As Finance Minister Nirmala Sitharaman prepares for her eighth consecutive Union budget, common people, especially those with lower incomes, are facing challenges. High prices, particularly for food items, are hurting families. Wages have not kept up with inflation, and job opportunities are scarce. As a result, many households have been forced to reduce or delay spending, impacting corporate earnings.
Inflation Hits Household Budgets
The prices of essential food items like vegetables, cooking oil, and milk have risen sharply. Extreme weather has driven up vegetable prices, while increased duties have pushed up cooking oil costs. Additionally, higher input costs have led to milk price hikes. However, a Rs 1 reduction in milk prices, announced by cooperatives like Amul, will offer some relief to households.
Packaged foods such as biscuits and toiletries have also become more expensive due to their reliance on palm oil. Companies have warned of more price hikes, as their input costs rise. Lower import duties on edible oils could reduce prices and ease the burden on both consumers and companies.
Slow Wage Growth Adds to the Strain
Wages, particularly for non-salaried workers, have not kept pace with inflation. Non-salaried workers saw only a 3.4% wage increase, while salaried workers saw a 6.5% rise. Additionally, wages in sectors like engineering and manufacturing grew slowly between 2019 and 2023, despite rising corporate profits.
Economic Growth Slows
India’s economy is expected to grow by 6.4% in 2024-25, the slowest since the pandemic. Reduced government spending on infrastructure projects in the first half of the fiscal year is one cause of this slowdown. Increasing government investment in infrastructure could boost demand for materials like cement and steel, create jobs, and encourage factory expansions.
Job Creation Lags Behind
During the pandemic, many workers returned to agriculture after losing their jobs in urban areas. However, the return to urban employment has been slow, mainly due to a lack of jobs and high living costs. While formal sector jobs have increased, India still struggles to create enough employment. Increased government investment in infrastructure and private sector involvement in labour-intensive industries could help improve this situation.
Tax Relief Remains a Key Demand
High taxes, particularly on essentials, remain a burden for lower- and middle-income groups. While the GST Council decides on indirect taxes, lowering import duties on essential goods and streamlining taxes on petroleum products could offer some relief. Furthermore, reducing income tax for lower- and middle-income earners would leave more disposable income in their hands. However, the government has only made small adjustments in this area so far.
