Lacklustre Budget: Fails to stimulate economy

Lacklustre Budget: Fails to stimulate economy

Budget 2020-2021 presented on Saturday last lacks direction and does not take us anywhere. Though lot of promises were made in the two-and-half-hour speech by Finance Minister Nirmala Sitharaman, some calling it a ‘story-telling speech’, it hardly came up with concrete proposals to stimulate growth. Jargons and projections have been reiterated like doubling farm income or investment of Rs one lakh crore without pointing to a definite road map of how this will be achieved.

Apart from lack of vision, the numbers being dished out in the Budget is difficult to believe as these are completely unreliable. The cuts in food and public distribution, agriculture and transfers to State and inadequate social sector outlay point to the fact that benefits will go to crony capitalists and some foreign portfolio investors. Besides, reduction in income tax slabs, once calculate remain an eyewash, except for the pensioners.

Though the government may project it as pro-rural Budget, in reality the allocations have been more or less the same. In fact, the allocation for agriculture is down but there is a slight increase in rural development sector. Keeping the annual inflation in mind, the overall allocation has been much less. The budgetary allocation for PM-Kisan Samman Nidhi Scheme, which is considered an ideal route for increasing farmers’ income, has been reduced to Rs 6000 from Rs 12,000 per year. In addition, allocations for MNREGA, which would have helped in creating more rural demand, were anticipated to go up to Rs 70,000 has too been reduced. This shows that a significant section remains sidelined as various problems in agriculture and rural demand, which are pressing issues of the day. The total outlay of Rs 2.83 lakh crore is hardly an increase over the present fiscal’s Rs 2.66 lakh crore.

Unless public investment is geared up, any significant rural demand would not be created in the next fiscal. The proposal to create warehousing in the taluk and village levels through viability funding as also to increase other storage facilities by SHGs is a good suggestion. But the assertion that farmers’ income would be doubled by 2022 is again another area of wishful thinking. As of now, the farmers are in a distressful condition and how they will double their income in two-three years has not been accepted by experts.

Clearly, this is not a pro-poor Budget. The proposal to set up 100 airports by 2024 or the abolition of the dividend distribution tax reveals there has been an effort to make life easy for the upper income sections and the corporate class. While a few airports may be considered, the necessity of setting up wellness centres at the block and sub-divisional levels to help the poor and the EWS should have been priority.  Questions have also been raised why corporate tax rates have been decreased a few months earlier, which are not forthcoming in investment.

The allocation for health of Rs 69,000 crore may be on the higher side but is not sufficient. There is no announcement of how many hospitals would be added under PPP mode in Tier-II and Tier-III cities. Moreover, what facilities would be made available and at what rates so that the lower income sections benefit remains unanswered. However, the allocation of Rs 35,600 for nutrition related programmes may help lowering MMR  as well as improving nutrition levels, specially for children.

Regarding education, the allocation has been increased by around 5% but here again universities, some specialized ones, are needed at the district levels. However, attaching medical colleges to medical hospitals may help the country have more doctors which is critical. Also the announcement of degree level online educational programme by big institutions could help students as also the proposal of 150 higher education institutions starting apprenticeship embedded diploma courses by March 2021.

The national infrastructure pipeline involving 6500 projects needs to be examined. There are expectations that 100% tax exemption for sovereign wealth funds may bring funds to these projects. Also the announcement to increase the FPI limit for corporate bonds to 15%t from 9% is welcome. But only time will tell how much money comes to the country in the coming year. Some experts point out that the infrastructure boost is mostly hype and may not fructify, keeping in view the needs of the country.

Aviation is definitely not a priority area for the aam janata but setting up 9000 km of economic corridor may be effective. Regarding Railways, not been much has been heard, except redevelopment of stations under PPP mode and developing solar power capacity beside rail tracks. Moreover, having more trains under Teja type trains to connect tourist destinations are definitely welcome but more should have been outlined about express trains and facilities that would be made in such trains. It is believed that the plan for complete electrification of the Railways by 2024 may reduce emissions. What needs attention is that while most trains get booking in sleeper class there is need to add more trains or coaches in congested routes and this should have been announced.

The recent Economic Survey advocated ‘Assemble in India’ as an integral part of the ‘Make in India’ is definitely welcome as it may boost manufacturing but it is difficult believe that it can create 4 crore well-paid jobs by 2025 and 8 crore by 2030. However, this may give some boost to assembling various types of electronic products in collaboration with foreign companies.

A significant point made is the setting up a National Recruitment Agency with an office in each aspirational district for recruitment to non-gazetted posts in government and banks. Though there are agencies to monitor such recruitment, it is good to believe that the government may be interested to gear up employment generation.

The disinvestment target of over Rs 2 lakh crores in the next fiscal by disinvesting in LIC (through an IPO), as also profitable public sector companies like BPCL, Concor, Shipping Corporation of India (SCI) etc., has been announced. Experts and opposition leaders are questioning whether the government is privatiwing every area it can lay hands on. A point here that the finance minister mentioned about “ethical wealth creation” goes against the character of our private investors, who are not motivated towards profit maximisation but have also shown unwillingness to adhere to CSR. How does involving private investors, some of whom have doubtful integrity, help in creating ethical wealth creation?

The path chosen in the Budget, in a poor country like ours, will hardly increase the purchasing power of the EWS and low income groups. The ‘lower requirement’ in food subsidy as also no plans to gear up rural jobs and the incentives to the business community shows the negligent outlook of the government towards the marginalised sections. Moreover, it would not be wrong to predict that the corporate sector, in spite of the tax slash, has been reluctant to invest. Thus one may be inclined to question whether the slowdown may persist and the job growth may be static?

Whether the much-talked about transition to an economy that is resource efficient and waste less can be achieved by depending only on the private sector may be the subject of a debate. But the government needs to gear up monitoring and ensure that this is achieved through good and effective governance in the next few years.



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Lacklustre Budget: Fails to stimulate economy