Skip to main content

Does Union budget address contraction in informal sector, slowdown of manufacturing, farmer and lower middle class distress?

By Mohan Guruswamy*

The Union Budget 2018 was presented at a time when the Indian economy is facing the worst slowdown in at least half a decade. While macroeconomic shocks such as demonetization and the implementation of the goods and services tax (GST) are likely to have contributed to the slowdown, the root of the slowdown lies in the decline of investments in the country. The slowdown in investments has led to all round and widespread gloom and distress. The big question about this budget then was to see how it addresses issues arising out of this such a job contraction in the informal sector, slowdown of manufacturing, increasing farmer and lower middle class distress?
In a budget you take from some and give to others. So who gives and who takes is where we should be looking. The challenge of budget making is to take enough from the nearly 15% of the population or about 200 million making up 40 million families liable for direct taxes, without dissatisfying them too much. This should provide enough to blunt the edge of popular anger of the 60% who make little more than subsistence in terms of income. This covers about 700-750 million population or 150 families. It is these people have largely been bypassed by the huge growth gains made since 1998. That means the two NDA and two UPA terms.
Added to this the government has to promise delivering all this with a most expensive public administration (10.4% of GDP), and an almost defunct delivery system. A majority of government employees - over 25 million - are the bedrock of the direct taxes paying cohort. So in effect, a major part of the direct taxes are realized by the government from those who work in it. In either case, we the people pay for them.
So you need to get much from others. This is where indirect taxes come in. Indirect taxes are derived from a far bigger base of population. For instance, even the lowest sections will buy match boxes from which taxes are derived. As you go up the chain of manufactured goods the incidence of indirect taxes increase. This is where you run up against powerful lobbies. For instance, the polyester yarn manufacturers will look at askance at too many reliefs and benefits given to the cotton textiles sector. Balancing the budget is the easier part. Balancing aspirations is next to impossible.
Thus, budgets haven’t really changed over the decades. An analysis of budget break-ups since 1999 shows that proportions of most heads just do not change, as GDP growth and hence tax revenues usually stay nearer where they have been before. Discretionary revenue expenditure can only go up when GDP growth really perks up as we saw between 2009-2012. From then it has been downhill in terms of growth.
Against this backdrop how are Modi and Jaitely faring? I must say quite heroically. Like boys on the burning deck. They are just distracting us with promises and hoping to stave off the inevitable - popular discontent. Take for instance the much-hyped National Health Protection scheme to cover 500 million people or 100 million families with medical cover of up to Rs. 5 lakhs. But what is the outlay for this? It is a measly Rs. 30,000 crores translating into a premium of about Rs.3000 per beneficiary family, whereas the prevailing premiums are at about Rs. 4400 a year.
Even here the government is being disingenuous. If this were in addition to what is allocated to the Rs. 1.38 lakh crores to health, which was Rs. 1.22 lakh crores in the previous year, there would be some little cause to cheer. No, instead it comes from the health budget, which in effect means that this year less money is being spent on public healthcare. So if government hospitals and clinics have fewer doctors and lesser medicines be happy with your health insurance and go to a private nursing home or corporate hospital and see how soon the cover evaporates. In effect this is a direct benefit to private healthcare providers, and insurance companies who will get an Rs. 30,000 crores windfall.
Similar sleight of hand is indulged in increasing the standard deduction to Rs. 40,000 for salaried persons. The outlay for this is Rs. 8000 crores. But the education cess goes up by 1%, which means an outgo of Rs. 11,000 crores. So who is out of pocket by Rs. 3000 crores?
The government has announced that it will fund 8 crores new stove and cylinder on getting a gas connection. This is an existing scheme. But reports from gas agency dealers in several parts of the country, especially those in rural areas, have reported that an extremely low number of Ujjawala beneficiaries are returning for refills of their cylinders. Thus, the number of LPG connections may be rising rapidly, but LPG usage is not. The catch is that below poverty line families who exist on on less than Rs 32 a day in rural areas and Rs 47 a day in urban areas are simply too poor afford the market rate of LPG.
There was much expectation of an agriculture-oriented budget. Nothing of that sort has been announced to suggest that. Institutional credit to the agriculture sector has gone up to Rs.11 lakh crores when it was Rs.10 lakh crores last year.
The Finance Minister spoke about “revitalizing Infrastructure and Systems in Education by 2022. Technology to be the biggest driver in improving quality of education. To increase digital intensity in education, it will move infrastructure from blackboard to digital board. By 2022, every block with more than 50 per cent ST population will have Eklavya schools at par with Navodaya Vidyalayas”. Fine, but show me the money? He is clearly a man for the big picture who doesn’t get into such specifics.
Am I unhappy about the budget? Why should I be? The limit for senior citizens for investment in interest-bearing LIC schemes doubled to from Rs.7.5 lakhs Rs 15 lakhs. But as Claude Pepper said: “At my age I don’t even buy green bananas!”
---
*Source: https://www.facebook.com/mguruswamy/posts/10211625017729910

Comments

TRENDING

Buddhist shrines massively destroyed by Brahmanical rulers in "pre-Islamic" era: Historian DN Jha's survey

Nalanda mahavihara By Our Representative Prominent historian DN Jha, an expert in India's ancient and medieval past, in his new book , "Against the Grain: Notes on Identity, Intolerance and History", in a sharp critique of "Hindutva ideologues", who look at the ancient period of Indian history as "a golden age marked by social harmony, devoid of any religious violence", has said, "Demolition and desecration of rival religious establishments, and the appropriation of their idols, was not uncommon in India before the advent of Islam".

Labelling a Jesuit a Marxist? It's like saying if you use a plane, you become American

Jesuits: Cedric Prakash, Stan Swamy By Fr Cedric Prakash SJ* A thirteen- fourteen-year-old has many dreams! That's an impressionable age; at the cusp of finishing school. It is also a time when one tastes a different kind of freedom: to go for camps with boys of your own age (not with ones family). Such camps and outings were always enjoyed to the hilt. The ones, however, which still remain etched in my memory are the mission camps to the Jesuit missions in Maharashtra and Gujarat.

Lost to commercialisation, vanity? Ashram awaits 'second assassination' of Gandhiji

Counterview Desk  Around 130 “concerned” citizens, in a statement, have protested against the Government of India and Gujarat government decision to turn Gandhi Ashram into a ‘world-class’ tourist destination spread over 54 acres at the cost of Rs 1,200 crore, which would include a Gandhi Ashram Memorial, an amphitheater, a VIP lounge, shops and a food court, stating it would compromise and trivialize the “sanctity and importance of the present-day Ashram, mainly Hriday Kunj, surrounding buildings, and the museum.”

Tussle between Modi-led BJP govt, Young India 'key to political battle': NAPM

Counterview Desk  In its month-long campaign, civil rights network National Alliance for People’s Movements (NAPM) carried out what it called Young People's Political Persecution and Resistance in “solidarity with all comrades facing political persecution and remembering human rights defender Stan Swamy…”

Govt of India has 'no moral right' to declare national day for Muslim women, Naqvi told

Counterview Desk  In what has been described as a nationwide outpouring of condemnation, following the announcement by Mukhtar Abbas Naqvi, Minister of Minority Affairs, declaring August 1 as ‘Muslim Women’s Rights Day’ to mark the anniversary of the Triple Talaq law, over 650 citizens have said it is nothing but "cynical optics" of using Muslim women’s rights in the face of an "unprecedented" onslaught against the rights of the Muslims in recent years.

Debt bondage, forced labour, sexual abuse in Gujarat's Bt cottonseed farms: Dutch study

By Rajiv Shah  A just-released study, sponsored by a Netherlands-based non-profit, Arisa , “Seeds of Oppression Wage sharecropping in Bt cottonseed production in Gujarat, India”, has said that a new form of bondage, or forced labour, exists in North India’s Bt cottonseed farms, in which bhagiyas, or wage sharecroppers, are employed against advances and are then often required to work for years together “without regular payment of wages.”

Covid: We failed to stop religious, political events, admits Modi-dharmacharya meet

Counterview Desk An email alert sent by one the 11 participants, Prof Salim Engineer, on behalf of the Dharmik Jan Morcha regarding their "religious leaders' online meet" with Prime Minister Narendra Modi, even as offering "support to meet challenges of Corona pandemic", blames religious congregations, though without naming the Maha Kumbh and other religious events, which apparently were instrumental in the spread of the second wave.

Madhya Pradesh Adivasis protest externment notice to Barwani tribal rights leader

By Harsing Jamre, Nasri Bai Ningwal, Prakash Bandod*  Over 2,500 Adivasis mobilized in response to Barwani district administration’s recent move to issue a show cause notice to Valsingh Saste, a prominent Adivasi activist of Jagrit Adivasi Dalit Sangathan (JADS), Madhya Pradesh. For two decades, Valsingh Saste as an activist of JADS has been continuously leading struggles for the constitutional and fundamental rights of Adivasis.

Swami Vivekananda's views on caste and sexuality were 'painfully' regressive

By Bhaskar Sur* Swami Vivekananda now belongs more to the modern Hindu mythology than reality. It makes a daunting job to discover the real human being who knew unemployment, humiliation of losing a teaching job for 'incompetence', longed in vain for the bliss of a happy conjugal life only to suffer the consequent frustration.

How Madhya Pradesh cops, ABVP 'pressured' varsity to cancel scientific temper webinar

Apoorvanand, Gauhar Raza Counterview Desk  An online petition, signed* by over a thousand citizens -- mainly activists and academics -- titled “Attack on scientific temper”, floated by the civil rights group Anhad, has strongly protested against  to use of administration to cancel an International Webinar on Cultural and Linguistic Hurdles in the Achievement of Scientific Temper under the pressure of the Akhil Bharatiya Vidyarthi Parishad (ABVP), the BJP's student wing.