The unceasing bench thumping in the parliament at the treasury benches on the budget day, gave an impression as if the budget was packed with a pile of path breaking initiatives. But the facts speak otherwise. There is nothing much to commend in the budget.
Once again, like the government’s previous budgets, the present budget has little to show by way of benefits for the farmers, for the workers or for the middle-income groups. At a time when a significant number of workers in the workforce have been pushed into misery in the last two years, under the impact of pandemic, there is much that the government could have done to mitigate their plight; however, there is little evidence of any such initiative in this budget. Further, when the country has been faring poorly even in comparison to its neighbors, on almost all human development parameters there is not much to show in the budget on this score too.
What is even more intriguing is a fact that the finance minister has gone ahead and reduced the allocations or kept them stagnant on most of the government’s welfare schemes. Take for example, allocations for grain procurement. The budget has fallen well short of what was required. The downward trend in budgetary allocations on these schemes has continued from the previous years, even in this budget. For example, the budgeted figure for the grain procurement, which was Rs1,11,000 crore in 2020-21, and estimated at Rs98000 crore in the ongoing financial year, has been further eroded to Rs73000 crore in this budget. By doing so the government has ignored the farmers’ demand for legally guaranteed MSP (minimum support price). This is sure to inflame farmers’ feelings, who had agitated at the nation’s capital until recently for over a year for legally guaranteed MSP for all agricultural produce. They had withdrawn their agitation only after the government revoked the three controversial farm Acts and promised them that it would form a committee to explore the ways to implement MSP. But there is not even an iota of indication of it in the budget, which often has been used in the past to make policy announcements.
A fact that the government has cut down on grain procurement allocations, is expected to affect grain distribution in the public distribution system (PDS), which caters to the needs of low-income groups. Moreover, the falling subsidies on food grains supplied to the PDS, together with the reduced outlay on MNREGA, would have telling effect on the incomes of those below poverty line (BPL) as well as others who depend on it. While this has been the government’s attitude towards the low-income groups, it has once again showed a soft corner towards the corporates by reducing the surcharge on corporate tax in the budget. This may add a few more billionaires but it will at the same widen the income gap even more; especially, when this has been widening rapidly and has been a cause of universal rebuke.
An unfortunate aspect of this government’s economic policies has been its noticeable tendency towards scaling down of the welfare spendings during much of its eight years at the helm. But on the other hand, it has not stopped from liberally doling out excessive sops to the corporate India. In 2019, it had reduced the corporate tax by 10 per cent and now again it has reduced the surcharge on corporate tax. This policy stems from the misconceived belief that it accelerates growth. However, there is little evidence to support this hypothesis. On the contrary, all it has done is to starve the economy of demand year after year and stoke speculation in stock markets and on commodity bourses. This has curbed the growth impulses that come from well distributed per capita consumption. Yet the government has cussedly continued to pursue policies that defy commonsense.
This surely cannot be the trajectory of economic policy in a country, where the income of bottom 20 per cent has fallen by 53 per cent and that of the upper 20 per cent has grown by 39 per cent, and where hunger and child mal nutrition has grown rapidly. Yet what we see instead is that the affluent living, reflected in the rising imports of gold and jewelry and luxury cars, has continued to grow unabatedly, eating up precious resources in the process that could have gone towards financing progressive policies.
What is disturbing as of now is that which could upset the government’s budgetary calculations. In this respect the rising yields on bonds pose a major problem. There are clear signs that RBI would be compelled to riase the interest rates on government bonds during the course of the year in order to maintain exchange rate stability, especially in the wake of the US’ tapering policies. This would inevitably impact the borrowing costs of the government as it steps out to finance its fiscal deficit. Considering the overall outlook of the present government, one fears that by default, it’s axe may fall disproportionately on what is budgeted on welfare schemes, squeezing them further, in order to compensate for the rise in its borrowing costs.
Overall, due to falling economic growth in the last eight years and the rising unemployment, the middle-income group, which has been the bulwark of demand in the national economy, has shrunk in size; especially, since a significantly large population has fallen out of this category in the last couple of years. This doesn’t augur well for demand revival, which is the pressing need of the hour. Seen from this angle, on the whole this year’s budget has been lack luster. Like the doors that open to nowhere but the walls in a haunted castle of San Jose, this budget too seems to have no openings to change the course for the better. It is long on announcements as usual but short on real measures that could impart greater dynamism to the economy at a time when it is needed the most. What is required are the policies that boost consumption while balancing the need for growth. Unfortunately, the government has been falling short on this score.
Shrikant Modak is a Sr Journalist. He has co-authored five books, the last of which was published recently by Sage Publishers. He has held senior positions at the Economic Times, Business Today and Business India.