Budget ’19: Betrayal of the mandate
The opportunity cost of a tame budget is an opportunity lost for the people of the country.Updated: Jul 08, 2019 07:58 IST
An examination of the state of India’s economic affairs reveals that the balance sheet of the Narendra Modi government is a lopsided one, with more losses than gains.
Unemployment in India was at a 45-year high at 6.1% in the year following demonetisation, while the workforce has shrunk by 4.7 crore since 2011-12. Thirty five farmers commit suicide every day and the farm sector grew at only 2.9% in 2018-19 while agricultural wages grew at mere 4.64%. Agriculture, on which 65% of the country’s population depends for livelihood, is in a state of regress.
The nation’s GDP growth in the last quarter of 2018-19 came down to a mere 5.8% and fresh investments plunged to a 15-year low. Private sector projects are being stalled at an all-time high rate of 26% sending signals of flagging interest in undertaking investment. New public sector projects fell by 41%, which is the lowest in 14 years. The share of the manufacturing sector in GDP has risen by only 0.5% in the last five years and growth of exports (compared to the United Progressive Alliance) has fallen by 15 times . The economy is clearly not in the pink of health and the need to reduce uncertainty in economic policy to promote viable investment cannot be stressed enough, if we are to give ourselves any chance of sustaining 8% growth.
It is in this backdrop that the mandate received by PM Modi must be examined. The mandate is overwhelming, not least because of its sheer magnitude. It reflects the magnanimity of voters who have given another opportunity to the Modi government to perform, reform, revive and thrive. With the first budget of the new government, people expected monumental changes, but the budget, at best, offers incremental hope. It is modest on intent, and utterly disappointing on content. In her speech, the finance minister invoked the values of “Asha, Akanksha and Vishwas”, but the budget presented by this government met neither the aspirations of people nor did it uphold the trust and hope that people placed in the government. While people were anticipating solutions to economic slowdown, agrarian distress, and the unemployment crisis, what they got in return was denial and eyewash.
Denial has been this government’s standard response to every problem . Therefore, it comes as no surprise that after burying the National Sample Survey Office report on high unemployment for months before grudgingly acknowledging it in the Economic Survey, the budget was completely silent on measures to deal with unemployment and boost job creation. Schemes such as the Pradhan Mantri Kaushal Vikas Yojana have failed to spur job growth because of mismatch between skills imparted and industry requirements and because of lack of linkages with the job market. Out of 33.93 lakh people skilled under this scheme since 2016, only 10 lakh got placed against the target of benefitting 1 crore youth till 2020. Yet, in the budget speech, the government patted its own back for its apparent success on this account.
Once again, the government has exhibited its expertise at camouflaging its economic failures , while presenting its anti-people policies as smart fiscal decisions. In her budget speech, Finance Minister Nirmala Sitharaman argued that since crude prices have “softened from their highs”, she has decided to levy Rs 2 per litre on petrol and diesel as a special additional excise duty and road infrastructure cess. Rather than allowing the benefits of a global plunge in crude prices to accrue to the common man during this prolonged economic slowdown, the government has chosen to further burden them through this decision. Had the government kept prudent fiscal planning at the centre, it would have realised that such imprudent policies do not help spur savings and investments - the two key engines of progress that are imperative for driving consumption growth, which if stalled could cause the economy to stagnate.
The budget speech truly embodied the famous phrase: the devil lies in the detail. This is borne out by the manner in which allocations for major initiatives and flagship schemes like Ujjwala Yojna and Swachh Bharat Abhiyan were only divulged in writing instead of being part of the speech, a significant departure from the tradition.
Moreover, the FM announced that a new Jal Shakti ministry has been formed to comprehensively undertake water management by merging the ministry of drinking water and sanitation with the water resources and river development ministry. Given that various parts of the country are reeling under drought and water crises, this seemed like a welcome development until one realised that the budgetary allocation for the Jal Shakti ministry is about Rs 2,955 crore less than the combined budgetary allocation in the last financial year for the two ministries merged into it.
Manipulation of numbers mars the entire economic system. This is evident from the FM’s announcement of achieving a ‘$5 trillion economy’- which is nothing but a pipedream because GDP grew from $1.8 trillion to only $2.7 trillion in the last five years.
The most cheated, however, are farmers, constituting more than half the workforce and contributing 16% of India’s GDP, who have been driven to ending their lives because they are unable to pay their debts. And the government’s grand solution to it - 10,000 farmer producer organisations. While this may help in linking farmers to the market, how will prices be corrected, or procurement guaranteed? Why hasn’t the government fulfilled its commitment of implementing the Swaminathan Commission’s recommendation, in letter and spirit, on MSP and other reforms? Why is there no clear roadmap to actually double the income of farmers?
On primary education and health front, two areas integral to our developmental journey, this budget seems like a vague statement than a well-drafted plan.
The New Education Policy calls for 6% of GDP expenditure towards education. However, education sees less than 10% increase in the budget at a time when Indian has been spending only about 2.7-3% of its GDP on education. It reflects a tendency towards a demographic disaster rather than leveraging the dividend. On healthcare, while the Congress manifesto promised to enact the Right to Healthcare Act, the BJP flagship scheme of Ayushman Bharat through which government has promised to provide insurance and wellness centres for 55 crore Indians has only been allocated Rs 1,350 crore this year. It can be concluded that with such a paltry budget this scheme is not meant to be implemented, but only to be used for political advertisement.
Any attempt to resurrect a faltering economy must keep at the centre of its road map, its intent to revive its consumption, investments and savings cycles. Coming on the heels of weak domestic consumption, an increased stimulus for income support and larger allocations for the rural sectors had been anticipated. This was an opportunity to usher in much needed reforms by taking risks but the government seems to have given up even its ambition of double digit growth before even attempting to pull the economy out of the trenches. The government has betrayed its own mandate. The opportunity cost of a tame Budget 2019 is an opportunity lost for the people of India.