Budget: A Catalyst for Social and Economic Transformation

by Suranjita Ray

The Budget has always been interpreted as an instrument of social and economic reforms alongside an innovator of far-reaching reforms in fiscal policies. It has a vital role to play in the economy of a welfare state as it aims at bringing social and economic transformation by removing inequalities, poverty and unemployment. As an important step towards the overall development of the nation, the Budget focuses on fulfilling the dreams of every section of society, including the poor and the under-privileged—farmers, tribal people, Dalits, oppressed, and women. Therefore, the Budget presents a prospect for the government of the day to introspect its performance for the past year, and for last five years in an election year. It almost turns out to be an election manifesto of the ruling party, where the government is not only expected to outline its accomplishments but also affirm its vision for the future. Over the years, democratic participation by all stake-holders has brought greater opportunities as well as greater challenges for India’s budgetary process.

Assuring few Expectations

A majority of the people who voted the Bharatiya Janata Party (BJP) to power in the 2019 elections were/are hopeful that several of their expectations would be congregated. Therefore, it was expected that with a landslide victory the ruling party would present a Union Budget to chalk out the roadmap to achieve not only its unfinished goals and objectives but also aim at fulfilling many aspirations of the people. However, a major challenge was the trajectory of a declining economic growth in the last few years from 8.2 per cent to 7.2 per cent, 6.8 per cent, and 5.8 per cent, which was the lowest at the end of the fourth quarter in 2018-19. Introducing fiscal stimulus for economic revival was difficult with the growth rate at its lowest in five years and no picking up in the investment. Both the Inter-national Monetary Fund and World Bank have lowered India’s expected growth rate in the current fiscal.

Therefore, the most important need was to redraw an appropriate economic model to sustain a higher economic growth alongside focusing of social security to ensure the well-being of the people. The Economic Survey 2019 focuses on moving to a ‘virtuous cycle’ of savings, investments and exports to transform India into a $ 5 trillion economy in the next five years, that is, by 2024. It has projected the economic growth to pick up at seven per cent in the current fiscal, but states that a sustained eight per cent growth is important to achieve the target as a major economy. It states that decline in the Non-Performing Assets should help push the capital expenditure cycle and investment as a percentage of the GDP has to be in excess of 30-35 per cent. The approach of the Economic Survey focuses on legal reforms, ensuring policy consistency, encouraging behaviour change using behavioural economics, nourishing Micro, Small and Medium Enterprises (MSMEs), reducing cost of capital and reducing risk-return trade-off for investment. Krishnamurthy Subramanian, the Chief Economic Adviser, argues that for job creation to happen, it is the young firms that need to grow and exploit the economies. It is significant to focus on unshackling the MSMEs and enabling them to grow, thereby creating jobs and exports in the economy.

With a mission to make India a major growing economy, the Budget centres on a higher rate of economic growth for continuous years. The growth-oriented Budget encourages corporate sectors/private enterprises to invest more by enabling them to raise more money from the capital markets. Arguing in favour of an investment-driven growth as a must, the Finance Minister, Nirmala Sitharaman, stated that the country required Rs 20 lakh crore worth invest-ment per year. Steps to enhance investments in infrastructure, liberalisation in the Foreign Direct Investment (FDI) policy, lowering of corporate tax to 25 per cent for small enterprises and the allocation of Rs 70,000 crores towards capital for Public Sector Banks (PSBs) are important. The government believes that private investment will grow with recapitalisation of the PSBs. In addition, raising funds globally by borrowing will contribute towards the $ 5 trillion economy growth aspirations. The focus on flow of more money into the Indian economy through FDI proposals and raising more money through Public Private Partnership (PPP) with a push to infrastructure, construction, real estate, production, growth, job creation, demand and exports—all feeding into each other—‘will enable the animal spirits in the economy to thrive’. The government promises to bring the fiscal deficit to 3.3 per cent from 3.4 per cent as was projected in the Interim Budget. The Finance Minister emphasises that rather than Nehruvian socialism, it is fiscal prudence and fiscal consolidation which matter. Since a major factor that paid the BJP in the recent elections was the trust to benefit from some of the social welfare schemes such as Swachh Bharat Abhiyan, Ayushmaan Bharat, Ujjwala Yojana, Saubhagya Yojana and Jan Dhan Yojana, a new paradigm of welfare in the Budget focused on the expansion of these schemes that promised benefit to every section of society.

The Finance Minister stated that people’s hearts having been ‘filled with Aasha (Hope), Vishwas (Trust), Aakansha (Aspirations)’, the government is compelled to re-emphasise on schemes such as MSMEs, start-ups, defence manufacturing, automobiles, electronics, and medical devices under Make in India, building physical and social infrastructure, self-suffi-ciency and export of foodgrains, pulses, oilseeds, fruits and vegetables, achieving a healthy society through Ayushmaan Bharat, improving nourish-ment of women and children, and safety of citizens. She argued for the extension of several schemes that ‘have transformed the lives of every rural family, dramatically improving ease of their living’ such as the pension benefits under the Pradhan Mantri Karam Yogi Maan Dhan Yojana that provides Rs 3000 per month as pension on attaining the age of 60 to workers in the unorganised and informal sectors, electricity and clean cooking facility to all willing rural families through the Saubhagya Yojana and Ujjwala Yojana, housing for all through the Pradhan Mantri Awas Yojana—Gramin, all-weather connectivity connecting the eligible and feasible habitations through the Pradhan Mantri Gram Sadak Yojana, digital literacy in rural India through the Pradhan Mantri Gramin Digital Saksharta Abhiyan, and encouraging women entrepreneurship through the National Rural Livelihood Mission that impacts 52 lakh women Self-Help Groups (SHGs) as Rs 5000 would be given to members possessing Jan Dhan Bank account, over and above their savings, and at least one woman per SHG would be eligible for a loan of Rs 1 lakh under the Prime Minister’s MUDRA scheme. For the safety of women Rs 500 crore has also been granted to the Nirbhaya Scheme. She stated that higher education in the country will be reformed comprehensively through a new education policy, and the government will make renewed efforts to promote research in the country. The focus on the Jal Jeevan Mission to achieve Har Ghar Jal (piped water supply) to all rural households by 2024 and formation of a New Jal Shakti Mantralaya by merging the Ministries of Water Resources, River Develop-ment and Ganga Rejuvenationalong with Drinking Water and Sanitation to look at the management of water resources and water supply in an integrated and holistic manner is certainly a positive step to ensure the basic rights of the people.

Ignoring few Concerns

However, while the Budget speech focused on gaon, garib and kisan (villages, poverty and farmers/peasants), the Budget has not been able to break any new ground to increase the income of the ordinary people both in rural as well as urban areas. Two major uncertainties that remain unaddressed are generating employ-ment/job creation and agrarian crisis/farmers distress. While it boosts investment in select industries, the word jobs did not find a mention in the Finance Minister’s speech. Despite the election campaign that promised to convert job- seekers into job-creators, we see a large decline in the labour force participation and an increase in joblessness. The data released by the Labour Ministry reveals that the unemployment rate was 6.1 per cent in 2017-18 which is arguably the highest in fortyfive years, that is, since 1971. The Centre for Monitoring Indian Economy (CMIE) report 2019 finds that over the years, the count of employed is decreasing and that of the unemployed is increasing steadily. Unemploy-ment has increased by a substantial 11 million by December 2018. Job losses are also concen-trated amongst the wage labourers, agricultural labourers, small traders, and in particular the women in rural India. In such a context, it is difficult to comprehend that the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) has received less grant than last year’s revised estimates.

While the Prime Minister argues that the Budget underlines structural reforms in the agricultural sector with a roadmap to transform the sector to double the farmers’ income, the feeling of disappointment amongst the farmers’ groups is high as the Budget has ignored many of their concerns. In a situation of agrarian crisis and drought, there is no drought relief in the Budget. There are no significant reforms or strategies announced for boosting agriculture and farmers’ incomes or reaching the target of doubling the farmers’ income by 2022. Though the expenditure Budget for the Ministry of Agri-culture and Farmers’ Welfare has jumped from Rs 67,800 crores to Rs 1,30,485 crores from 2018-19 to 2019-20, which is more than 92 per cent, the lion’s share of the climb is meant for the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN), which provides Rs 6000 for each farming household per year. While a jump from Rs. 20,000 crores to Rs 75,000 crores underlines the biggest policy shift towards direct income transfer, the poll promise and Cabinet decision to expand the scheme to all the farmers has not been reflected in the Budget.

Though the Budget announces ‘zero budget’ agriculture which will promote zero-based natural farming, it continues to provide a rise of Rs 10,000 crores over last year for the chemical fertiliser subsidy. Most of the subsidy is confined to the fertiliser companies and excludes small and marginal farmers. Policy-analysts argue that while organic farming is fine for niche markets, it is significant to allot money for Research and Development (R&D) on mass production at a low cost. The Economic Survey has highlighted that India spends only 0.37 per cent of agriculture GDP on R&D in agriculture and therefore a boost in productivity is not possible. Though the Budget for the PM Krishi Sinchai Yojana (PMKSY) is raised by 17 per cent, it is insufficient to take care of the irrigation needs of agriculture. The per drop more crop scheme is budgeted at just Rs 3500 crores. The Budget reiterated the government’s earlier goal of bringing in more regulated agriculture markets on the electronic National Agriculture Market (e-NAM) platform. The policy initiatives and market intervention such as strengthening e-NAM, and the hikes in farmers’ welfare schemes, including crop insurance, price support and Pradhan Mantri Annadata Aay Sanrakshan Abhiyan (PM AASHA) procurement scheme, and making annadatas (producers of foodgrains) also as urjadatas (producers of solar power), are insufficient and do not address the root causes of persisting farmers’ distress. Agriculture has to be understood beyond increasing farm produce. Strategies to integrate farming with procurement, marketing, and pricing, need to be worked out to benefit the farmers.

Articulating a Vision

Nirmala Sitharaman states that the Budget reflects long-term goals and the government has a vision for ten years in mind. She argues that it is the behavioural economics that will work as a catalyst for transformational change. Arun Jaitley, the former Finance Minister, states that the Budget creates a political direction for an aspirational India as it ensures prosperity and growth for the lower sections as well. Amitabh Kant, the Chief Executive Officer of NITI Ayog, claims that it is a path-breaking and comprehensive Budget. Hailing it as full of hope and boosting confidence, Prime Minister Narendra Modi stated that the Budget for ‘New India’ gives an assurance to the new desires and many expectations of the people. He argues that it is citizen-friendly, development-friendly and future-oriented, which will make India pros-perous as it promises a better tomorrow to the youth. It laid the foundation for an inclusive and progressive nation with a roadmap to transform India by 2022, that will mark the completion of 75 years of India’s independence. He calls it a Green Budget as it focuses on clean energy and environment, and promises a pollution-free India, alongside focus on water management, clean rivers, and a Blue Economy.

While the Budget will always remain significant for the government to regain its control over the political narrative, the more inquisitive question is whether the Budget articulates a vision. Though it is important not to get the Budget wrong, there is disappointment for those looking for radical reforms. In the context of serious job woes and agrarian crisis in the country, the Budget disappoints the unemployed youth and farmers in particular as no reforms were announced to ease the biggest problems. An increasing feeling of disappoint-ment is obvious as the Budget intends to take no transformative role.

The debate on the Budget in Parliament underlines the criticism by the Opposition parties as it has given no meaningful relief to any section of the population. The Congress party reasoned that despite a huge mandate, the BJP Government has failed to announce any ‘bold’ decisions or structural reforms, which will result in a status-quoist economy. While a weak economy needs a bold approach, the Congress party claims that the Budget insists only on increasing investment to spur the economic growth and completely lacks such a vision. The leaders of the Biju Janata Dal believe that the Budget favours the corporate sector. The Communist Party of India contends that it is a fraudulent Budget with anti-labour labour codes. The Trinamul Congress criticises it as a dream Budget which is selling dreams instead of delivering. Notwithstanding the ruling party’s constant attempt to gain political advantage by promising a higher GDP growth rate and the Opposition parties’ unceasing effort to contest the possibility of attaining such a growth rate, it is significant to raise demands which will raise the capacity utilisation in the economy and a consumption boost which will lead to an increase in investment in productive capacity. While the Economic Survey provides a roadmap to strengthen the Indian economy and has identified the demand problem as a major economic problem, it suggests raising investment in the economy and focuses on solutions centred on the supply side. The dependence on international financial markets for borrowings will result in increased control and manipulation of the country. While the private companies are expected to deliver economic growth through private investment or private consumption, much remains to be seen. However, even if the target of economic growth is achieved, a larger economy on its own does not explain well-being for all.

Farmers are a distressed lot, and their distress is not an aberration but a constant in terms of deprivations and denial of the right to basic resources of livelihood. Abysmal poverty, landlessness, increasing alienation of land, disentitlement to forest and water for the marginalised, increasing control over the productive resources by the dominant class, and consistent decline in the proportion of cultivators and corresponding increase in agricultural labour have resulted in persistence of distress for certain sections of the farmers. In fact, the government announced no radical change in agriculture.

Though the Finance Minister argues that there is a shift in the approach from women-centric-policy-making to women-led initiatives and movements, without altering the power relations determined by unequal and hierarchical structures in society and involving women in decision- making at the local level, women will remain vulnerable to disentitlement and disempower-ment and many women-targeted schemes will merely remain relief measures. In fact, a comprehensive understanding of the Budget makes it significant to move beyond its promises and targeted objectives, to understand the every-day impact it has on the lives of the people. In addition to monitoring the strategy, implemen-tation and impact of social welfare schemes, substantial changes at the ground level need to be evaluated. There is still much that needs to be addressed for an adequate understanding of the idea of development and well-being that the ordinary people assent. It is vital to get the basics of welfare policies correct to ensure minimum living conditions.

Suranjita Ray teaches Political Science at Daulat Ram College, University of Delhi. She can be contacted at suranjitaray_66[at]yahoo.co.in