Silver linings in Budget, implementation is the key

The annual budget for 2018-19 is, true to predictions, a budget to pacify the anger among the country’s farmers who have been facing rough times in recent years. To that purpose it is, in a sense, a budget with an eye on the Lok Sabha elections which are due next year but could well be advanced. To call it a non-populist budget would therefore be a misnomer.

While there is a plethora of schemes to improve the living conditions of those in the rural areas, neither industry nor the middle class have got the attention that they were hoping for. There is little for capital formation too in what is doubtlessly a welfare budget but not one that would spur growth dramatically.

Exports, which have been sluggish for a time, are sought to be given a new impetus in finance minister Arun Jaitley’s new scheme of things. There is ostensibly a big push envisaged for infrastructure, special emphasis and schemes for healthcare, and reiteration of the goal of housing for all.

Education is professed to be revolutionised, and there is support for ancillary sectors such as fisheries, food processing and textiles.

An expenditure of Rs 14.24 lakh crore on livelihood and infrastructure in rural areas considering the agrarian distress in the country and a step-up in total credit growth to agriculture to a whopping Rs 11 lakh crore are part of the farm package. Doubling farm income by 2022 may be too ambitious a target but that the Modi government would strive for maximizing the level of satisfaction in the rural areas is realistic to expect.

Whether this and other boosters for the rural economy will bring the farmer back to supporting the BJP is anybody’s guess. A lot would depend on how the various schemes for the poor are implemented.

The Economic Survey of the Central government had candidly recognised that employment generation, the plight of impoverished farmers and revamping education were the three most pressing priorities of the Narendra Modi government. Evidently, the government is no longer ducking the issue of working on a war footing in these areas as the budget shows.

Chief economic advisor Arvind Subramanian and his team, who formulated the Economic Survey, found that demonetisation and GST resulted in an additional 1.8 million individual tax papers, representing 3 per cent of existing taxpayers. This is being deemed as a big plus as is the assessment that the formal sector accounts for 53 per cent of the work force contrary to earlier assessment that it was much less. But these are not enough.

The government insists that the macroeconomic fundamentals of the economy are robust and that the deceleration in the growth rate seen in the last June quarter due to the impact of structural reforms has bottomed out. They cite the optimism reflected by multilateral agencies like the International Monetary Fund that see the difficult times to be a passing phase.

With 12 million young Indians entering the workforce every year, the challenge on the jobs front can hardly be under-estimated. Most of these young people need low-skilled jobs, which the construction and real estate industries can provide. But with sluggishness on that front, the economy cannot but be in a morass. There indeed is no tangible evidence in the budget that jobs would suddenly become aplenty. It would therefore be difficult to reverse the swelling dissatisfaction among the youth in the short period before the elections.

The other big worry is that India’s largely government-owned public sector banks are in a mess. Seventeen of 21 banks have a bad loans rate of 10 per cent or more (as of March 31, 2018). This may well be a legacy issue but the current government can hardly be absolved of responsibility to set things right.

The government has already pumped in huge money into banks as capital since 2009 to keep these banks going. But with the banks continuing to accumulate bad loans, they are going to need crores more as capital to continue to operate.

If the economic revival is to be real, it is vital that agriculture and industrial infrastructure be boosted. Whether Thursday’s budget is a big step in that direction is indeed debatable.

Evidently, there are some welcome measures. But with general elections approaching, the Opposition is bound to look upon the changes with a jaundiced eye. That is not the sign of a healthy democracy.

It is indisputable that whatever the doomsday forecasters may say, the economy is on a rebound after the initial hiccups that accompanied the demonetisation of high value currency and the onset of GST. That is a silver lining in the wake of sluggish industrial and agricultural growth and poor delivery on the jobs and export fronts. But the proof of the pudding would lie in its eating.

All said and done, the finance minister had a difficult task to fulfill and he has not let down the key sectors. Much would now depend on the implementation which is always the key.

WHILE there is a plethora of schemes to improve the living conditions of those in the rural areas, neither industry nor the middle class have got the attention that they were hoping for.