Dealing with falling growth and rising unemployment
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GDP quarterly growth has fallen to a 5-year low and unemployment rate has touched a high of 6.1% (though employment data is non-comparable with earlier periods). It does not mean that raising growth (which may happen on its own) will necessarily increase employment -- as "jobless growth" was seen even in the fastest period of growth, between 2004 to 2009 where only 1 million jobs were created. Nevertheless there is a dire need to pump money into the economy but the fiscal space is not there.

For growth improvement, clearly the credit supply is clogged. It is said that 14 lakh crore bank capital is locked in stressed assets and the resolution process is still slow (despite insolvency reforms). Public sector banks, comprising 2/3rds of deposits, are facing severe capital shortages. They have become risk adverse and so credit availability is drying up. Gross capital formation has dropped from 34.3% in 2014 to 31.0%. This should be reversed for stronger growth.

Demand or consumption is weak, but this is a symptom of low investment or growth. A boost to investment is required. Govt has a packed agenda so higher public sector investment will surely happen. The govt in respect of the current budget is constrained by fiscal prudence, of not exceeding its 3.4% fiscal deficit figure. Surplus RBI capital is a probable solution. Bimal Jalan Committee will report by end-June on its use, and it could be used for bank capitalisation.

Unemployment issues have to be resolved independently and the problem is more structural. Though policy changes or reforms will be required, judicious allocation of funding can be done in the budget. It is best to look at long-term solution which is to improve labour productivity through education and skilling. Also, targeted funding in labour-intensive industries can be tried after due analysis on its potential in India.
Budget 2019: Jobs and economy are the core challenges for Sitharaman

Capital requirements for Banks
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It is estimated that budget will set aside Rs 30,000cr for bank capitalisation. But why?
1. To meet minimum regulatory capital requirements in this fiscal
Govt wants to remove the remaining 5 weak banks from RBI scrutiny (Prompt Corrective Action) this fiscal and it must pump capital into banks for them to meet Basel III norms. 6 out of 11 weak banks came out of PCA last fiscal as part of Govt's bank capitalisation programme of over Rs 100,000cr. One weak bank joined in a 3-way merger with Bank of Baroda, so Govt will infuse capital to make the new bank financially strong.

Larger banks such as SBI and BoB have been given permissions to float their equity. Banks in general are unable to tap the markets as their shares are severely marked down. The non-core assets of banks are lower than earlier estimated. Thus, banks are coming to Govt to make up the shortfall.

2. Banks need capital to increase bank lending, which has just started to pick up.
FinMin assessing capital needs of PSU banks, may provision Rs 30,000 crore
June 16th, 2019