Realising Ambedkar’s vision of a more equitable society faces these key challenges: persistently high levels of youth unemployment, rural distress evidenced by high demand for wage work under MGNREGA, food and fuel inflation. It is in this background that Thursday’s interim budget should be looked at.
With an eye on Lok Sabha elections, and inspired by Congress‘ ‘Guarantees’, the budget is high on rhetoric and generics, and lacks specific instruments to achieve structural change towards greater inclusion. Thus it fails to provide a lasting vision to achieving the goal of true economic and social democracy.
Income inequalities are rising in India. Real per adult income of the bottom 50% of the population is rising at a very feeble rate, and growth rates are decelerating while income of the top 1% is rising at a higher rate. We need economic policy to bring in structural change to increase sustainable jobs and pave the way for income transfers to the bottom 60%. No new central programme seems to address this challenge.
In Karnataka, through ‘5 Guarantees’ we are transferring directly into family bank account, more than ₹50,000 crore every year. 75% of Karnataka households are benefitting from this. We match policy of cash transfer and provision of free foodgrain with job creation through capital investment from both public sector and private sector for industrial development. We are also addressing regional imbalances by committing ₹3,000 crore every year to the Kalayana-Karnataka region. Similar policies are not being thought of by GoI, even as the Centre retains disproportionate share of the taxes collected from states.Last year, the budget made ambitious provisions of ₹10 lakh crore for infra development. But revised estimates (RE) have shown under-achievement by ₹1 lakh crore. Further, this interim budget has projected only a modest growth in capex. This shows that the stated objectives of FM Nirmala Sitharaman’s speech are not fully matched by actual numbers. The budget claims to be pro-welfare. However, allocations made cannot be taken at face value. Allocations for major welfare schemes in the 2023-24 budget have been significantly reduced in RE. PM Awas Yojana, National Health Mission, SC/ST welfare and Samagra Shiksha have taken the biggest hits.Also, long-term investment in improving the productive potential of land is not being made. GoI’s allocation for irrigation at about ₹21,000 crore is abysmally low. Even the 2023-24 budget promise of ₹5,300 crore for the Upper Bhadra Project has not yet been kept.
GoI is obligated by law to keep its fiscal deficit under 3% of GDP. It also enforces a 3% fiscal deficit parameter on states with great zeal. FM’s fiscal consolidation attempts and keeping the fiscal deficit target for 2024-25 at 5.1% must be appreciated. But there are two problems:
- It is doubtful whether GoI can adhere to the target of 5.1% as 2023-24 RE figure of fiscal deficit is as high as 5.8%
- Even though growth in revenues is claimed to be robust, the budget proposes a modest growth in capex. This means fiscal consolidation is being achieved through expenditure control, not through resource augmentation. Moreover, GoI’s fiscal deficit has a large share in the form of revenue deficit. GoI should be targeting to reduce revenue deficit to ensure borrowed funds are used for capital investments.
- The poor and middle-classes are reeling under food inflation. Cooking gas is increasingly becoming unaffordable. To mitigate this hardship, Karnataka government’s guarantee, ‘Gruha Lakshmi’, gives ₹24,000 per female head of household a year.
GoI was expected to come to the rescue of people suffering income loss due to inflation. No such programme was announced. Sitharaman did not even consider a reduction in I-T rates for the salaried and middle-classes.
The interim budget has been high on rhetoric, low on actual commitment towards an inclusive and equitable society.