FROM THE EDITOR-IN-CHIEF
Going into the last full Union budget of his term, Prime Minister Narendra Modi has not only bet on the farmers, but bet the farm on his rural voters. Articulating his vision for the general election of 2019 quite clearly, he has recognised the existence of rural distress, amplified by a string of farmer protests and suicides last year provoked by falling commodity prices and increasing debt. Hoping to deliver on his promise to double farmers’ incomes by 2022, when India celebrates 75 years of independence, the budget has shown every intention of boosting farmers’ incomes by raising the minimum support price for crops to 1.5x the cost of production, liberalising export of agri-commodities, and modernising agricultural markets. This comes in the wake of agri-GDP registering an insipid average annual growth rate of 2 per cent in the first three years of the Modi government—in the last three years of the UPA rule, it was nearly twice this figure.
The second clear narrative in Modi Vision 2019 is the creation of jobs. The budget has seen a push to small businesses, which were badly hit both by demonetisation and the initial implementation of GST. The corporate tax reduction for firms with turnovers below Rs 250 crore as well as Rs 3,794 crore in credit support to MSMEs could help. The continuing push to infrastructure, with expected investments in excess of Rs 50 lakh crore in roads, airports, railways, ports and inland waterways, is also of a piece with this strong effort—unemployment emerged as the biggest concern among respondents to the india today Mood of the Nation Poll last week, along with rising prices.
Equally clear is the government’s belated recognition of the importance of healthcare and education. As Amartya Sen says, no developed country in the world has progressed without investing in these key areas. On education, the budget has announced Eklavya schools for tribals as well as 24 new medical colleges and 1,000 new fellowships for doctoral students. In healthcare, Union finance minister Arun Jaitley announced an ambitious National Health Protection Scheme, which will provide up to Rs 5 lakh per year to 100 million families for secondary and tertiary healthcare. Impressive as this sounds, I am not sure the mechanisms or details of funding have been worked out. The expense could be monumental. There is a disconcertingly familiar sense of too many announcements and too little implementation. Take the example of the Smart Cities Mission, announced in 2015, which aimed at building 100 Smart Cities with state-of-the-art amenities. So far, 99 cities have been selected with an outlay of Rs 2.04 lakh crore. But projects worth a mere Rs 2,350 crore have been completed. The rest remain ‘in progress’. That’s a pathetic strike rate, which doesn’t exactly inspire confidence in the government’s ability to deliver.
Given the additional spending, meeting the fiscal deficit target of 3.3 per cent of GDP for 2019 will require disinvestment and the highest ever gross taxes as a percentage of GDP. It is a tough ask, according to Crisil chief economist Dharmakirti Joshi, one of the eminent economists in our panel of commentators, but not entirely unachievable. The budget has nothing for the middle class and large corporates, who in many ways are the bulwark of the economy. The big question is, whether all this will be enough—especially given that the GDP growth rate is expected to fall to 6.75 per cent for the current fiscal, compared to 7.1 the previous year. So far, the economic environment was conducive, but now oil prices have crossed $70 a barrel internationally, and retail inflation has breached the RBI’s target, hitting 5.21 per cent in December. Also, there is nothing to spur the investment rate which has fallen from a peak of nearly 34.3 per cent in 201112 to 26.4 per cent in 2017-18. Unless the government is able to move the needle on this, it is difficult to imagine the acceleration in economic growth so necessary to finance its ambitious schemes.
My own nagging concern is an old one: I am not sure how much of government expenditure actually reaches the intended beneficiary. In 1985, on a visit to droughtaffected Kalahandi in Odisha, the late Rajiv Gandhi said that of every rupee spent by the government, only 15 paise reached the intended recipient. Has that leaky bucket been fixed? If not, the electoral benefits this government is hoping for after this budget may not materialise. Elections are not won on grand announcements or manifestos but on real development on the ground which people can feel.