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Mainstream, VOL LVI No 10 New Delhi February 24, 2018

Are NDA-II Government’s Budgets Farmer-focused and Rural-centric ?

Friday 23 February 2018

by D. M. Diwakar

A Budget for a government is a tool of resource generation for public expenditure and reflection of an indicative direction for fiscal and development policies. During the last four budgets of the National Democratic Alliance (NDA-II) regime, the government has made a few significant changes in the Budget structure, such as, abolition of Plan and non-Plan heads of the Budget, merging the Rail Budget into the main Budget, realignments of heads of expenditures, pre-scheduling the timing of the Budget, etc. This Budget might be a final full budget of this NDA-II Government; hence, it was expected that this Budget should have been generally a populist generous budget for attracting Indian voters for the next Parliamentary Election on or before the expiry of the 16th Lok Sabha on May 25, 2019. At the same time it might be the last opportunity of this government to put in place possible strengthening measures to bring the economy on the right track of development.

The latest Indian Economic Survey for the year 2017-18, presented in Parliament, expresses concerns of a sliding economy in terms of the growth rate of the Gross Domestic Product (GDP)/Gross Value Added (GVA) in general and of major sectors, that is, manufacturing, agriculture, impact on employment, export, rising crude oil prices having fiscal deficit, in particular. The Central Statistical Organisation (CSO) has recently released advance estimates about the growth rate for the current year 2017-18. As quarterly growth rates were slowing down, the annual growth rate of the Indian economy is bound to slow down. The GDP at constant prices 2011-12, which was 7.1 per cent for the last financial year (2016-17), has come down to 6.5, that is, 0.6 per cent less for the current year (2017-18). It is still more alarming that the growth rate of agriculture has come down sharply from 4.9 per cent of last year to 2.1 per cent for the current year, that is, 2.7 per cent less, and manufacturing has come down from 7.9 per cent of last year to merely 4.6 per cent in the current financial year, that is, 3.3 per cent less. Growth rates for Public Administration, Defence and other services have slowed down from 11.3 per cent to 9.4 per cent, that is, 1.9 per cent less. (CSO, 30.11.2017) These three sectors have greater implications on slowing down of employment of the economy.

Although the income distribution gap has already been increasing, still decline in the per capita GDP growth rate is much sharper from 5.8 per cent of last financial year to 5.1 per cent in the current financial year, that is, 0.7 per cent less. As a result of declining income, the per capita private final consumption expenditure has sharply declined from 7.4 per cent to five per cent, that is, by 2.4 per cent (CSO, 30.11.2017), which has serious negative implications on the economy, employment, income, consumption and poverty. Even the growth rate of net tax for the government has come down from 12.8 per cent last year to 10.9 per cent in the current financial year, that is, 1.9 per cent less, despite tall claims and expectations from demonetisation followed by the Goods and Services Tax (GST). It means less resource at the disposal of the government for expenditure. This further implies that the government will cover the expenditure through cess, fiscal deficits, disinvestment and privatisation. The Government of India has already accepted and implemented the recommendations of the 7th Central Pay Commission, which needs more resources to maintain even the status quo of employment in the public sector. Hence, the percentage curtailment of public expenditure on development and new employment will be a compulsion.

Latest estimates of the CSO indicated, however, far worse. The growth rate of the GVA, which was 7.9 per cent for the year 2015-16, went down to 6.6 in 2016-17. There is indication of a further decline in the first half of 2017-18 to 5.8 per cent, which is much lower than 7.2 per cent in the first half of 2016-17. (CSO, 30.11.2017) The Economic Survey 2017-18 records concerns of uncertainty and fluctuations in the year-to-year growth rates of agriculture because more than 50 per cent of agriculture is dependent on the vagaries of monsoon and hence this sector suffers from uncertainty. (GOI, 2018:99-100) The Finance Minister has acknowledged financial constraints in terms of shortfalls in tax compliances, rising international prices of crude petroleum, rising wage bills on account of the 7th CPC, etc. In order to address the concerns, the Finance Minister has claimed that this Budget is farmer-focused and rural-centric. If we rely on his statement, besides many innovative proposals for development of agriculture and rural areas, it should be reflected in terms of higher percentage of allocation of the total Budget to agriculture and rural development with reflected priorities. This paper is an attempt to understand whether this Budget is intended to be farmer-focused and rural-centric.

Needless to emphasise that a majority of the population still survives on agriculture with their declining income. Uncertainty of monsoon and inadequate arrangements of assured irrigation and other inputs, vulnerability of market imper-fections, absence of remunerative prices, sensitive policies, ineffectiveness of minimum support prices, and indebtedness, tragic deaths of farmers, etc., have made agriculture a non-viable proposition even for subsistence and survival. (Diwakar, 2017) As a result, a series of protests of farmers in Karnataka, Tamil Nadu, Maharashtra, Madhya Pradesh and other States for loan waiving, remunerative prices, procurement of produce, fifty per cent cash payment, etc. culminated in police firing at Mandsaur which led to all-India protests followed by the All-India Kisan Mukti Sansad, this had created pressure for redressal of farmers’ and farms’ concerns in this Budget. In the Budget speech the Finance Minister records: “Budget 2018-19 reflects the Government’s firm commitment to substantially boost investment in Agriculture.” Continuity of Green, White and Blue Revolution, Dairy Development Fund, Long Term Irrigation Funds, PM Agriculture Irrigation Scheme, Crop Insurance Scheme, Interest Subsidy for Short Term Credit to Farmers, Crop Science and Agriculture Universities and Institutions, and announcement of Operation Green, National Bamboo Mission, increased provision of farm loan, etc. may sound soothing, provided the investment promise is backed by substantive budgetary allocations.

In absolute terms, the proposed expenditure for agriculture and allied sectors for the financial year 2018-19 is Rs 63,836 crores, which was Rs 56,589 crores for the financial year 2017-18, according to the Revised Estimates (RE). Thus, absolute increment is of Rs 7247 crores only for the entire nation, which our Finance Minister may consider sufficient for his prioritised and focused agriculture. This increment is about 12.81 per cent from last years’ absolute amount. If we deduct the consumer price index (CPI) rate of 2.9 per cent, it turns out less than 10 per cent (to be precise 9.91 per cent) only. If we consider this amount as percentage of the proposed expenditure on agriculture and allied sectors (including research and education, earth science, animal husbandry and forest) to total expenditure, it is less than in the current financial year. In 2017-18, the Budget estimate for agriculture was 2.46 per cent, which has declined to 2.43 per cent in the Budget estimates of 2018-19. If we take the aggregate of the four Budgets of NDA-II, this percentage gets further reduced to 2.03 per cent to the aggregate expenditure of the Budgets. So far as the percentage expenditure on fertiliser to the total expenditure is concerned, it was 4.27 per cent in 2014-15, which was reduced to 4.08 per cent in 2015-16, and further reduced to 3.29 per cent in 2016-17, 3.26 per cent in 2017-18 (BE), 2.92 per cent in 2017-18 (RE), and has further been reduced to 2.87 in the proposed 2018-19 BE. If this is the scenario of public investment, it will have serious implications on the sentiments of private investment in agriculture. Still, it is claimed as an agriculture-centric Budget.

The Finance Minister of India in his Budget speech reported to Parliament and the people of the country that his government has implemented the recommendations of the Swaminathan Commission Report on Minimum Support Price (MSP) for Rabi Crops (cost + 50 per cent) for the first time and agrees in principle to other crops as well. However, this is far from the truth. It may be recalled that during the last year of the UPA Government, the MSP of rabi crop was above the simple cost (C2). Let us examine the fact. For instance, the Rabi Crop Report of the Commission for Agriculture Costs and Prices (CACP) suggests that the cost of wheat per quintal is Rs 1256 and 50 per cent over the cost amount is Rs 1884. The Minimum Support Price announced for wheat is Rs 1735 per quintal, which is Rs 149 less (that is, 1884-1735= Rs 149) than cost + 50 per cent, forget aboutthe economic cost, which is much higher than this simple cost. The announcement by the Finance Minister in Parliament stands nowhere. Now I leave it to the readers to judge whether he has not misled Parliament and the people of India.

The proposed Budget expenditure for rural development for the financial year 2018-19 is Rs 138,097 crores whereas the revised estimates for the year 2017-18 is Rs 135,604 crores. This Budget has an increased provision of Rs 2493 crores, that is, 1.84 per cent. If we consider consumer price index of 2.9 per cent, in real terms the expenditure on rural development has been reduced by 1.06 per cent. Even to maintain at the level of 2017-18, the proposed expenditure on rural develop-ment should have been Rs 139,536.52 crores. Still it is being claimed by the government and Finance Minister that the Budget is rural-centric. If one takes the percentage of proposed expenditure on rural development to the total expenditure of the proposed Budget 2018-19, it comes to 4.6 per cent. This proportion was 4.9 in 2017-18 (RE) and 4.91 in 2017-18 (BE). Thus, proportionate allocation has declined from the previous year’s Budget. Rather, expenditure on the rural development head in 2017-18 was higher than that of the year 2016-17 (4.81), which was still higher than 2015-16 (4.32) and 2014-15 (4.04 per cent). If one aggregates four years budgetary allocations for rural development as the percentage to the total expenditure still it turns to be merely 4.57 per cent.

The Finance Minister proposed to create 22,000 Rural Haats to facilitate market infrastructure in the rural areas with a provision of Rs 2000 crores for farmers and people of the rural areas. Even if we spend the total amount of money without having any administrative expenditure on line department, every haat will have on an average only Rs 9,09,090. I wonder whether a boundary wall can be constructed for the haat, forget about platform, roofs and other basic facilities, such as an office, toilets, drinking water, canteen, and salary for staff to look after the arrangement.

Education is one of the important segments for rural development. The proposed expenditure on education for the year 2018-19 is Rs 85,010 crores, whereas the revised estimates for the current financial year came to Rs 81,869 crores. Thus, an increment of Rs 3141 crores, that is, merely an increase of 3.83 per cent. If we deduct the consumer price index increase 2.9 per cent, it comes to a mere 0.93 per cent, that is, less than one per cent addition in the last year’s spending in absolute terms to make a Kushal Bharat. If one examines the percentage of expenditure on education to total budgetary expenditure, it has declined. The expenditure on education to total budget in 2014-15 was 4.13 per cent, which was reduced to 3.75 per cent in 2015-16 and 3.65 in 2016-17. In 2017-18 (BE) there was a nominal improvement to 3.71 per cent, which was actually reduced to 3.68 per cent in 2017-18 (RE) and further reduced to 3.48 per cent in the proposed expenditure in 2018-19 (BE). If one probes further, the Budget for school education and literacy witnesses a similar declining nature. This percentage was 2.74 in 2014-15, which was reduced to 2.33 in 2015-16, 2.18 in 2016-17. It was further reduced to 2.16 in the Budget estimates of 2017-18 (BE) and further aggravated to 2.11 per cent in 2017-18 (RE). The percentage of the proposed estimates has still been kept lower at 2.04 per cent in the 2018-19 (BE). The situation of higher education has also not been much different. Although, the percentage of expenditure on higher education witnessed a nominal increment from 1.39 in 2014-15 to 1.42 in 2015-16, 1.47 in 2016-17 and 1.55 in 2017-18 (BE) and 1.57 in 2017-18 (RE). However, the percentage of expenditure to higher education proposed in 2018-19 (BE) is worse (that is, 1.43 per cent only). Moreover, this will influence the commitment to the Right to Education Act and the 7th Pay Commission’s recommendations too. It has an implicit imperative to keep public education at a low key and promote the privatisation drive in the education market, away from the subsidised state-owned education to loan-based education. Needless to mention that a majority of rural children are in the public sector education, which may face financial crises and closure of schools and higher education in the name of rationalisation. This will have a direct impact on the children and youth of the country. Our leadership is still reiterating the commitment of Kushal Bharat, and encouraging youths to become employers. This raises a set of questions as to whether this government is serious for creating a skilled new India, as the policy prescription does not appear to be addressing the same.

We are all aware of the diversity and segmen-tation of the Indian labour market. A majority of the workforce is still surviving in the informal sector in a vulnerable condition of employment. Very little has been done by the present government for generating employment. The Labour Bureau‘s Fifth Annual Employment-Unemployment Survey 2015-16 reveals that about 85 per cent of the workforce survive with less than Rs 10,000 a month and a majority of them (54 per cent) has only one earning member. Only 31 per cent working households have two members. On the front of generation of new employment, this government has been disappointing the youth and workforce in general. Demonetisation followed by GST has further aggravated the declining employment situation. The backlog of unemploy-ment, which was 17.7 million in 2016, is likely to increase to 18.3 million in 2017, 18.6 million in 2018 and 18.9 million in 2019. (ILO, 2018:21) The proposed percentage of allocation for labour and employment in 2017-18 (BE) was merely 0.33, which was reduced to 0.30 per cent in 2017-18 (RE). Again now the proposed percentage of allocation for 2018-19 (BE) is lower (0.32 per cent) than 2017-18 (BE). If one takes the percentage of aggregate expenditure on labour and employment to aggregate the budgetary expenditure in four years of NDA-II, it comes to a mere 0.28 per cent. This shows the seriousness of this government on labour and employment.

The Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) is a flagship pro-gramme of the right to work and it is binding on the government to provide job in the informal sector if demanded. The revised estimate of expenditure on the MGNREGA account for the year 2017-18 was Rs 55,000 crores. The proposal for this year is to spend the same amount, that is, Rs 55,000 crores. It implies that the Budget has been reduced at least by 2.9 per cent in real terms from last year to this year if one takes the consumer price index into account. So far the data on generation of employment on the website of the Ministry is concerned, it is available till 2017-18. The data available about the tenure of the NDA Government suggests that on an average 32 lakh households got 100 days employment. On an average in 2014-15, 24.93 lakh days, in 2015-16, 48.48 lakh days, in 2016-17 39.91 lakh days and in 2017-18 only 14.93 lakh days of employment were generated. Thus, the rural employment flagship programme touched the rock bottom in 2017-18 during the NDA-II regime. Per household 40 days in 2014-15, 49 days in 2015-16, 46 days in 2016-17, and in 2017-18, 40 days of employment were generated. This shows as to what extent the government of the NDA-II is serious about rural employment.

The Railways is one of the employment-centric sectors of the country, the budget for which has been reduced to an insignificant amount. The percentage of rail expenditure has been reduced from 2.56 per cent of the total expenditure for the current year (2017-18 BE) to 2.26 per cent proposed for 2018-19. The budget for heavy industry has been reduced from 3585.94 crores in 2016-17 to Rs 2600 crores in 2017-18 (BE), Rs 1107.28 crores in 2017-18 (RE), and Rs 11.25.73 crores in 2018-19. Another striking point is the declining percentage of the establishment expenditure to the total expenditure in this proposed Budget despite the provisions of the 7th CPC. This implies that there is no priority for further employment generation in the public sector in India. Needless to mention that this NDA-II Government promised two crores of new employment generation every year, which has been proved to be unrealistic.

The proposed expenditure on the Deen Dayal Upadhyay Gram Vidyutikaran Yojana in the financial year 2018-19 was reduced to Rs 3800 crores from Rs 5400 crores. And the expenditure on the Sahaj Vijali Har Ghar Yojana was increased from Rs 1550 crores in 2017-18 RE to Rs 2750 crores in 2018-19. Thus, the total expenditure for electrification of poor households was Rs 6950 crores in 2018-19, which was reduced to Rs 6550 crores, a reduction of Rs 400 crores. The proposed allocation for Solar Power-Off-Grid/Distributed (and Decentralised) Renewable Power has been reduced in 2018-19, that is, from Rs 985 crores to Rs 849 crores. Still the Budget is claimed to bring light to poor households!

Drinking water and sanitation is another sector, which may have a significant bearing on the development and quality of life of the rural people. Percentage expenditure on this sector was proposed to be 0.93 per cent in 2017-18 (BE), which was increased to 1.08 per cent in 2017-18 (RE). However, in this proposed Budget the allocation for this percentage has been reduced to 0.92 per cent in 2018-19 (BE), which is even lower than 2017-18 (BE). Thus, it is a clear indication that drinking water and sanitation, although claimed to be one of the flagship programmes, does not match the promise when it comes to allocation.

Swachh Bharat Mission was launched with a big hype by this government. However, the proposed expenditure for the Swachh Bharat Mission for the financial year 2018-19 (BE) has been reduced to Rs 17,843 crores from Rs 19,248 crores in 2017-18 (RE). Thus, a significant reduction of Rs 1405 crores. The Finance Minister has announced two crore new toilets to be constructed. If this money is spent only for toilets, and no adminis-trative expenditure is involved, per toilet allocation comes to Rs 8921.5. We can imagine as to how serious the government is to its announcement in Parliament and before the people of the nation!

One may welcome the proposal of mega health insurance in the public sector, if what the Finance Minister has said is true. In the Budget speech the Finance Minister has said that 10 crore families will be given five lakh insurance cover each. This means the government has proposed Rs 50 lakh crores on health insurance. If we look into the overall sectoral provisions of health in Budget 2018-19, it amounts to Rs 54,667 crores only, which was just Rs 53,198 crores in 2017-18 RE. Meaning thereby the Central Government has increased merely Rs 1469 crores more than the last revised estimates, that is, 2.76 per cent, which may not be enough to maintain even last year’s status in this sector. Obviously, no provision for premium has been made for this mega scheme.

The expenditure on Social Welfare in the financial year 2018-19 is proposed to the tune of Rs 44,220 crores, whereas allocation for this sector in the last Budget 2017-18 was Rs 39,383 crores, that is, an increment of Rs 4837 crores, an increase of 12.28 per cent. Adjusting to the consumer price index 2.9 per cent, the real increase is 9.38 per cent, which includes departmental non-Plan expendi-ture on account of salary to the tune of the 7th CPC. Thus, we need to segregate the non-Plan parts of salary and maintenance expenditure. In fact, little is left for development expenditure. The proposed expenditure on pension scheme 1995 was Rs 5111 crores in 2017-18 (RE) which has declined to Rs 4900 crores in 2018-19 (BE).

If one considers the percentage allocations of resources through different major heads, the highest percentage of total expenditure goes to payment of interest, which is to the tune of 23.58 per cent. In 2014-15 this share was 24.65 per cent, in 2016-17 it was 24.34 per cent and in 2017-18 (BE) this share was 24.37 per cent. Thus, in the last four Budgets interest payment was on the top of the priority to the tune of 24.24 per cent. The second highest expenditure is 16.56 per cent for Defence. The third big-ticket is food and public distribution with 7.1 per cent in 2014-15, 7.84 per cent in 2015-16. This expenditure percentage was reduced to 5.83 per cent in 2016-17. This share was restored in 2017-18 (BE) to 7.01 per cent but revised estimates suggest reduced share at 6.55 per cent of the total expenditure. In this proposed Budget 7.13 per cent of the spending is for food and public distribution, which is the third highest expenditure so far of the total Budget. Transfer to States comes fourth in the order of spending (5.85 per cent). The percentage of transfer to the States has also been reduced significantly in comparison with the last Budget 2017-18 (BE). In 2015-16 the transfer to States was 6.41 per cent of the total Budget, which increased marginally in 2016-17 to 6.72 and thereafter this percentage has been reduced to 6.39 in 2017-18 (BE) which further got reduced to merely 5.4 per cent in 2017-18 (RE). Thus, the transfers to the State are going to be significantly less than in the previous year.

It is evident from the allocation of resources that interest payment comes on the top of the spending to the tune of 20.09 per cent of the total aggregate funds followed by Defence to the tune of 16.91 per cent. In terms of allocation of resources, it appears that neither agriculture, nor rural development, nor employment, social sector, is in the priority of this Budget. If one takes aggregates of all four Budgets the NDA-II has presented so far before the nation, the situation does not change any way. Thus, this Budget appears to be neither farmer-focused nor rural-centric as claimed by the Central Government.

Reference

Diwakar, D.M., (2017): ‘Challenges of Deepening Agrarian Crises in India’, the 41st Indian Social Science Congress, Volume XLI, pp. 375-393.

Government of India (2017): Central Statistical Organisation Press Release, 30.11.2017, Ministry of Statistics and Programme Implementations, www.pib.nic.in accessed on 01.12.2017.

Government of India (2018): Economic Survey, 2017-18, Ministry of Finance, Tabled in the Parliament 29.01.2018, www.finmin.nic.in accessed on 29.01.2018.

Government of India (2018): Union Budget 2018-19, Ministry of Finance, Tabled in Parliament on 01.02.2018, www.finmin.nic.in accessed on 01.02.2018.

ILO (2018): World Employment Social Outlook Trends, 2018, Geneva.

The author is a Professor of Economics and former Director, A.N. Sinha Institute of Social Studies, Patna.

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