First budget rather ‘Bahi Khata’ of the Modi 2.0 government, presented on July 5 in the Lok Sabha by Finance Minister Nirmala Sitharaman, had aroused much expectations particularly because people had given a far better improved mandate than in 2014. There were hopes that the document of national revenues and expenditure would address problems of growth and make pathbreaking reforms to send a positive signal that India is ready to break the shackles to release animal spirits of entrepreneurs.
Industry, business and people at large were expecting something more than ordinary and a routine budget like that of 1991-92, 1997-98 and 2000-01 that had given decisive push to national economy setting the country on unprecedented growth path. Since big issues have been overlooked and bold ideas are absent, the document fails to evoke much needed confidence.
National economy had considerably slowed down during five years of Modi 1.0 government. The GDP growth has slid down to tis 20-quarter low of 5.8 per cent in January-March 2019. Unemployment stands today at record levels worst in the last 40 years. Agricultural distress is rampant and rural unemployment is worst then in urban areas.
But it seems Prime Minister Narendra Modi and Sitharamanhave chosen to follow a conservative path avoiding risks by not taking the reformist path. The 2019-20 budget is prudent and has preferred the path of fiscal rectitude. There are policy announcements but the Finance Minister has not revealed as how the same are going to be implemented. For example, Sitharaman, like his predecessor Arun Jaitley, has projected the economy to grow 8-8.5 per cent and has assumed inflation to remain range-bound at 3.5-4 per cent but no unbiased expert is going to buy these loud pronouncements because there is nothing in the budget that can ensure what is being claimed.
Confirmation of belied hopes came from stock markets with BSE Sensex falling by 395 points or almost one per cent though the government claimed that markets are based on sentiments rather on hard ground realities and facts. Over two hour 15 minutes long budget speech of the Finance Minister, acclaimed by the Prime Minister and the MPs of the ruling NDA coalition several times, has undoubtedly woven a beautiful dream by using pleasing words and symbolic gestures.
By proposing higher income tax on rich and super rich, the Modi government has successfully sent a message to poor that it stands for them but it would fetch around Rs 12,000 crore which is not an earth moving sum but is definitely strong on political messaging. In another step, the Finance Minister has granted a bank overdraft facility of Rs 5000 for women members of the Self- Help Groups (SHG). The hike in allocations for women (10%), the Scheduled Casts (30%) and the Scheduled Tribes (25%) is also a significant indicator of the government’s priorities.
Similarly, announcements of targets for the construction of 1.95 crore houses under Pradhan Mantri Awas Yojna (PMAY) and an allocation of Rs 80, 250 crores for the upgrade of rural roads under the Pradhan Mantri Gram Sadak Yojna (PMGSY) were made. Unfortunately, the Modi government has again, like in the first two years of the previous tenure, lost a golden opportunity to take the country on path of rapid development and has instead opted for political consolidation and sustaining the party in power.
For example, the Finance Minister could have announced steps to dismantle all or some provisions of the Essential Commodities Act and Agriculture Produce Market c\Committee laws that allow restrictions on sale, movement. Stocking and export of farm commodities thus unshackling energies that would have given boost to production as well as creation of one market. Such controls have lost relevance in the context of India transforming from a structurally deficit to surplus producer in most of the crops.
One clear message of intent of the government would have infused optimism and generated confidence among agri-businesses, large retailers and traders who are eager to invest in grading, processing, value addition, warehousing, transport and port infrastructure that in turn would have also contributed to the doubling of farmers’ incomes.
Another area where the Modi government could have taken a decisive initiative is of rationalisation of farm subsidies. In 2019-20, the government’s budgeted figure for food, fertiliser and crop loan subsidies along with the PM Kisan income support scheme stands at Rs 3,57,216 crores. At least half of this amount could be reduced by half at least by just capping sales of subsidised fertilisers. This step, apart from reducing amount on subsidies, would have also contributed to reduction of the use if chemical fertilisers that are apart from poisoning the soil is also eroding soil quality.
Instead, the Finance Minister has introduced the concept of ‘zero budget’ farming which in real term means organic farming but this may be good for niche markets but for mass production at low cost, it is neither feasible nor practical. If the Modi government had only allocated funds of agriculture Research & Development sector, results would have been much promising.
While the Prime Minister has come down heavily on doubting the government’s claim of making the country a $ 5 trillion economy in the next five years calling them ‘professional pessimists’ but the budget has nothing concrete that would ensure a sustained GDP growth of 8.5 to 8 per cent growth which alone can help in achieving the ambitious target.
In short, the budget is high on rhetoric, strong on political optics, emotional on gullible and ignorant but is deficient on economic principles and entrepreneurial fundamentals.
Dr. Satish Misra is a Veteran Journalist & Research Associate with Observer Research Foundation.