80,429.04, down 73 points from Monday’s close.

Bait for job creation

High public spending has steered the Indian economy out of the pandemic-induced crisis. But the government now wants the private sector to shoulder the twin burden of investments and jobs.

Sitharaman said the government would launch a comprehensive scheme under which the nation’s top 500 companies would be incentivised to provide internships to 1 crore youth over the next five years.

“An internship allowance of ₹5,000 per month along with a one-time assistance of ₹6,000 will be provided. Companies will be expected to bear the training cost and 10 per cent of the internship cost from the pool of funds they create as part of their corporate social responsibility (CSR)," she said.

The Big Boys of industry did not immediately respond to the challenge the Modi government has thrown before them. However, the Opposition Congress said the employment-linked incentives offered to industry needed to be reworked.

“The Congress had promised to deliver the employment-linked incentives through tax credits. The budget provides them in the form of reimbursements for contributions to the Employees’ Provident Fund Organisation (EPFO),” said Congress general secretary Jairam Ramesh, suggesting that tax rebates would induce employers to start hiring.

The government has rolled back the 2 per cent equalisation levy — the so-called digital tax introduced in 2016 — which was designed to tax income earned by overseas e-commerce companies from online sales of products and services.

Sitharaman said the government would facilitate investment-ready, plug-and-play industrial parks in over 100 cities in partnership with states and private partners.

The government has also vowed to formulate an economic policy framework to push the next-generation reforms that would encapsulate all the factors of production: land, labour, capital, entrepreneurship and technology.

The Centre has scrapped the angel tax on startups that was introduced in 2012 to check money-laundering practices through investments in bogus firms.