As finance minister Nirmala Sitharaman prepares to present her eighth consecutive Union budget, common folks seared by high prices of food items, particularly vegetables, are looking for some relief. Households with limited income were particularly hurt as wages and salaries did not keep pace with rising inflation. Additionally, there are not enough jobs available for those looking for employment. This forced households to reduce or postpone consumption in the past few months, hurting corporate earnings.

HT identifies the top five concerns of common folks that the budget needs to address.

Inflation

Households across the country shelled out more for kitchen essentials as prices of vegetables, cooking oil and milk rose. Vegetable prices were affected by extreme weather conditions, while cooking oil prices climbed after the government increased duties, and milk prices rose due to the increased cost of inputs. A Re 1 cut in the price of milk announced on 25 January by cooperatives such as Amul will give households some respite.

Household budgets in recent months have been affected by a rise in prices of packaged food such as biscuits and toiletries, most of which use palm oil as a manufacturing input. Companies have already warned of more price hikes owing to increased costs. Reduction in import duties on edible oil can lower the MRP of these oils and the input cost for FMCG companies.

Slow rise in wages

The slow rise in wages and salaries of workers and junior- to mid-level executives was seen as one of the causes of the slackening of consumption in recent months. Britannia in its second-quarter earnings call presentation pointed out that wages of the non-salaried workers, who are more than half the workforce in urban areas, rose just 3.4% compared to earnings of the salaried that grew 6.5% over the previous 12 months. A report by industry body Ficci and staffing solutions company Quess Corp found just a 0.8% compound annual growth rate in wages for the engineering, manufacturing, process and infrastructure companies and 5.4% for fast-moving consumer goods industries between 2019 and 2023. This even as corporate profits soared due to lower taxes on profits and robust demand in the post-Covid period.

Economic slowdown

The National Statistics Office has estimated that India’s economy will grow 6.4% in 2024-25, at its slowest rate since the contraction during the pandemic. Muted government spending on infrastructure projects (capital expenditure) during the first half of the fiscal year is seen as one of the causes of the slower economic growth. The government’s capital expenditure usually creates demand for cement, steel, and construction machinery among other items, which then improves the capacity utilisation of factories making these. As capacity utilisation reaches 80%, companies usually invest in expansion. All this leads to the creation of more jobs in manufacturing and construction. A commitment by the government to accelerate spending is vital for boosting growth and job creation.

Slow growth of jobs

The share of the population engaged in agriculture shot up during the Covid pandemic as millions migrated back to their villages after losing their livelihood in cities. That reverse migration is yet to be fully reversed for reasons including the inability to find work and the higher cost of living in urban areas. Though official statistics show a rise in formal sector employment, India has yet to create enough jobs for those joining the labour force. Besides increased government spending on infrastructure creation, private sector investment in labour-intensive activities can improve the situation. More central incentives and other measures to support the medium, micro and small enterprises are also needed.

Incidence of taxes

The high incidence of taxes has been a pain point for those in the lower- and middle-income groups. The central government cannot do much about indirect taxes such as the Goods and Service Tax, as it is decided by the GST Council comprising the union and state finance ministers. However, lower import duties on essentials such as edible oil and rationalisation of taxes on petroleum products are some measures that can give some relief.

Lowering the burden of income tax for individuals in the lower- and middle-income brackets has been an outstanding demand, as it will leave more money in their pockets. The NDA government has made only incremental changes so far.