Budget Replies - Nirmala Sitharaman (11/02/2025)

●​ The Global Economic environment and challenges - Global conflict-

Russian-Ukraine war; Stagnation in global GDP & sticky inflation.
●​ NSO estimates the economy grow by 6.4% in real terms and 9.4% in nominal
terms.
●​ Inflation trends - food inflation appears to be moderated
●​ Main goals: growth, inclusive development, and increase private sector
investment.
●​ Balancing national development priorities along with fiscal imperatives
●​ Effective Capital Expenditure - includes core capital outlays and grants in aid for
capital asset creation - while capital asset creation goes to states so – states are
included in this concept.
●​ In budget- ECE - is expected as 15.48 lakh crore against the 13.18 lakh crore in
RE 2024-2025
●​ So, the ECE in BE 2025-26 is 4.3% of our GDP, 0.1% lower than the fiscal deficit,
which is 4.4% of GDP.
●​ ECE - 4.3% GDP; FD -4.4% GDP —> indicating the govt is using entire
borrowings for financing ECE → not for revenue or committed expenditures.
●​ Sectoral Outlays: 1.71 Lakh cr - agriculture, rural development - 2.67 lakh cr;
Urban development & transport - 6.45 lakh cr, health and education - 2.6 lakh cr
●​ ~ capital outlays have not come down, they have gone up.
●​ Transfers to state - 2025-2026: 25.01 lakh crore across all schemes.
●​ Transfers are growing (lc - Lakh crores)
Year Transfer to states Amount (lakh crores) Difference from the previous year

2021-22 13.40 -4000 (slightly less coz of covid)

2022-2023 15.56 +2.26 lc (50 yr interest-free loan

scheme)

2023-2024 17.98 +2.42 lc

2024-2025 22.9 +4.93 lc

2025-2026 25.01 +2.1 lc

Steps for fiscal prudence:

●​ 2020-2021 - FCI budget borrowing of 1.4 lakh crore bringing down

●​ Partnering with states to deepen the multiplier effect.
●​ 2021-2022 - pre-paying the urban housing of the off-budget
●​ 2023-2024 - New Tax regime was made the default tax regime - rebate was raised
- 7.27 lakh rs annual earning.
●​ 2024-2025 - empowered the ministry - revision of services and new instruments
of service limits ~ operational efficiencies in ministries.
●​ 2025-2026 - 4AA - expenditure profile - balance in states for selected schemes.
●​ Debt Consolidation for states - till March 2031

1. Concerns Unemployment among youth: PLFS 2023-2024 - 49.8% in 2017-18 to 60% in

2023-2024 ~ a rise of 10.3% points
●​ Worker population ratio - 46.8% in 2017-18 to 58.2% in 2023-24 ~ rise of 11.4%
points
●​ Unemployment rate - 6% in 2017-18 to 3.2% in 2023-24
●​ Rozgar Mela - 9.25 lakh appointment letters have been issued for central govt
jobs have been issued.

2. High Inflation (food):

●​ Retail inflation is within the notified tolerant band of 2.6%
●​ Water adequacy is being taken care of, as supply chain disruptions and weather
conditions are responsible.
●​ As per RBI, MPC meeting, CPI is projected to lower at 4.2%
●​ Double-digit inflation (10%) in UPA is not the case…. ~ usual comparison.
●​ “Fuel inflation in UPA2 was 8.9% compared to NDA 2014-2024 4.4% highlights
better management of global price volatility”.
●​ PM Dhan Dhanya Krishi Program - 100 developing agricultural districts.
●​ Listing the onion, chana dal, etc quantities that are sold at affordable prices!

3. Depreciation of Indian Rupee:

●​ Factors influencing exchange rate - movement of $ index, trending capital flow,
level of interest rate, current account deficit, etc.
(The dollar index, often known as the U.S. Dollar Index (USDX), is a tool for assessing
the strength or weakness of the US dollar in relation to a basket of major currencies.)
.
●​ Currency volatility across other countries is extensive, USDX rose 6.5% during
Oct 2024-Jan 2025
●​ Major Asian currencies depreciated-

South Korea 8.1%

Indonesian Rupya 6.4%

Malaysian Currency 5.9%

●​ Major G10 currencies depreciated-

Japanese Yen 7.0%

British Pound 6.6%

Euro 5.8%

●​ Raghuram Rajan (former RBI governor ~ part of Bharat Jodo Yatra): “Fixation of
course always is with rs - $ exchange rate and reality is dollar is strengthening to
all currencies, if you look at euro vs dollar, 6-7% appreciation in Euro, ~ same is
happening with rupee. If you look at the real effective exchange rate of the rupee,
it has not depreciated that much, some nominal depreciations might be useful for
exports” — it's a $~issue!

3. Decline on household savings:

●​ Net financial + Physical Savings- an increase of 8.9% CAGR - Reallocation of
household, real estate investments has gone up steadily.
●​ NSO - Household savings in physical assets have gone up by a compound
average growth rate of 15.6% (2019-20 to 2022-2023)
●​ Total Expenditure in this budget(2025-26) - 50.65 Lakh Crores - gone up
●​ Capital expenditure has not come down either, from 11.11 lc to 11.21 lc, so it has
only gone higher.
 ●​ ECE (effective capital expenditure) 2025-26, pegged at 15.48 lc, net additional
expenditures of 2.44 lc, BE 2025-26 higher over BE 2024-25, is mainly going to
finance 3-major items - a) Interest Payments, 1.13 lc; b) CSS (Central sector
schemes) 1.06 lc; c) Centrally sponsored schemes 0.35 lc
●​ The burden of repayments of oil, fertilizers and FCI bonds raised during the
UPA era are being repaid, in this budget, only interest repayment - not even
the principal amount, [interest 2024-2025 - 5,946 crores; interest going in
2025-26 - 3,524 crores ]; overall principal due in 2024-25 is 44,701 crores; 2025-26,
principal due is 40,464 crores!

4. Fiscal consolidation and reduced public spending in the social sector, education
budget, PM Poshan, Aawas yojna and post metric scholarship:

●​ The social welfare budget has gone up - from 56,501 cr in 2024-25 to 60,052 cr in
2025-26
●​ Education: 1.26 lc in 2024-25 gone up to 1.29 lc in 2025-26
●​ Health: 89,287 cr in 2024-25 gone up to 98,311 cr in 2025-26
●​ Budgetary Technologality: “Expenditure Profile 4AA” - how unspent balance is
remaining:
~ 1,395.45 crores is lying in an S&A account, treasury or in an escrow account in
the states - Rashtriya Krishi Yojna (head)
~ 4,636.55 crores – Assistance to state agencies for intra-state movement of food
grains under the National Food Security Act.
~ 11,516 crores lying in states under SAMAGRA Siksha ​
~ 5,2025 crores lying in states for Poshan Abhiyan
~ 2,988 crores lying with states for the flexible pool for RCH, National Health
Program and National Urban Health mission
~ 7,059 crores lying in state accounts Human resources for health and medical
education
~ 12,319 crores lying with states for Swachh Bharat Mission
~ 12,377 crores are lying in states for Urban Rejuvenation Missions (500 cities)
~ 13,782 crores are lying with states for Jal Jeevan Mission
~ 14000 crore is left for Grameen Urban
~ 4,351 crores lying with states for MNREGA
KERELA

●​ In Aug 2024, Industrial Nod in Palakkad: approved; 1,300KM NH constructed in

Kerela since 2014 ; 1,126KM NH developed under Bharat Mala Pariyojna

5. High Debt
●​ On account of the Pandemic, FD reached 9.2%, 61.4% debt level to the %age of
GDP.
●​ Now, 4.4% FD; Debt to GDP’s target is to bring it down to 50% (+_1) ~ as
suggested by the debt management committee for both the central and state.
●​ Liabilities of Center are domestic in nature with only 3.4% of total value is
external ~~~ so our external debt is not that big.
●​ In UPA, BSNL market share fell from 19% in 2005 to just 7.96% in 2015.

6. Minority Affairs

●​ Budget allocation increased from 3,183 crores in 2024-2025 to 3,350 crores in

2025-2026
●​ Food & Fertiliser subsidies increased from 3.81 lc in 2024-25 to 3.83 lc in 2025-26
●​ Food Subsidy, 11,000 crores equity was given to food corporation of India
●​ Atmanirbharta in Urea Production, 3-dormant urea plants have been re-opened
in Namroop in Assam

(West Bengal – a big list answering Kalyan Singh Banerji for his disruptions & questions on the
spot)

6. MSME
●​ Employment to 25 crore people, so their classification has been increasing.
●​ Customized credit cards have been given a 5 lakh limit for enterprises registered
at the Udyan Portal.
●​ KCC to farmers, more indebtedness for increased limits → 3 lahks increased to 5
lakh is done to save them from middle man trap – they get interest subvention.
 ●​ Liquidity (₹) for People: Only in 2 of the last 12 quarters, has the growth rate
touched 5.4 or remained below it ~~~~~ assuring members of taking measures to
continue to remain the fastest growing economy.
●​ PFCE (Private Final Consumption Expenditure) is expected to grow by 7.3% in
2024-25 driven by good rural demand, PFCE is estimated to be 61.8% of
Nominal GDP - highest since 2002-03.

Replies in Rajya Sabha (13/02/2024)

●​ Trends are changing, and no model working in the Indian Economy.

●​ The situation of fragmentation of the world- instead of globalisation, rising debt
is a problem. Fiscal prudence vs Global Debt & Globalisation vs Fragmentation.
●​ Multilateral forums becoming diluted - bilateral and regional forums are
governing the world.
●​ NSO - estimates - Indian economy real terms growth 6.4% and 9.7% in nominal
terms.
●​ 4 groups - gareeb, youth, anna data and Nari

~~~similar points as Lok Sabha.