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

Plastic burning in homes threatens food, water and air across Global South: Study

By Jag Jivan In a groundbreaking study spanning 26 countries across the Global South , researchers have uncovered the widespread and concerning practice of households burning plastic waste as a fuel for cooking, heating, and other domestic needs. The research, published in Nature Communications , reveals that this hazardous method of managing both waste and energy poverty is driven by systemic failures in municipal services and the unaffordability of clean alternatives, posing severe risks to human health and the environment.

Economic superpower’s social failure? Inequality, malnutrition and crisis of India's democracy

By Vikas Meshram India may be celebrated as one of the world’s fastest-growing economies, but a closer look at who benefits from that growth tells a starkly different story. The recently released World Inequality Report 2026 lays bare a country sharply divided by wealth, privilege and power. According to the report, nearly 65 percent of India’s total wealth is owned by the richest 10 percent of its population, while the bottom half of the country controls barely 6.4 percent. The top one percent—around 14 million people—holds more than 40 percent, the highest concentration since 1961. Meanwhile, the female labour force participation rate is a dismal 15.7 percent.

The greatest threat to our food system: The aggressive push for GM crops

By Bharat Dogra Thanks to the courageous resistance of several leading scientists who continue to speak the truth despite increasing pressures from the powerful GM crop and GM food lobby , the many-sided and in some contexts irreversible environmental and health impacts of GM foods and crops, as well as the highly disruptive effects of this technology on farmers, are widely known today.

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.

UP tribal woman human rights defender Sokalo released on bail

By A Representative After almost five months in jail, Adivasi human rights defender and forest worker Sokalo Gond has been finally released on bail.Despite being granted bail on October 4, technical and procedural issues kept Sokalo behind bars until November 1. The Citizens for Justice and Peace (CJP) and the All India Union of Forest Working People (AIUFWP), which are backing Sokalo, called it a "major victory." Sokalo's release follows the earlier releases of Kismatiya and Sukhdev Gond in September. "All three forest workers and human rights defenders were illegally incarcerated under false charges, in what is the State's way of punishing those who are active in their fight for the proper implementation of the Forest Rights Act (2006)", said a CJP statement.

Urgent need to study cause of large number of natural deaths in Gulf countries

By Venkatesh Nayak* According to data tabled in Parliament in April 2018, there are 87.76 lakh (8.77 million) Indians in six Gulf countries, namely Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE). While replying to an Unstarred Question (#6091) raised in the Lok Sabha, the Union Minister of State for External Affairs said, during the first half of this financial year alone (between April-September 2018), blue-collared Indian workers in these countries had remitted USD 33.47 Billion back home. Not much is known about the human cost of such earnings which swell up the country’s forex reserves quietly. My recent RTI intervention and research of proceedings in Parliament has revealed that between 2012 and mid-2018 more than 24,570 Indian Workers died in these Gulf countries. This works out to an average of more than 10 deaths per day. For every US$ 1 Billion they remitted to India during the same period there were at least 117 deaths of Indian Workers in Gulf ...

Jayanthi Natarajan "never stood by tribals' rights" in MNC Vedanta's move to mine Niyamigiri Hills in Odisha

By A Representative The Odisha Chapter of the Campaign for Survival and Dignity (CSD), which played a vital role in the struggle for the enactment of historic Forest Rights Act, 2006 has blamed former Union environment minister Jaynaynthi Natarjan for failing to play any vital role to defend the tribals' rights in the forest areas during her tenure under the former UPA government. Countering her recent statement that she rejected environmental clearance to Vendanta, the top UK-based NMC, despite tremendous pressure from her colleagues in Cabinet and huge criticism from industry, and the claim that her decision was “upheld by the Supreme Court”, the CSD said this is simply not true, and actually she "disrespected" FRA.

Stands 'exposed': Cavalier attitude towards rushed construction of Char Dham project

By Bharat Dogra* The nation heaved a big sigh of relief when the 41 workers trapped in the under-construction Silkyara-Barkot tunnel (Uttarkashi district of Uttarakhand) were finally rescued on November 28 after a 17-day rescue effort. All those involved in the rescue effort deserve a big thanks of the entire country. The government deserves appreciation for providing all-round support.

'Restructuring' Sahitya Akademi: Is the ‘Gujarat model’ reaching Delhi?

By Prakash N. Shah* A fortnight and a few days have slipped past that grim event. It was as if the wedding preparations were complete and the groom’s face was about to be unveiled behind the ceremonial tinsel. At 3 PM on December 18, a press conference was poised to announce the Sahitya Akademi Awards .

Search This Blog