Budget 2018: A wasted mandate high on hype
There were no significant measures to help the middle class when it is facing inflationary timesopinion Updated: Feb 01, 2018 20:03 IST
After four years of economic mismanagement, people’s expectations from Budget 2018 were mixed. Would we see more attention-grabbing announcements followed by inadequate implementation? Or would the Modi government finally do something about the major crises facing India: rural distress, unemployment, falling private investments and rising prices? Unfortunately, India’s hopes are shattered after Finance Minister Arun Jaitley’s final budget speech.
First, the Economic Survey revealed stagnant agricultural growth over the past four years. Thus, Jaitley announced the fulfilment of the BJP manifesto promise of an increase in minimum support price (MSP) for farmers at cost plus 50%. His claim that the government had already fulfilled this promise for some rabi crops in 2018 is wrong — it is between 3% to 38% and not 50%. Farmers have no reason to trust the BJP any more, as apparent from the recent results in Gujarat elections and the Rajasthan by-polls. They will naturally ask why this wasn’t implemented four years ago. Also, given inadequate investments in agriculture, the government hasn’t offered a concrete roadmap for how it will double farmers’ incomes by 2022.
Second, the fiscal deficit target was breached yet again. It is now 3.5% for FY 2017-18 compared to an already revised target of 3.2%. For FY 2018-19, the target was supposed to be 3%. Now this has been further revised to 3.3%. How credible is this government when it cannot meet its own revised target? Remember it had a Lok Sabha majority and benign macroeconomic conditions. It reaped an oil bonanza when low crude oil prices allowed it to rake in revenues by increasing central excise duty on diesel by more than 380%, and on petrol by more than 120% over the last three years. Instead of using this historic opportunity, the government frittered it away and now prices have steadily increased and GDP growth has remained largely stagnant.
Third, now that the government has got an upgrade from international ratings agencies, it seems to no longer care about how it achieves goals such as its disinvestment target. It raised Rs 37,000 crore by selling its 51% share in HPCL to another public sector undertaking, ONGC, which is now saddled with debt as a result. Similarly, the massive amount of resources needed to finance the bank recapitalisation bonds are going to be kept off the balance sheet, even though the government will have to pay at least the interest on those bonds. These examples illustrate that the NDA model of governance is more a sleight of hand than steady hand.
Fourth, unemployment is the most important issue facing India. Yet, Jaitley mentioned the word jobs only in the 47th minute of his speech. Tax sops were announced with the aim of boosting private investments and job creation. But the targeted Micro, Small & Medium Enterprises (MSME) sector is still suffering from the negative impacts of demonetisation and the hasty GST rollout. MSMEs will not create jobs unless their existing capacity is better utilised. According to an RBI survey, there has been no improvement on that front for four years. So, after four years in office, we see that the government has been unable to come up with a sustainable formal job-creation initiative. No wonder India is witnessing an epidemic of youth unrest.
Fifth, the FM reverted to grand announcement mode when he hyped his health insurance initiative as the world’s largest. Across the world, such schemes benefit insurance companies more than they do the poor. The health allocation has only increased marginally. Thus Indians will have to manage the epidemic of non-communicable diseases with their private resources.
Sixth, we must pay attention to what was missing in this budget speech. There were no significant measures to help the middle class when it is facing inflationary times. There was precious little mention of Make in India, Start Up India, Stand Up India and other slogans, because they have not delivered at any scale.
Finally, just before the state election, the FM has accepted the Karnataka’s Congress government’s offer of 80% financing to introduce a suburban rail for Bengaluru. As a long-time advocate for the cause of sustainable transport, I am thankful.
Rajeev Gowda is a Congress MP and chairman, AICC research department.
The views expressed are personal