What the Budget's Priorities Tell us About How the Union Govt Views the Indian economy

The Union Budget speech of 2022 will be remembered as the historic moment when an Indian government committed itself to the redistribution of wealth from the poor to the rich.

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The Union budget speech of 2022 will be remembered as the historic moment when an Indian government discarded welfarism and fully committed itself to redistribution of wealth from the poor to the rich.

A government’s priorities are known by how it spends the taxpayers’ money. Equally important is where the government chooses to cut down.

The Modi government has chosen to cut down on food subsidy by a whopping Rs 80,000 crore at a time of rising poverty and malnutrition.

Fertiliser subsidy has been slashed by Rs 35,000 crores at a time when agricultural incomes have either fallen or stagnated (after all, the promise of farmers income doubling by 2022 has not come true). The most incisive wound to welfare is inflicted by reducing MGNREGA budget by Rs 25,000 crore when demand for work is at a record high.

Petroleum subsidy has been reduced by Rs 7,000 crores.

Where does the money taken from common people go? In financing capital expenditure, the allocation for which has been increased by Rs 1,48,000 crore. Interestingly, the subsidy and budget cuts mentioned above equal 1,47,000 crores.

The government claims that increase in capital expenditure is needed to boost private investment. Similar claims were made in 2019 when a corporate tax cut was doled out (rates were reduced from 30 to 22%), costing taxpayers’ 1.45 lakh crores. Back in 2019, a demand slump was clear as day. Automobile sector was laying off people; demand for a Rs 5 biscuit packet was falling.

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The time-tested economic recipe for such a downturn is to raise government spending and bolster people’s income. This has a multiplier effect that can initiate a virtuous cycle of growth. The government was unwilling to follow that way. It stuck to the tax cuts; the private investment rate fell but the billionaire wealth ballooned.

The pro-rich and anti-welfare tilt of this budget is not an aberration. When we look at some of the key policies over the last seven and a half years, a clear pattern emerges, i.e., the incumbent government has aided the rich in multiplying their wealth at the common people’s expense.

One of the first major economic step this government took was the abolishing of the wealth tax, part of its effort to simply tax procedures. In 2017, it introduced a punitive and complex Goods and Services Tax that eroded the thin margins of micro, small, and medium enterprises. It mercilessly raised excise rates, passing on the tax burden on common people when doling out tax cuts to corporations.

When confronted with the COVID-19 pandemic, India announced the Atmanirbhar Bharat package – the fiscal component of which was less than 1% of the GDP. The unplanned lockdowns created a humanitarian crisis, and experts called for measures that were going to put money into the hands of people. The government was unrelenting. Welfare spending was reined to the bare minimum, resulting in massive loss of livelihoods for crores.

Last year, the government announced a national monetisation pipeline, through which ownership of public assets like roads, railways, telecom, etc. will be transferred to the private sector. The threat of a select few entities owing public assets is a real one and based on experience from the recent past. Public sector employees are genuinely concerned as are the lakhs of students who fear a loss of employment opportunities. Reservation in the public sector is a shining example of redistribution of wealth as is intended.

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In ideal circumstances, redistribution of wealth implies measures that bridge the income gap between the rich and poor. The Modi government has turned the principles upside down.

Between 2015-16 and 2020-21, the poorest 20% people lost more than half their income. In the same five years, the richest 20% increased their wealth by nearly 40% (ICE360 Survey). India has produced 70 new millionaires every day since 2018 (Oxfam India). Poverty in India has increased as the middle class shrunk (Pew Research).

This great wealth creation and concurrent rising poverty is not a coincidence. It is the result of the policies championed by the present government at a grave human cost.

A 150 years ago, Dadabhai Naoroji, through his ‘drain theory’ demonstrated how the British rule was draining India’s wealth, leaving its citizens poorer. The present government is following its unique ‘transfer of wealth theory’. It is facilitating a transfer of wealth from the poor to the rich. The results of both are eerily similar.

The Preamble to our constitution promises economic justice. Article 39(c) of the constitution urges the state to direct its policy towards securing “that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment”.

As the prime minister calls for duties taking precedence over rights, we must remind him of his government’s constitutional obligations – justice, social, economic, and political.

Akash Satyawali is National Coordinator at the Research Department, All India Congress Committee.