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The government would, without doubt, fail in doubling farm incomes by 2022 as promised. The kind of investment required to make that dream come true just did not exist. Don’t be surprised if many of the schemes to address farmer distress promised in this last full budget remained on paper. Increasingly, it has been getting clear that the Modi government talked tall but fell short. On delivery on promises, the government has no capacity. Here’s an analysis, for different Truths.
Any budget impacts the economy as a whole for the coming year. It determines the direction the economy will take in the next 12 months. The problems that cropped up in 2017-18 were in the farm sector, underemployment and inadequate employment of educated youth, in private investment and in the stock markets. Problems in the education and health sectors are perennial.
The government claimed a higher direct tax buoyancy but GST saw to it that there was a slippage in revenue. The situation was aggravated by the extra cost of demonetisation despite disinvestment. There was also slippage in revenue from the auction of spectrum. The slowdown in the economy was real.
Revenue shortfall affected fiscal deficit. The government would be forced to cut expenditures in the remaining three months of this fiscal. The cuts would be in education and health and would affect employment generation. The unorganised sector was hit hard both by GST and demonetisation. That was where the growth rate fell.
This has been the pattern. All social responsibility has fallen on public sector units, pushing up their costs, making them sick. It happened with public sector banks after demonetisation. The next step would then be divestment of these entities, giving the government the chance to announce popular schemes and further push public sector disinvestment.
It was a clever ploy, Prime Minister Narendra Modi clubbing “ease of living” with “ease of doing business” – a political slogan that would not take the BJP first past the pole if that was the intention. The impression sought to be given was that the budget was focused on the common man’s welfare.
The corporate sector has also not got the kind of concessions it looked for. The signal from Davos and the signal from Lok Sabha were not the same. No wonder the markets crashed even as Jaitley laid out his budget. The big danger could be FII fleeing to other shores.
The need of the hour was demand revival and job creation. The budget could be rated high on the election-scale but it would produce a political dividend only if elections were to be held ASAP. The Modi-Shah election juggernaut has been on a slippery slope despite electoral victories. By mid-2018, it would lose the traction required for a 2019 triumph.
Jay Bhagwan
©IPA Service
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