The new year brings with it a mix of hope and expectations, especially among the youth and middle class who have placed their trust in the Narendra Modi government. The upcoming Union Budget is being eagerly awaited by these two groups in particular, in the hope it addresses the very real concerns of a generation in search of a brighter future. The upcoming budget is expected to focus on job creation in sectors such as energy, and improvements in the education sector through the integration of cutting-edge technologies like artificial intelligence (AI), which are crucial for preparing the youth for the challenges and opportunities of the future.

Focus on job creation
The promise of a transformative budget has already sparked discussions around schemes that can address these challenges. The government's previous budget, which emphasised jobs and upskilling, is a step in the right direction, with the announcement of a Rs 2 lakh crore initiative aimed at benefiting over four crore individuals over the next five years. This flagship scheme, which offers a month's wage subsidy to first-time employees entering the formal sector, is designed to not only create jobs but also to ensure job retention. Employers who register new hires with the Employees' Provident Fund Organisation (EPFO) will benefit from direct benefit transfers of up to Rs 15,000 per employee, incentivising them to sustain their workforce for a minimum of 12 months. This policy is a well-thought-out attempt to foster a long-term, stable job market – especially for young people eager to enter the workforce.

Another untapped area for employment generation is the energy sector. As the global shift toward renewable energy accelerates, the question looms: Can the government channel investments in this sector to generate employment? The answer could hold the key to addressing two critical challenges: creating a resilient and sustainable environment while simultaneously providing jobs for the youth. Increased spending on renewable energy reduces fossil fuel dependency and also paves the way for innovation in energy solutions. Investing in emerging industries has ripple effects across the economy. Sectors with strong forward and backward linkages, like renewable energy, can drive growth in ancillary industries, creating a cascading impact. By fostering development in these areas, the government can stimulate broader economic activity, ensuring that the benefits of such investments extend far beyond a single sector. The promise lies in strategically targeting these industries to build a sustainable, future-ready economy while empowering the youth with the jobs of tomorrow.

Bridging the gap with upskilling programmes
Creating jobs alone, however, will not solve the broader challenge. A significant gap exists in the skills of India's youth, making it harder for them to secure meaningful employment. To bridge this gap, the government has proposed a comprehensive upskilling programme, which aims to leverage the existing network of Industrial Training Institutes (ITIs) and collaborate with states and the private sector. Modernising curricula, expanding training capacities and aligning skills with the demands of the modern economy will help prepare young individuals for emerging job opportunities. This initiative could go a long way in tackling the growing problem of underemployment and preparing the youth for a future that demands more than just basic educational qualifications. Now that AI is gaining more prominence in the industry, more courses focusing on data analytics and machine learning should be introduced in the curriculum – to make the generation ready for the future.

The middle-class mandate
Yet, as much as the youth are the focus of these initiatives, the middle class cannot be ignored. The middle class forms the backbone of India’s economic engine – contributing to the tax base and fuelling consumption. However, rising costs of essentials like food items, healthcare facilities, fuel, electricity and housing have severely impacted their purchasing power. The recent decline in private consumption, from 58.1% of GDP in FY22 to 55.8% in FY24, signals a worrying trend. The expectation is clear: reduction in GST on health insurance along with subsidised healthcare services for greater accessibility. Middle-income groups are also seeking higher deductions for medical expenses alongside tax-free interest from senior saving schemes. The skyrocketing housing prices with hefty interest rates have become a far-off dream for middle-class people. Therefore, affordable housing in the form of loan subsidies to make home ownership more achievable and providing incentives for first-time buyers is expected in the coming budget. By increasing the money-holding capacity of the public, the government could boost demand and help accelerate the recovery of the economy, especially in rural areas where purchasing power has been constrained.
Revitalising rural markets
The signs of recovery are visible, particularly in the rural market, where growth in Q3 FY24  increased to 6%, up from 5.2% in the previous quarter. This recovery, though modest, provides a glimmer of hope for rural households, who have long been left out of the economic mainstream. With more targeted schemes, such as employment opportunities for daily-wage workers, consumption vouchers for low-income families, and enhanced direct benefit transfers, the government could further increase the purchasing power in rural regions. This would, in turn, drive demand in the rural market and contribute to a more balanced recovery across the country.

To conclude, our nation is looking forward to the upcoming budget not just for economic stimulus, but for a vision that addresses the pressing issues facing the youth, the middle class, more investment in renewable energy and R&D and the broader society. A budget that supports job creation, upskilling, tax deductions and measures to encourage the latest technology could go a long way in revitalising the economy. Now, it is time for the government to demonstrate that it understands the challenges of the people and is committed to creating an inclusive growth path for all. All eyes are on the budget, and the expectations are high. Only time will tell if the government can meet them.

Anshita Sachan is a senior research associate at Pahlé India Foundation; Dr. Palakh Jain is an Associate professor of Economics at Bennett University and a Senior Visiting Fellow at Pahlé India Foundation. Views are personal.