Budget 2019: A poll vault

IMG_20190202_224507Critics of Congress’s ‘populism’, the NDA takes a somersault and promises flamboyant spending programmes, keeping an eye on general elections 2019

During a Sunday mass, a preacher once announced to his herd: “I have good news and bad news…”. The good news is, he said, “we have enough money to pay for our new building programme.” And the bad news is, he continued, “it’s still out there in your pockets!” It is quite natural if one recalls this old joke while surfing through Piyush Goyal’s budget speech, especially considering the way the union finance minister, on behalf of his party and its vanguard chief Prime Minister Narendra Modi, has proposed in the Budget, which can easily be interpreted as the BJP’s poll propaganda where rhetoric ruled over reality. Even though there are several interesting elements in the budget that make it a case study in political pamphleteering, some points stand out for their sheer absurdity.

At the outset, Goyal’s Interim Budget 2019 is replete with proposals that target the common man and the middle class. The much-hyped income tax waiver scheme is an example. Those who earn up to Rs 5 lakh a year in taxable income now do not need to pay the income tax. On the face of it, this might look a cool proposal, but dig deeper and there are issues. In fact, the income threshold earlier stood at Rs 3.5 lakh and now those who earn up to 5 lakh in taxable income will get a benefit of Rs 12,500, up from Rs 2,500 earlier. If you break this down further, that’s a benefit of a nearly Rs 1,000 month in effect. Clearly, this is not something to tom-tom about, still the BJP’s cyber wing decided to play this as a giant leap in terms of income tax relaxations. And, above all, to package and present it even as a measure that can win votes in an election year takes some nerve.

Interestingly, this was a budget that didn’t talk much about the GDP growth figures. Ever since the Modi government took office in May 2014, a lot of lip-service was dedicated to painting a rosy portrait of the GDP and time and again, BJP ministers and RSS leaders went ovearboard in claiming obscene growth rates. But Goyal’s budget didn’t discuss the GDP growth in detail. However, just a day before the budget, the government came up with bumped-up GDP numbers (for fiscals 2016-17 and 2017-18). On Thursday, the Centre steeply revised the GDP growth estimates, resulting in a 7.2% expansion in 2017-18 (the demonetisation year) and an 8.2% acceleration in 2016-17.

The higher base gave the Centre enough legroom to rejig the nominal GDP figures for the current fiscal (2018-19) in its second advance estimate, which will come out on February 28. According to this curious maths, the demonetisation period seemed to have had a great time in terms of GDP growth. Well, there is clearly a reason in why many call economics a dismal science. Even during this period, interestingly and quite alarmingly from a market perspective, the government’s gross market borrowings for FY20 is a staggering Rs 7.1 lakh crore from Rs 5.7 lakh crore in FY19. Yet, the fiscal deficit remains a cool 3.4%, by assuming a 11.5% growth in nominal GDP growth for FY20. That kind of growth is a big ask if you consider the current challenges in the economy (inflation, et al).

So what’s the BJP contemplating actually? Is it trying to woo the lower-income groups (which interestingly include young people who have just entered a job, who form a big chunk of the BJP’s followers on social media) or is it trying to create a chimera of being a party that cares for the middle class? Either way, the budget exposes the existing confusion in the Modi government’s approach towards attracting the middle class, which is arguably losing interest in the government’s outlandish ways.

What happened to Make in India?
The near absence of Make in India in Goyal’s budget is also quite revealing. The Budget speech mentions Make In India only four times and in all these instances no significant programmes or outlays have been announced for the programme, which has been a flagship manufacturing drive aggressively promoted by the Centre in the past few years. If once places this silence along with reports that the Make In India programme has been a dud in spite of the publicity campaigns it elicited, the big picture of Indian manufacturing emerges and it’s not a great picture to boot.

Just a few months ago, reports in India and international media suggested that the Make in India programme has failed to bloom more than three years after PM Modi launched it aiming to boost investment in manufacturing in India. To be realistic, manufacturing’s contribution to the economy did shrink in late 2016 following the demonetisation and the confused introduction of the Goods and Services Tax (nearly eight months later), which delivered a body blow to the country’s enterprises. A forecast showed manufacturing’s share to GDP contracted more than 16% in the fiscal year ended March 31, 2018. This could be the lowest since the start of the current series of data six years ago and leave the government far short of its goal of bringing manufacturing’s share up to 25% by 2025, Japanese news agency Nikkei noted in April 2018.

Another important point about the Interim Budget is the way the government has made some proposals that can never be altered by successive governments, which does not augur well for a democracy. Take the farmer assistance of Rs 6,000 a month (in installments of Rs 2,000). The move to send the dole to accounts of farmers holding less than two hectares has in a way officialised bribery as the Congress has rightly pointed out. It is with good reason The Telegraph daily has termed the move “Daylight Bribery” because such a move in a poll-bound year can easily open a channel for pumping in money into gullible voters’ accounts, especially in areas where impacts of agrarian distress is really palpable and such channels can be used by politicians close to the ruling coalition to literally bribe the voters. It is clearly surprising that the move could get the approval of the Election Commission. Easily, this proposal can be challenged in the country’s top courts. Even if this is cleared by the courts and EC, how the Centre is going to pool in the money is, literally, a billion dollar question.

Another interesting trend the budget shows is the way income support is gaining importance in public policy. Placing short-term measures such as direct cash transfer to farmers and other crisis-hit groups and position such actions as panacea to their ordeals is in a way belittling the political economy of such issues. Simply put, such stop-gap measures are not sustainable and do not address the root cause of the problems they try to address. The way the Centre has increased allocations for Ayushman Bharat and PM-Kisan and even the MGNREGA allocations is, hence, really telling. This is going to boomerang in the near future.

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