Should A Paperless Budget Be Heartless Too?

 

By Ganesh Bhat :

As per PROUT: “In pure economic terms developmental programmes are those programmes which directly increase national wealth and indirectly support this increase.”

“Economics today is a theoretical extravaganza. It should be made more practical. Economics must be a precise, practical science and should be properly developed for the welfare of all,” is the observation of Shri Prabhat Ranjan Sarkar, the propounder of socio-economic theory-PROUT. India’s Budget 2021 has proved the first part and overlooked the later part of the remark.

       Two days ahead of the Budget, the Economic Survey recommended an “expansionary fiscal policy” in 2021-22 to boost Growth. It also advised the government to continue with structural reforms and significant privatization of state-owned companies. It is faithfully reflected in the Budget. For the first four decades after independence, a period of shortages and ever more stringent government controls on all economic activities, budgets were anxiously awaited for what they would tax next, leading to hoarding and artificial scarcity of essentials and other daily necessities. Since the 1990s, successive governments have used budgets to announce their policy priorities and paved the way for introducing new taxes beyond the budget proposals.   

India’s draconian countrywide lock-down pushed more people out of jobs and sent many more millions back into poverty. The revenues and profits of the largest companies have been growing, yet their expenditure on workers is declining. The Demonetization of high-denomination currency, the introduction of GST and the Covid lock-down helped large Companies take over the enterprises and market-shares of small and medium businesses, especially those in the unorganised sector. Reverse migration of labourers created new challenges and a peculiar situation of shortage of labour in the cities and swelling ranks of unemployed in rural areas. It was natural that the people expected initiatives and announcements of schemes in the Budget, which could create employment in rural areas and help the people in general.          But, Budget 2021-22 has confirmed that the government is committed to institutionalizing India’s already high and growing income inequality, and it will allow the unbridled growth of private corporate capital. The booming stock market from the moment of the Budget presentation indicates that this speculative investor section is happy with the Budget. The budget is being hailed as an Expenditure Budget by economists who have given 10 out of 10. Still, they fail to explain how it benefits the common people, creates employment and increases their purchasing capacity? The government’s actions proposed for the year ahead carefully avoid discussing the employment crisis—a mess that existed well before the COVID-19 pandemic.  

      It is announced that the fiscal deficit for the year 2020-2021 would be a massive 9.5 per cent of the GDP and that for the next year would be 6.8 per cent.  Revenue deficit is the excess of revenue expenditure over revenue receipts.  Such a deficit implies the government’s need to borrow funds to meet expenses that may not provide future returns.  High borrowings in the current year (indicated by fiscal deficit) and increased outstanding debt leads to high-interest costs. In 2021-22, interest payments are 15% higher than the interest obligations in 2019-20. The Interest payment is estimated at 45% of revenue receipts in 2021-22, up from 36% in 2019-20. It leaves little scope for developmental projects.  

      No Populism, but focus on Growth, praise the sycophants, overlooking the criticism that the Centre is setting a new trend of playing 'dirty politics' for votes through the budget; allocating more funds to poll-bound states is looked upon as a kind of bribery.

The capital expenditure is proposed to be raised; investment in the construction of highways is announced. Such steps, at best, can make the people believe that their area is being helped, but it will not create employment on a massive scale; because machines replace human labour; the real beneficiaries will be the contractors and investors. Moreover, tourism, hospitality and other sectors which have the potentiality of creating employment opportunity have been neglected in Budget.  

 PROUT opines, “In pure economic terms developmental programmes are those programmes which directly increase national wealth and indirectly support this increase. Programmes which only increase national wealth indirectly, not directly, cannot be regarded as developmental programmes until the minimum requirements of the people are guaranteed.” Will the present government heed this advice? To  make India the most attractive destination for FDI, we forget the basic psychology of the investors, which is to earn maximum profits in minimum time; and that they are least concerned about creating employment opportunities for the local people.

        The government appears to have realised that the finances of the government are in a precarious state. We are borrowing to fund the ever-burgeoning revenue deficit and are paying interest in existing and fresh borrowings. So, they have decided to start selling the assets, divest and monetize so that necessary finances are raised, donors of party fund are appeased, and the people at the helm of affairs get praises from all (self-centred) corners. Yes, this can run for some more time, and a time will come when the government has nothing to divest. The so-called experts blinded by capitalistic thinking and a centralized economic system suggest similar steps. But, they fail to understand; rather refuse to understand the benefits of a decentralised economy and more accessible, easier, safer, sustainable ways of raising capital.

Disinvestment is the centrepiece of this Budget. The  IPO's of LIC, the PSUs (BPCL, Air India, Shipping Corporation, CCI, IDBI, BEL, Pawan Hans, NISL), the 75% FDI in Insurance, and the general relaxations under the incentive frameworks at the State level - are all breaking new ground, never before attempted at this scale. However, the proposal to privatise two public sector Banks and a General insurance company shows that either we have not learned from the failures of private Banks during the last year or are conveniently ignored.   

           With non-performing assets (NPAs) set to rise in the wake of the economic slowdown induced by the pandemic, the creation of an asset reconstruction company/ asset management company (ARC/AMC)  -  popularly known as a “bad bank” was announced. The purpose of a “bad bank” is to park the bad assets of commercial banks and later sell those assets at a discounted price in the market. Thus, it will help clean up the balance sheets of commercial banks. As a result, a good chunk of gross NPAs totalling about ₹ 9 lakh crore as of March 2020 is expected to be transferred to the bad bank.

             The government is under severe criticism for writing off the NPAs of Banks, which consisted of  many large loans availed by the business houses close to the power centre. Instead of the Government writing off bad corporate loans and getting a bad name, now they can get it done through bad banks. It will give scope for increased political interference, overlooking security norms by banks, favouritism, unethical practices etc., while sanctioning loans.  Starting a bad bank in the guise of easing credit to fund  the growth cycle is a bad idea and a clear policy of ‘privatize the profits and socialize the losses’.

       A new agriculture infrastructure development cess (AIDC) on petrol, diesel, and several other imported items has been introduced to assure that it won’t burden consumers. Because the government feels that there is an immediate need to improve agricultural infrastructure so that we produce more while also conserving and processing agricultural output efficiently with a motto to ensure enhanced remuneration for our farmers. If the government is interested in solving the crisis of the agrarian sector, it should think of giving industrial status to agriculture. It can be realised by implementing  agricultural Cooperatives. Further, scientific land-use and crop-planning, setting up of agrico and agro-industries, timely Institutional finance, etc., in rural areas. Taking up production, procurement, processing, distribution and marketing of essential commodities exclusively through cooperatives is necessary to get a fair price to agricultural produce. Agriculture cannot achieve Industry Status through Contract and Corporate farming and Marketing methods, which the government wants to promote, by legislation.    

     However, following the introduction of the cess, states are likely to lose some revenue. Currently, the Centre shares 41% of its total tax revenue with states. But surcharges and cesses are not included in this pool. In May last year, the government had announced a ₹ 1lakh crore agriculture infrastructure fund. People need information whether the present cess is in addition to the above funds, who were and will be the beneficiaries of this fund etc. The Government appears to have aimed to achieve twin objects of reducing the state’s revenue and creating a public opinion against farmers with Agriculture Infrastructure Development Cess (AIDC).   

It is proposed to strengthen thousands of schools to implement National Education Policy. NEP itself is short-sighted and devoid of a holistic approach. Strengthening any number of schools will not impart humanistic education; it can at best create obedient intellectual labour to work for the capitalist class. A voluntary vehicle scrapping policy to phase out old and unfit vehicles was announced for encouraging fuel-efficient, environment-friendly vehicles, thereby reducing vehicular pollution and oil import bill. The approach appears to be for the benefit of vehicle manufacturers, who may crease their sales through advertisement and offer of loans. It may help the economy in the short run, but not in the long run as the debt economy has suffered in every Country. The solution to the problem lies in fortifying an efficient public transport system and ensuring adequate purchasing power to common people. 

The Budget has not addressed issues of the common people, forgetting that the motto of government is to work for the good and happiness of all.

    The party in power probably thinks that 'Minimum Government-Maximum Governance' means privatisation. This Budget proves that the government is overly business-friendly, is nurturing crony capitalism and that all the economic policies in the Country are formulated by a handful of people who are pillars of capitalism. Hardly few people in the entire Country (including 795 MPs) read the entire Budget from the beginning till the end of around 2,000 pages! And for that, why print thousands of copies? This transition from paper to digital is a welcome move. They say it is a historic budget as it is paperless. But, is it necessary that it should be heartless also?