Needed: A Budget to tackle economic woes
On February 1, the Union government will present the Budget. This is the first time the Budget will be presented not at the end of February but at its very beginning. The decision to do this was taken in September last year for functional reasons that would better enable funds to be in the pipeline when the new financial year begins on April 1.
The timing of the Budget has, however, ignited debate due to electoral reasons. Five states, including Uttar Pradesh and Punjab, will go to polls within days of the Budget being presented. Since the Budget could contain proposals that would influence the choice of voters, should it not have been postponed to after March 11 when the voting is over, as indeed was done in 2012 when these very states were to hold elections? The Election Commission has, in its wisdom, given the green signal to the presentation of the Budget with the caveat that it should not contain any proposals specifically intended for the five states going to the polls.
In my opinion this is a rather messy compromise. Even if the Budget has sops intended for national application, they cannot but also influence voters in the five states going to elections. On the other hand, there is some merit in the argument that the Budget is a national event and cannot be held hostage to local elections, because some elections are ongoing in India throughout the year. It can only be hoped that under the garb of “national” proposals the government will not cynically manipulate the Budget for short-term political gain in the Assembly elections. Perhaps the EC should draw up comprehensive guidelines for such eventualities in the future.
What should the Budget contain? First, it should provide some relief to the millions of people who have suffered as a result of the demonetisation exercise. This suffering has been particularly acute for the poor in the unorganised sector, farmers, entrepreneurs, traders and the middle class. The Budget must provide them some compensation for the losses incurred and the inconvenience they have faced.
Second, agriculture must be a principal focus of the new Budget. Our farmers have faced two successive years of scant rainfall and agricultural growth has been below two per cent last year. Farmers are committing suicides in droves, while the BJP has blatantly reneged on its 2014 electoral promise of raising MSP prices. In the last Budget, the government said that it would double agricultural income by 2022. Frankly, this means very little and is a classic “jumla”. According to National Service Scheme data, the average annual income of the median farmer net of production costs from cultivation is less than `20,000. If you double this income it will be `40,000 annually. This translates to less than `3,500 per month. With inflation factored in, it comes to even less.
Currently, half of the farmers in our country are under a per capita debt of `47,000. Merely providing them more credit, as was the principal focus of the last Budget, means very little considering their current level of indebtedness, and the NPA-ridden condition of our banks. What we need is much higher allocations to boost agricultural productivity, for better seeds and fertilisers, training and extension work, warehousing, cold storages, irrigation, transportation and R&D. Unfortunately, last years financial allocations were below those made for agriculture in 2005. It must always be remembered that one per cent growth in agriculture leads to double the growth of GDP as a whole.
Third, the Budget must do more for the creation of jobs. In 2014, the PM had promised the creation of two crore jobs. Available statistics seem to indicate, however, that job creation in vital sectors such as exports and manufacturing have actually fallen. We have an army of young people looking for jobs. They have to be adequately skilled and provided remunerative employment.
Fourth, we expect the Budget to take concrete steps to facilitate much greater ease of doing business. Today India is somewhere near the bottom in the world in this area. To remedy this unfortunate situation, a host of steps would need to be implemented, including through rationalising and simplifying the tax structure, greater transparency and dispatch in obtaining approvals for business proposals, incentives to boost investment, reforms in the banking sectors, and in general a more friendly and responsive ecosystem for entrepreneurship.
Last, the Budget, as an instrument of policy, must push for more balanced and equitable regional development. There are large swathes in the country, like Bihar, West Bengal or Odisha, which are less developed due to the legacies of the past. This inequity needs to be rectified by institutional policy initiatives. Currently, almost 90 per cent of all public and private financial flows go to five or six relatively more developed states. The Centre has also reduced its contribution to several development schemes relating to poverty alleviation, health and education. India cannot develop with some parts of the country seeing rapid economic growth, while others, in spite of their best efforts, remain locked in a cycle of perpetual poverty. There are instruments, such as the special category status, which are available to tackle such unbalanced economic development. We expect the Budget to take verifiable steps to correct regional inequity.
The time has come for the NDA government to give meaning to their slogan of “achhe din”. Given the number of competing priorities, the finance minister’s predicament is not an easy one. But the complexity of the exercise cannot be an excuse for policy paralysis, or tokenism, or more of the same. It is easy for governments to withdraw into a cocoon of self-complacency behind the shield of selectively chosen statistics. However, what India is looking for in the Budget is a clear policy thrust that tackles the real economic problems being faced by the people, while providing a credible roadmap for a better economic future.
What India is looking for in the Budget is a clear policy thrust that tackles the real economic problems being faced by the people, while providing a credible roadmap for a better future