7 Key Points To Understand What Budget 2018 Has In Store For Indian Millennials

Posted by Shravani Prakash in Business and Economy
February 6, 2018

India is slated to become the youngest country by 2020 with a median age of 29 years. But a study shows that over 30% of India’s population aged between 15 and 29 years are NEETs (Not in education, employment or training). To make sure that India enjoys the benefits of its demographic dividend, the government needs to provide an enabling ecosystem where the youth and millennial population can thrive. The union budget is a vital policy tool that the government can use towards achieving this goal.

This is the only year left with the Modi government to ensure that its vote bank is appeased enough to elect them back to power in the 2019 elections. This is why the finance minister, Arun Jaitley had to shape this year’s budget in a way that would allocate enough money to ‘buy happiness’ for those who are currently the most displeased with the government. Consequently, the poorest families and farmers in the country have been delivered the most promises of a better future, and have the most to cheer about from provisions announced under the budget. There’s not much that has excited the ‘young and restless’ while the ‘rich and famous’ have been left a little worse off.

But now that the initial reactions have settled, it is time to reflect upon things that Indians will take forward to rest of 2018, a crucial year when the performance of the current government will be under the scanner. The following is a seven-point assessment to judge whether the budget has provided for bettering the state of India’s youth and millennial population –

1. Jobs And Employment Creation

The finance minister introduced provisions to address the rising unemployment in India, saying, “Job creation is at the core of the Modi govt’s policymaking.”

To incentivise employers in the formal sector to give more jobs, the government said it will contribute 12% of the wages of the new employees in the employee provident fund (EPF) for all the sectors for next three years. Currently, it is the employers who have to contribute to match the employee’s contribution of 12% of their basic salary as the statutory monthly contribution to EPF. The move will reduce payroll costs of companies and may encourage them to hire more.

The budget also mentioned that the government will roll out fixed-term contractual jobs across industry segments, which is likely to add ‘quick jobs’, although there is a risk that it might fuel ‘hire-and-fire’ jobs. Additionally, the finance minister said that provisions like increased investment on infrastructure project, healthcare initiatives like National Health Insurance Scheme and the Ayushman scheme (top open health and wellness centres) would generate a large number of jobs as well as the as well as reduction in corporate tax for medium and small enterprises (MSMEs).

These measures do seem like they have the potential for creating more jobs in the near future, although they do not guarantee employment generation. They also do not seem to find long-term solutions for addressing unemployment. The job creation numbers should especially be seen in the light of the 10 million jobs per year that PM Modi had promised in his 2014 election campaign, the 8,23,000 jobs that had actually been created till October 2017 and the 18 million Indians who are currently unemployed. Therefore, something like an integrated National Employment policy would, perhaps, be a more holistic approach towards sustained jobs creation. Anything smaller would render the shrinking job market incapable of absorbing the 10 million new entrants into the labour pool every year.

2. Education

A welcome surprise was a renewed focus on enhancing the quality of education in India. Measures like the initiation of an integrated B.Ed programme for teachers and providing for teacher training will hopefully incentivise more teachers. I believe the proposal to increase the digital intensity in education will go a long way in enhancing the quality and relevance of education. The finance minister also stepped up fund allocation on research and development by announcing the launch of “Revitalising Infrastructure and Systems in Education (RISE)” by 2022 (₹1,00,000 crore invested in next four years to step up investments in research and related infrastructure in premier educational institutions) and the Prime Minister’s Research Fellows (PMRF) scheme in which 1,000 best B.Tech students would be identified each year and provided with fellowships to do Ph.D in IITs and IISc. These measures would be great for enhancing the extremely poor rate of scientific research output from India’s colleges and perhaps prevent drain to foreign universities.

3. Skill

The budget announced that the government will set up a model aspirational skill centre in every district of the country under the Pradhan Mantri Kaushal Kendra Programme, under which 300 plus centres have already been established for imparting skill training. This is an important move because skill development is a major problem that the country faces today. While skill development schemes like the National Policy for Skill Development and Entrepreneurship, 2015 and the Skill Development Initiative are already in place, mega-scale initiatives are now needed to increase the employability of the Indian youth.

4. Information Technology

A very important point for millennials that Arun Jaitley addressed is the government’s visible desire to prepare itself to incentivise the next wave of IT products and to promote the growth of the newer areas of technology like artificial intelligence and block-chain.

Jaitley said that the Ministry of Finance is examining the policy and institutional development measures needed for creating the right environment for Fintech companies to grow in India. Recognising the growth of artificial intelligence (AI), Mr Jaitley said that the NITI Aayog will initiate a national program to direct efforts in the area of artificial intelligence, including research and development of its applications. To invest in research, training, robotics, artificial intelligence, digital manufacturing, big data analysis, quantum communication and internet of things – the Department of Science and Technology will launch a mission on cyber-physical systems to support the establishment of centres of excellence. Although he categorically noted that the government does not consider crypto-currencies legal tender, he said that the government will explore the use of block-chain technology proactively for ushering in a digital economy.

All of these point towards the creation of an enabling environment in which technology startups to thrive in, especially those founded and operated by young entrepreneurs.

5. Agriculture And Rural Economy

The finance minister has decided to allocate the largest chunk of the money in the country’s wallet on the revitalising the slow-growing agricultural sector, since the manufacturing and services sectors have been sustaining growth quite well. The intention is to bring relief and cheer to farmers and to the rural population who have had very tough years in recent past, and it is a move in the right direction.

Apart from setting aside capital for development of agriculture, Jaitley announced that the government will give assured and higher Minimum Support Prices (MSPs) for all crops (1. 5 times the cost of production) so that farmers do not suffer losses during bumper crops. There are also measures to improve farmer loans and for the development of rural infrastructure and livelihood.

All of these measures, if implemented effectively, will go a long way in preventing large scale suicides by farmers – something which simply cannot be justified any longer. Such measures would also help create more jobs in the agricultural sector and incentivise younger generations to continue farming.

6. Healthcare

The Modi government loves to announce magnanimous schemes every now and then, and this year it’s the National Health Protection Scheme – marketed by the FM as ‘the world’s largest government-funded healthcare programme’. It is essentially a health insurance scheme wherein 10 crore poor and vulnerable families will be reimbursed up to ₹5 lakh per family per year for hospitalisation. The scheme appears to be inspired by the success of “Obamacare” in the US. However, the big difference is that India currently spends less than 1.5% of its GDP on healthcare compared to 18% allocation in America.

And the one question everyone is asking is how the government will find the finances to spend on such a largescale program – will it put added pressure on the already large fiscal deficit, will the rich be further taxed in coming years. And how well the schemes can target and actually reach the beneficiaries is another story.

A bigger problem is that many poor people do not even have access to healthcare in the first place because of a dire shortage of doctors, hospitals and other infrastructural facilities. Therefore, while the intention of financing medical benefits for the poor is great, the effectiveness of “Modicare” will depend on simultaneous measures to increase access to healthcare as well. In that sense the Budget provision to set up 24 new government medical colleges and hospitals to ensure that there is at least one government medical college in each state of the country is a step in the right direction towards addressing the shortage of doctors in the country.

7. Women

It is pretty clear that enhancing women’s employment is still not a key priority for the government. They have initiated piecemeal measures now and then, and in this budget, there is no separate section or segment addressed towards women, like in the 2017 and 2016 budgets.

To incentivize employment of more women in the formal sector and to enable higher take-home wages, Jaitley proposed a reduction in women employees’ contribution to 8% for the first three years of their employment against existing rate of 12% or 10% with no change in employers’ contribution. The efficacy of such a measure towards incentivising women to work sounds questionable, since lower take-home wages is not really a main reason for women not working. It might be more useful if the government were to extend this benefit to women returning after a career break.

The budget also talked of increasing sanctions loans under the MUDRA Yojna under which, as per Jaitley, more than three quarters of the loan accounts are held by women.

However, all of this is far from enough. As the World Bank suggests, “Conventional approaches to increasing female labour force participation such as education and skills and legal provisions will be insufficient. Policies should canter on promoting the acceptability of female employment and investing in growing economic sectors that are more attractive for female employment.”

As noted in this year’s ‘pink coloured’ Economic Survey – “Just as India has committed to moving up the ranks in the ease of doing business indicators, it should perhaps do so on gender outcomes as well.” and that’s because India’s GDP can rise by 27% if women’s participation in the workforce equals men’s (IMF), and India can earn US$700 billion extra in 2025 by raising women’s workforce participation by 10% (Mckinsey). This would perhaps need a large scale movement along the lines of “Make In India” or “Swachh Bharat” is needed.

Overall, the budget has shown some promise towards bettering the future of India’s millennial population. It shows that the government has taken note of the major areas needing policy intervention, even though they don’t seem to have hit the nail on many of them – in fact, many of the measures even seem superficial. But if the government is able to stick to its promised areas of development and ensure effective implementation, it will be a jump in the right direction.