Nirmala Sitharaman Has Given us a Lacklustre Budget, Aimed Not at Growth or Welfare

The government’s budgetary calculations have been adversely hit. The lack of financial resources completes the circle for a government which, in the first place, is unwilling to invest for the revival of the economy.

Having been in dire straits for a better part of the current fiscal, the Indian economy needed the Union finance minister to provide the much-needed impetus through her second budget.

Unfortunately, the Union Budget of 2020 turned out to be an exercise of laissez faire, something that the Economic Survey had so glibly spoken about.

The government did not show interest in making any interventions and instead showed its unwavering faith on the market forces to turn the economy around. This is despite the fact that the demand compression being faced by the economy has too severe for the private investors be interested in putting their money.

A few months ago, the finance minister had disregarded this reality when she offered the largesse of a substantial cut in corporation tax, expecting that the corporates would respond to this “incentive”.

Also read: Explainer: Will Nirmala Sitharaman’s Corporate Tax Cuts Save India’s Economy?

The corporates never responded, but the government’s budgetary calculations have been adversely hit. The finance minister has informed us that the gross tax revenue for the current fiscal is expected to be below the budgeted figure by over 12%, which is largely due to the 20% decline in corporation tax receipts on account of the tax concessions granted to the corporate sector.

Indirect taxes have also been down as the sluggishness of the economy has affected collections of both the goods and services tax (GST) and import duties.

The capital non-debt capital receipts are also down as the proposed disinvestments have fallen short by over 38%. Which means that the government has had to borrow heavily to make its ends meet; a move that would increase the already large interest burden.

The lack of financial resources completes the circle for a government which, in the first place, is unwilling to invest for the revival of the economy.

Ever since it took office, the Modi government has relied more on aspirations, on the so-called “feel good” factor, and this Budget is no exception. The serious downside of putting forward only “aspirations” instead of concrete programmes that can also be implemented successfully, is already being experienced by the stuttering economy.

So, what are the new set of aspirations?

The finance minister has chalked out plans for an “aspirational India” in three important areas: agriculture irrigation and rural development; wellness, water and sanitation; and education and skills.

When it comes to agriculture, the “aspiration” is to double farmers’ income by 2022 by making farming competitive and by liberalising farm markets. This is the most vacuous of all aspirations as it is completely unhinged from the reality. In the midst of the farm distress that is strewn all over the country, the finance minister has put forth a 16-point programme, with scant additional allocation of resources to implement it.

Also read: Budget Fails Yet Again to Present a Roadmap to Increase Rural Demand, Double Farmers’ Income

Funds allocated to agriculture have increased by a mere 4% over the budgeted figure of 2019-20.

For this critical sector, the capital expenditure is projected at only Rs 50 crores, and this when the government has increased capital expenditure by 22% and is expected to be Rs 4,12,085 crores. In other words, a sector that directly and indirectly supports about 60% of the livelihoods in the country gets 0.01% of the capital expenditure from the Union Budget.

How can the farmers ever expect a doubling of their incomes with hardly any capital expenditure by the government?

Education is another area where the aspirations have been laid out and like in agriculture, the government has not backed its aspirational plans with any significant commitment in terms of resources. In case of primary education, an area in which the government has the responsibility to implement the Right to Education Act (RTE Act), provisioning of funds has been far lower than necessary.

Funding for the flag-ship scheme for implementing the RTE, the Samagra Shiksha, which has replaced the Sarva Shiksha Abhiyan, is proposed to be increased by only 7% over the budgeted figure of 2019-20. For the school education sector as a whole, the projected increase is even lower. It must be pointed out here that the revised estimates for the current fiscal show that the projected expenditure for the year would not be spent.

What is then the guarantee that the projected 7% increase would be spent on this scheme when the government is struggling with resource constraints?

The case of higher education is even more shocking. The projected increase in expenditure is only 3%, which only confirms the suspicion that the government is heading for privatisation of higher education. It is because of this apathy of the government towards higher education that in this country, which has the largest young population in the world, only one out of every four young people can take admission in a college.

Also read: The Good, the Bad and the Impossible of the 2020 Union Health Budget

And, finally, for the health sector additional resources allocation for 2020-21 is just 4% over the budgeted level for the current financial year. Although the government has claimed that the Ayushman Bharat programme has been a huge success, the rising disease burden that the citizens of the country does not bode well for the future of the country.

What could the finance minister have done instead to revive the economy and to address some of the most serious pain points facing the citizens?

Clearly, she could have put in more resources for this could have been both welfare as well as growth enhancing. Take for example education and health. In case of education, effective implementation of the RTE Act would need several lakhs of teachers to be given employment.

Similarly, implementing a model of inclusive higher education system would require new colleges and therefore employment to the lakhs of the highly qualified unemployed.

In the health sector, focus on setting up primary health centres and government funded hospitals can made healthcare affordable, besides bringing in lakhs of health workers. This, of course, requires the political will to get involved in making the lives of the citizens of the country better and to see them gainfully employed.

But, with its current focus on market orientation, this government cannot be expected to deliver better days for its citizens. 

Biswajit Dhar is a professor at the Centre for Economic Studies and Planning, Jawaharlal Nehru University.