A Budget is more than an account of revenue and expenditure of taxpayers’ money. It is the government’s vision for the next fiscal year. It is expected to highlight the key challenges facing the nation, and demonstrate how the government intends to overcome them.
Unfortunately, Finance Minister Nirmala Sitharaman’s fourth Budget ignores the key challenges and sticks to this government’s standard pattern of mega announcements that never see the light of day. (Remember ₹100-lakh crore infrastructure pipeline, the extraordinary revenues expected from privatisation targets, 100 Smart Cities, etc.) There are some nods to cutting-edge challenges, such as the plan to tax crypto transactions, but the larger plan eludes us.
Times are tough, and the overall economy is struggling to catch up with its already-low pre-pandemic levels. Then the government’s primary duty is to put in place a safety net for the most vulnerable. This Budget unfortunately fails to do that.
Rural India helped returning migrants cope with lockdowns. But, as slumping two-wheeler sales demonstrate, it is hurting. Inexplicably then, this Budget cuts outlays for agriculture and allied activities. There is a token increase in the allocation for the PM Kisan Nidhi scheme, but not enough to keep up with inflation.
The Finance Minister’s announcement regarding the Minimum Support Price was shocking. Next financial year, 163 lakh wheat and paddy farmers will benefit from the MSP procurement, down from 174 lakh in 2021-22. Instead of expanding the MSP safety net, the government has chosen to do the opposite. Further, it has reduced fertiliser subsidies and will end up eroding agricultural incomes.
The budget for MGNREGA has been slashed by more than a quarter, when demand for MGNREGA work has been increasing, a sign of nationwide distress. Post the unplanned lockdowns, MGNREGA’s safety net kept rural India afloat. The government must rethink this budget cut immediately.
Tackling unemployment
The Budget presented no credible plan of action to address India’s unemployment crisis. We are 20 crore jobs short. Dispirited young men and women are leaving the workforce. Yet the Budget sidestepped the issue. The Finance Minister claimed that Make in India will produce 60 lakh new jobs. The data and prevailing business climate do not support this assertion. Manufacturing jobs have been declining. CMIE data shows a nearly 50 per cent reduction in manufacturing jobs between 2016-17 and 2020-21.
Government capital expenditure has been substantially increased at the cost of welfare measures. This may partly compensate for the depressing fall in private investments during the Modi years. The cut in corporate tax rates in 2019 has yielded no investment jump, as industry has spare capacity and is waiting anxiously for an increase in demand. The sharp rise in government capital expenditure is one last bet on crowding in private sector investments. Still, it is unclear how the government intends to finance its gati shakti plans (the new name for the infrastructure pipedream announced in 2019).
The Finance Minister omitted ‘inflation’ and ‘price rise’ in her speech. The persistent double-digit Wholesale Price Inflation may have been one reason. This is likely to worsen as global crude oil prices are shooting up rapidly.
Job destruction
It is extraordinarily worrying that private consumption is still below 2019-20 levels. Job destruction and suppressed incomes have put an end to consumption-led growth for now. The government has not cut fuel taxes sufficiently or found other ways to put more purchasing power in people’s pockets. Worse, people will still have to substantially bear healthcare costs, as the Budget has not increased health expenditures sufficiently to help the country cope with the impact of multiple waves of the Covid-19 pandemic.
School and college shutdowns have cost our youth two years of education. Addressing this crisis through more imaginative interventions should have been top priority. Instead we see some increase in educational TV channels, which will do little to overcome the access challenges and digital divides that prevent large numbers of our children from growing their human capital.
Last year, the government announced the Ken-Betwa river-interlinking project. It has allotted ₹44,500 crore for this and initiated project reports for four other mega river-linking projects. The ecological consequences of such projects are likely to dwarf any potential benefits, especially given that there are alternative, low-impact, sustainable measures available to achieve the larger policy goals.
I will end on an important positive note. When, as a Member of Parliament, I served on the Institute Body of NIMHANS, I had pushed for more focus on remote counselling, e.g., for farmers reeling from debt. NIMHANS doctors tried this out successfully. Now the Budget is funding the large-scale expansion of remote mental health counselling for vulnerable Indians far away from urban centres. Hopefully this will bring mental health to the centre stage, overcome taboos, and reverse the tragic trend of farmer suicides.
The writer is Chairman of the Congress party’s Research Department and a former Member of Parliament