Not business as usual

Budget 2017-18 is probably the most brilliant economic and political document since the path-breaking budget of 1991

should be) that a budget is both an economic and political document. Jaitley goes to considerable lengths in the budget to emphasise that we are not a Pit-compliant society. To coin a phrase, when it comes to PIT, Indians are the pits. This was also emphasised by PM Modi on December 31, and this is a very welcome innovation for leading policymakers to publicly, and loudly, admit to the plague of tax non-compliance.

Comparing the tax compliance data offered by Jaitley on page 28 of his budget speech (and our synthetic or estimated income distribution for 2011 to 2016/17, the one used by Virmani and myself), one gets the following result: For 2015-16, those earning between Rs 10 lakh and Rs 50 lakh (individuals with no tax surcharge), only 13 per cent of individuals paid taxes, while for those with incomes above Rs 50 lakh, tax compliance is 26 per cent, that is, the super-rich who are paying a 10-15 per cent surcharge are twice as tax compliant as the near-rich. So this policy of not cutting taxes for all is an opportunity missed — maybe next year?

However, in the main, the budget is workmanlike and brilliant, in being focused on the big picture, and ignoring all advice to do the wrong things — for example, instituting longterm capital gains tax, or bringing in inheritance tax, or providing doles instead of infrastructure, rejecting universal basis income, and indirectly hinting (through the Economic Survey) that the days of cash transfers for the poor are numbered (bye bye, PDS).

The best commentary on the MGNREGA was by the FM when he declared that this favourite of Sonia Gandhi and the Congress Left had received the maximum ever allocation of Rs 48,000 crore. What Jaitley did not emphasise was that this was the lowest in real terms since the programme was initiated in 2008/2009; the real allocation to MGNREGA is now less than two-thirds of the Rs 37,400 made available in 2008/2009. Further, and more importantly, MGNREGA has been converted into a programme for providing infrastructure for irrigation.

The budget has been extra-careful and conservative about the impact of Demo on the economy. It is very likely that GDP growth for 2016/2017 will close in on a number above 7 per cent. Somewhat surprisingly, Demo has not had that big a negative impact on the economy. The jury is still out, but all (conservative) official estimates peg GDP growth at C R Sasikumar

no less than 6.7 per cent. This is obtained with a GDP for agriculture at 4.1 per cent. Kharif acreage, unaffected by Demo, had an expansion of 3.5 per cent. Add a miniscule productivity growth of 0.6 percent, and one obtains the CSO estimate of 4.1 per cent agricultural growth for 2016-17.

The CSO was honest about not extrapolating beyond October 2016. But the rabi acreage, advertised by many anti-demo experts as doomed, has expanded by at least 5.9 per cent (all data as of January 13, Economic Survey, page 156); wheat acreage is up by 7.1 per cent. This implies that a minimum level of agricultural growth for 2016-17 will likely be close to 5.5 per cent, and the likely level 6 per cent to 7 per cent. Assuming an agricultural growth of 6.5 per cent (versus the 4.1 per cent estimated by the CSO), yields a GDP growth level of 7.1 per cent. This is well above that of the (deliberately-conservative) ministry of finance and near identical to the estimates of both the CSO and RBI.

The BJP, especially PM Modi, is a longdistance runner, a Test player, rather than one playing the gimmicky T20s (or even less gimmicky one-days). This longer vision has been apparent for some time, and I believe comes out strongly in the budget in its estimate of the fiscal deficit for 2017/18. Remember, the budget is (ultimately) about fiscalism, revenues and expenditures, that is, the fiscal deficit.

The budget has not only underestimated GDP growth, but also the addition to tax revenue this year, and in the future, from increased PIT compliance. The fiscal deficit for the next year is very likely to be less than the 3.2 per cent target for 2017/18, and likely less than 3 per cent. If both tax revenues and GDP growth are understated, the fiscal deficit is doubly overstated. What a great idea, Sirji.

After the elections in the next few days, large state elections are only in November 2018 and the national elections are scheduled for 2019. Flush with higher than expected tax revenue and GDP growth, the Modi government will likely complete tax reform for individuals, and corporates, in February next year. What exquisite timing — set a conservative base this year, so you can be radical next year.

The writer is contributing editor, ‘Indian Express’, and Senior India Analyst at Observatory Group, a New York-based macro policy advisory group. Views are personal. THE RECENTLY HELD Jaipur Literature Festival stirred up a controversy as a result of its organisers’ decision to invite two RSS functionaries. For many, this was unexpected and undesirable, while for others, it was just an unusual happening. This demonstrates that the exclusion of the RSS from intellectual discourse is considered legitimate and moral by the hegemonic class of intellectuals — predominantly Marxists and Nehruvians. Such exclusion was based on the presumption that the RSS represents majoritarian communalism and “fascism”, and therefore, the only discussion needed is on how to combat it.

Interestingly, despite the close interdependence of intellectual streams, such suppression did not work in politics. There is no political force, Right or Left, in Indian politics which has not allied with the RSS via its political fraternity — the Bharatiya Jana Sangh (BJS) or the Bharatiya Janata Party (BJP). In 1967, the CPI justified its alliance with the BJS not as a sop but based on concrete programmes. It was attacked by the CPM, which itself colluded with the RSS during the Emergency and later in 1989 to form the V.P. Singh government. Socialists have frequently cohabited with BJS/BJP and RSS.

However, secularist intellectuals continued to exhibit rigidity. The polemic this has spawned has been unique, with a devastating impact on both the Right and the Left. Each sees the other with contempt and suspicion. Ideological discourse has degenerated into sloganeering, freeing it from the burden of thought, debate and logical contestation.thenehruvianleftpropagated its main task as that of combating the RSS and its alleged communalism. Conversely, Right intellectuals, however few in number, grew in a milieu of fighting Left domination. This is the crisis of Indian intellectualism.

State patronage to intellectuals has killed their independent and critical spirit. India was known for its intellectual legacy and primacy, but these have declined, with politicisation stymieing any introspection into its reasons. Over time, intellectuals faced the indifference of society .

This is best illustrated by an editorial in The Statesman, “Democracy’s Ingratitude” (May 22, 1932), after the death of one of India’s foremost thinkers, Bipin Chandra Pal: “All the nationalist papers pay high tribute to the late Bipin Chandra Pal, who is acclaimed as one of the men who gave the nationalist aspirations of India a voice. In death, his services are recognised. In life, he might have starved for all the help he received from those who now acclaim his genius. For seven years and more, he had been dependent for aplatformoneuropean-ownednewspapers and there are many letters in our files emphasising the fact that no other outlet was open to the ablest pen that has served the cause of India.”

Far from mending its ways, the postindependence