In earlier times, the Union Budget was seen primarily as a statement of estimated annual receipts and expenditures of the government of India. Over the years, the Budget presentation has become a media event, and the finance ministers in their speeches defer more than willingly to this reality, by spending a good part of their speeches on announcements and proposals that have no bearing on the budget numbers. The speeches also tend to be long on rhetoric. The budget speech of Nirmala Seetharaman follows this pattern closely.
However, the Union budget for 2019-20, the first of the new NDA government, is noteworthy for a formal declaration by the finance minister that, ‘India Inc. is India’s job-creators. They are the nation’s wealth creators.’ This anointing of the corporate sector as the primary job and wealth creators drives the entire budget.
The budget has much for the corporate sector by way of various schemes and concessions, with the raising of the annual turnover ceiling from the present ₹250 crores, as eligibility for taxation at 25% instead of 30%, to ₹400 crores being the most prominent of such largesse.
The other striking feature of the Budget is the intense wooing of foreign capital, of both the portfolio and the direct varieties, in a bid to deal with the balance of payments difficulties always lurking in the shadows (with India’s current account deficit likely to be not less than 2.6% of GDP this year) and to attract foreign finance for growth.
Except for the measure to impose surcharge on the income tax on annual incomes in excess of ₹2 crores (which will amount to 3% and 7% increase in effective tax rates for those with annual incomes between ₹2 and ₹5 crores and above 5 crores respectively), the budget is full of concessions on direct taxes, including incentives to boost the real estate sector.
There is a nod in the direction of ‘social welfare’, with modest concessions/benefits announced for women in SHGs, SC and ST. There are also the self-congratulatory references strewn throughout the budget speech to the previous NDA government’s many schemes – several of these being largely renamed versions of ones from earlier governments – with somewhat exaggerated claims in respect of swach bharat, open-defecation-free villages and universal rural electrification.
Overall, these do not add up to much. As against this, we have the imposition of additional excise duty and cess on petrol and diesel which will push up the indirect tax burden borne in substantial measure by the working people and the poor.
The Modi mantra of India becoming a 5 trillion dollar economy by 2024 found repeated mention in both the Economic Survey and the Budget. Leaving aside the meaninglessness of this number per se without some specification as to its composition and its implications for the majority of our population, the budget does not provide any specific strategy for reaching this target which would presumably require considerable investment to achieve a real rate of growth of 8% per annum over the coming years.
In fact, the budget pins its hopes on private corporate investment, domestic and more especially foreign, with the government hardly playing a role in the process. Instead of stepping up public investment to help achieve the infrastructure thrust that the Budget talks about, it actually goes in the opposite direction of massive disinvestment – from ₹80,000 crores in 2018-19 to ₹1,05,000 crores in 2019-20, on top of ₹1,00,000 crores in 2017-18.
The disinvestment agenda is of course directly traceable to the neo-liberal obsession to reduce the fiscal deficit, not by mobilizing resources from the recipients of large profits – via taxation at reasonable rates sans exemptions – but solely by expenditure reduction and disinvestment. In fact, the budget projects a decline in capital spending in 2019-20 from the revised estimates for 2018-19.
The drive to reduce the deficit almost solely by expenditure reduction is also evident in the decline in the aggregate value of the three major subsidies on food, fertilizers, and petroleum as a share of GDP.
The reluctance to tax the wealthy – symbolised by the abolition of wealth tax a few years ago – leads to having to borrow from them to meet government expenditures. As a result, interest payments of the government of India have risen steadily and are projected to be 6,60,471 crores in 2019-20, more than 3% of the projected GDP.
As against this, the estimate of the three major subsidies put together amount to 1.41% of GDP. The regressive, anti-poor implications of the way fiscal policies work in a neoliberal regime are reflected in these numbers.
With the global economy moving towards a recession, and with the turbulent state of the international trade regime, one would have expected the budget to give a boost to the economy by increasing public expenditure, in particular, the public investment which is complementary to and critically important for private investment as well.
But the overall outlay for 2019-20 is projected to rise from ₹24, 57,235 crores in 2018-19 to only ₹27,86,349, an increase that implies that the share of total expenditure in GDP will in fact mark a marginal decline from 13.2% in 2018-19 to 13.1% in 2019-20. Of course, many of the numbers themselves have serious credibility issues but leaving that aside, it does appear that the budget will not help accelerate the economy.
Finally, it must be noted that the budget does little to address the issue of unemployment and massive agrarian distress. The belief that generous concessions to the corporate sector and tweaking things here and there in the MSME sector as well as in relation to start-ups will deliver growth and development is not borne out by evidence so far.
As for the agrarian economy, the increased allocation for agriculture is almost entirely due to the cash dole for all landowners –note, not cultivators, and without any ceiling on the amount of land owned – which will be hardly effective in addressing rural distress, in addition to being iniquitous.
The allocation for MNREGS is less in 2019-20 than in 2018-19. Allocations for education and health, though higher than in 2018-19, remain pitifully low for a country that exhibits massive deprivation in relation to these aspects of human development.
To sum up, the Union Budget 2019-20 does not address the immediate challenge of promoting balanced growth of the economy nor does it do anything for the twin crises of unemployment and the agrarian economy. Its tax proposals are regressive and will only further enhance the obscene inequality of wealth and income that characterise the Indian economy.
(The writer is an economist and political commentator.)
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