Fend For Yourselves, Nirmala Tells
Farmers, Job-Seekers And Producers

Raman Swamy

Industry chamber FICCI says:  “Given the constraints that the Finance Minister was facing, this has been a comprehensive statement. By leaving more money in the hands of citizens and corporates, the onus is now on us to increase consumption and industrial growth”. 

All India Kisan Sabha says:  “Farmers and rural poor have been left to fend for themselves.   A close look at the budget documents reveals significant cut in allocations for agriculture and allied activities”.

An Opposition party’s comment is:  “The Budget Speech lacks a coherent policy direction to address the economic crisis head on.  Unable to find a remedy on its own, the government has passed the buck to entrepreneurs to invest more and produce more in the find hope that the common man will start spending more again.  Instead of bold steps to revive demand and generate employment, the focus is on reducing fiscal deficit by expenditure cuts and disinvestment”.

Car manufacturers representatives said:  “Not the Budget speech the automobile industry was expecting.  None of our specific recommendations to revive demand have been considered.  Hoping the fine print will contain at least some duty cuts and incentives for lithium ion batteries imports and vehicle scrappage scheme”.

A tax pundit said:  “Income tax structure has been overhauled.  Rates have been cut.  But there's a catch - the new regime will be optional.  If you opt for it, you will not be able to avail of as many as 70 deductions or exemptions.  It is unclear which exemptions have been retained and which have been junked”.

These diverse reactions to Nirmala Sitharaman’s marathon Budget speech seem to reflect a common sentiment - a degree of disappointment, a feeling of being let down somehow, a sense of wonder over how a Finance Minister can make such a lengthy presentation and yet say so little. 

Also, it is perplexing why a government that has the strongest popular mandate in recent memory has chosen to take a virtual hands-off approach to tackling the severest economic crisis of the Millennium.    

Political critics are entitled to call the budget “insipid” and “lacking in stimulus for growth”.  But should even supporters of the government and those who have a vital stake in decisive steps towards urgent economic revival be left with a feeling of disgruntlement and even dread? 

Sitharaman’s speech was replete with quotes from the classics and it listed numerous programmes and schemes.  At the end of just under three hours of oratory, there was even a dramatic moment when she was unable to conclude her record-surpassing speech. 

Apart from generating genuine sympathy for her personally, there was an underlying symbolism in the very fact that it was left incomplete.   In a way it reflected the unreality of the entire exercise - and the futility of experimenting with tax slabs,  dressing up old schemes in new packages,  announcing a plethora of proposals that are hard to view as anything other than disjointed bits and pieces that do not solve the big puzzle of collectively offering life-saving injections for a comatose economy. 

The Finance Minister did say, as all Finance Ministers always say, that the “fundamentals of the Indian economy” are still strong and healthy.  There need be no doubt about that - the people of India are hard-working and resilient, the country’s banking and financial institutions are hopefully still capable of withstanding assaults on their autonomy, there is a still-credible judiciary, plus  an upwardly mobile middle class immense purchasing power that makes it potentially makes it an attractive investment destination.

 But right at this juncture, on the threshold of the third decade of the new century, business, industry and trade are in the ICU, GDP is probably lower than is being admitted and unemployment levels are at a frightening low.  Truly, the much-vaunted Demographic Dividend is looking ominously like a nightmare.

And yet, Sitharaman’s Budget proposals do not contain any clear prescriptions or bold reforms.  It is almost as if their priority was to avoid doing anything to harm the economy further.  

But even that may not be actually true.  Despite the oft-repeated assurance that the government is “committed to the goal of doubling farmers’ incomes by 2022", the budget is devoid of positive allocations. Instead closer reading reveals massive cuts in for agriculture and allied activities.

Spending for agriculture is spread across many ministries. If one combines allocations for agriculture and allied activities, fertiliser subsidies, irrigation, rural development and land resources, one finds, firstly, that the Revised Estimates for the current year is almost 25 thousand crores less than what was originally budgeted for this year. The overall allocation for the coming year is less than the allocation for the current year even in nominal terms.

The last budget in July 2019 had announced the PM-KISAN scheme with much fanfare. For 2019-20, government had allocated Rs.75000 crores for this scheme. In this one scheme alone, the Revised Estimates is Rs. 21000 crores less than what the government had promised to spend.  The government's estimate was that the scheme would cover 14.5 crore farmers in the country. However, only about 26 per cent of them were given all the three instalments. After the elections, the government did not talk about the scheme, and one now finds that the money that was promised was not spent during the current financial year.

In fact, the budget documents show that the Revised Estimate for almost every scheme of the Ministry of Agriculture and Farmers' Welfare has been reduced in the current year, and that these cuts are maintained for the coming year.

Another area where a very large cut is seen is in fertiliser subsidies. Even in nominal terms, the allocation towards fertiliser subsidies for the coming year is 11 per cent less than the allocations for the current financial year. The real decline is likely to be even higher. Kisan Sabha has maintained that deregulation of fertiliser sector will spell the death knell for Indian agriculture. Cutting down fertiliser subsidy will directly result in increasing the cost of fertilisers and reduce farmers' income.

Instead of investing to ensure "input sovereignty" of Indian agriculture, the Finance Minister has proposed to achieve this through the Paramparagat Krishi Vikas Yojana which is a smokescreen for the government to wash its hands off from the responsibility of ensuring that farmers receive appropriate agricultural inputs at affordable prices.

Nor does Nirmala Sitharaman’s budget contain concrete proposals for expanding access to irrigation, providing support to sharecroppers or ensuring livelihood security of rural workers.  

In the current financial year, owning to the severe economic stagnation, the government was compelled to enhance allocations for MGNREGA by about Rs. 11,000 crores to meet the huge demand for employment. However, this was partly done by reducing the spending under the PM Gramin Sadak Yojana. For the coming year, allocations for MGNREGA have been reduced again by about Rs. 10000 crores.

Another alarming statistic is the drastic decline in food subsidies. The revised estimates for food subsidies show a decline of about 41 per cent over the budgetary allocations. The budgetary allocation for this year is Rs. 18650 crore less than the allocation for last year. This decline is entirely on account of the decline in allocations to FCI for lifting the grain for distribution under National Food Security Act.

These are just a few striking examples, pointed out by agricultural economists.  In other sectors too there is a similar dual strategy of reducing support and passing the buck.  Despite attempts to downplay data, the gravity of the economic crisis does show up in the budget numbers.

For instance, the Revised Estimates (RE) figures show that the revenue collections in 2018-19 are way below the Budget Estimates (BE), and yet extent of the shortfall continues to be underestimated.  Some analysts say a more realistic RE would have shown a further shortfall of close to Rs. 1.5 lakh crores in gross revenues from central taxes. 

Projections for the the coming year, 2020-21, reflect a similar inclination to inflate revenue projections while allocating expenditures which would not be met.  Even after the jugglery, the RE revenue figures for 2018-19 are Rs. 2.98 lakh crores less than the Budget Estimates, Rs. 1.53 lakh crores of which will be the hit taken by states in their share in central taxes.

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Feb 2, 2020

Raman Swamy

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