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After four years in power already, the Modi government achieving neither inclusive growth nor jobs in millions promised in 2014, should now wake up to the plight of distressed farmers over years and of the rural and urban poor. The Modi Exercise is thus designed to focus on the needs of rural areas as well as other sectors from agriculture to infrastructure – a modified version of the “Garibi Hatao” slogan of the 1970s. Here’s an analysis, for Different Truths.
That it is all politically timed for safeguarding the strength of ruling BJP-led NDA in a critical election year in states leading to Lok Sabha polls in 2019 is patent.
Otherwise, how after four years in power already, the Modi government achieving neither inclusive growth nor jobs in millions promised in 2014, should now wake up to the plight of distressed farmers over years and of the rural and urban poor. The Modi Exercise is thus designed to focus on the needs of rural areas as well as other sectors from agriculture to infrastructure – a modified version of the “Garibi Hatao” slogan of the 1970s.
Jaitley said his other priorities in the budget were good healthcare to the economically less privileged, infrastructure expansion, and working with states to provide more resources for improving the quality of education. Laudable as all these goals are, there are no readily available institutional mechanisms nor funding at the central or state levels. In food also, the scale of procurement and the methodology for arriving at MSP were left unsaid for exchequer cost calculations.
It is understandable for the prime minister to bestir himself at a time the opposition has begun to make a gradual recovery to be able to challenge the ruling BJP in states first and later in the Lok Sabha elections. After Gujarat, Rajasthan is sending out strong signals of the changing voter mood. No doubt, the prime minister would become hyper-active henceforth, choosing all platforms, to thunder against opposition parties with allegations of corruption.
The Modi government thus far cannot claim to have mastered the art of seizing black money and benami properties and providing a corruption-free regime, leave alone the economic growth and lack of private investments in these four years. Nor is there anything of substance in Jaitley’s latest (fifth) budget to trigger “animal spirits” for business investment to revive.
Certainly, this government has fiercely and forcefully been enforcing Aadhaar in all spheres downplaying citizen’s rights including privacy, in a vast country of low literacy and large segments of poverty. A deliberate policy of digitalisation toward a ‘cash-less’ economy is being pursued with a majoritarian push unmindful of ground realities even as more basic needs and requirements of the people are downplayed.
The prime minister said with the focus now on “ease of living” – away from “ease of doing business” – the budget envisages an “unparalleled” shift in the health sector – providing healthcare to nearly 50 crore Indians at Rs. five lakh a year for quality treatment. The budget makes a token provision of Rs. 2,000 crore. Based on a research study, health insurance for 10 crore poor families would cost Rs. one lakh crore and the annual premium would be Rs.10,000 crore even at 2 percent of the sum assured (Rs. 5 lakh).
On the taxation side, Jaitley has now come to believe that medium, small and micro enterprises (MSMEs) would lead economic consolidation in India. He had earlier refused to acknowledge the damage done to this sector by demonetisation both in terms of loss of cash for transactions and lakhs and lakhs of workers being thrown out of jobs. The budget extends reduced corporate tax at 25 percent for MSM companies with turnover up to Rs. 250 crore and Jaitley hopes with higher investible surplus these enterprises could create more jobs.
For jobs, the finance minister relies more on new schemes in the agriculture, small-scale and health sectors and offered a selective subsidy, where employees would be kept for three years at least in any new start. The economy must first get back to sustained growth for jobs.
The government sees “green shoots” on the economic horizon and has assumed that GDP would grow at 11.5 percent at current prices (7.2 percent in real terms) in 2018/19 after the slowdown to 6.7 percent in fiscal 2018. The medium-term outlook is clouded with global developments not entirely benign. The rising trend in oil prices would affect the budget arithmetic as also any fall-out from the budget on consumer prices.
The government’s inability to contain fiscal deficit at 3.2 percent of GDP in 2017/18, attributed to less than expected GST revenues (net) and a decline in non-tax revenues, is compounding the outlook for inflation. From the now enhanced 3.5 percent of GDP, the budget assumes fiscal deficit at 3.3 percent in 2018/19. This is a temporary blip, according to the finance ministry, which sees more buoyant revenues with a reformed GST and strategic disinvestments planned. The revised consolidation plan targets fiscal deficit at 3.0 percent in 2021.
S. Sethuraman
©IPA Service
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