Home > 2019 > Illusionary Directionless Populist Interim Budget

Mainstream, VOL LVII No 9 New Delhi February 16, 2019

Illusionary Directionless Populist Interim Budget

Sunday 17 February 2019

by D.M. Diwakar

The Union Budget is presented under the provision of “The Procedures of Financial Matters” in Articles 112 to 118 of the Constitution of India (GoI, 2015: 54-59), an intended financial proposal of the Union Government about its receipts and expenditure for the next financial year from the Consolidated Fund of India to attain the goals set by the Constitution of India in its Preamble. The NDA-II Government has presented five Union Budgets since 2014-15, which were already analysed earlier. (Diwakar, 2018) This is the sixth Budget proposal, which has been presented for the financial year 2019-20. Needless to say that the present Union Government has been mandated to run the government until June 15, 2019, as it took oath on June 16, 2014.

A new government will be elected by the people of India to rule the country once it is in place, and it will present the full Budget to run the government. Hence, this Budget is an Interim Budget. It is expected from the government to know its limitation and act accordingly. However, the present dispensation not only placed a full Budget before Parliament but also drew an ambitious vision for the the next 10 years. This implies that the parties in government are either fully confident that they will run the show for the next 10 years taking the people for granted or they are desperate to lure the people through unrealistic promises to announce, and not to honour what they announce, something they have been doing since day one when they came to power. This exercise is intended to understand the Interim Union Budget 2019-20 and its implications.

Needless to mention that the government in power has customarily been presenting the status of the Indian economy through the Economic Survey before Parliament and the people of the country as a reference to carry out the business of the government in power in the interest of the people before placing a Budget proposal for the development and growth of the country. This government could not place the desired document before the House and people of the largest democracy about the health of the Indian economy this time, but was restless to present a full-fledged Budget before the House eyeing on the ensuing elections to the Lok Sabha. This implies that the people in government did not do proper homework before coming to Parliament and the people of the country, but never missed to encash in a popular opportunity to lure the people without homework.

The latest press release of the Central Statistical Organisation (CSO) on November 30, 2018 (GoI, 2018a) gave enough indication about the slowing down of the growth rate of the Indian economy. The Gross Value Added (GVA) at constant prices 2011-12 was 8.0 per cent in Q1 (April-June) of 2018-19 but slowed down to 6.9 per cent in Q2 (July-September) of 2018-19. Sectoral GVA for agriculture in Q1 was 5.3 per cent, which slowed down to 3.8 per cent in Q2. The growth rate of mining turned from 0.1 in Q1 to negative 2.4 per cent in Q2. In case of manufacturing, the estimated GVA of this sector declined from 13.5 per cent in Q1 to 7.4 per cent in Q2. Construction recessed from 8.7 per cent in Q1 to 7.1 per cent in Q2. Financial services, real estate and professional services also slowed down from 6.5 per cent in Q1 to 6.3 per cent in Q2. The Gross Domestic Product (GDP) at constant prices 2011-12 grew by 8.2 per cent in Q1, which declined to 7.1 per cent in Q2. Recession in the GVA and GDP and all these sectors has serious implications on employment and earnings of the people. As a result, private final consumption expenditure of the GDP has declined from 54.9 per cent in Q1 to 54.5 per cent in Q2, which has accelerator effects on the economy. Percentage expenditure of the GDP on export has increased merely by 0.4 from 21.4 in Q1 to 21.8 in Q2, whereas percentage expenditure of the GDP on import has increased from 24.7 in Q1 to 26.6 in Q2. This means that the current account deficit has widened. In such a situation, any serious government accountable to the people and Constitution should have brought the Economic Survey of 2018-19 for discussion. This implies the government in the last leg of its tenure is more worried of popular electioneering gimmicks for power than a serious debate on the health of the Indian economy and confidence in the wisdom of Parliament.

The Government of India led by NDA—II has presented its last Interim Budget worth Rs 27,84,200 crores for the financial year 2019-20. (GoI, 2019) The size of the Budget has increased substantially. Generally it has been doubled in the UPA as well as NDA-led governments in their five years tenure. In 2008-09 the actual Budget expenditure was Rs 8,83,956 crores which increased to Rs 15,59,447 in 2013-14, that is, around 76.42 per cent. During the NDA-II regime it has increased from Rs 16,63,673 crores in 2014-15 to 2015-16 Rs 17,90,783 crores in 2015-16, Rs 19,75,194 crores in 2016-17 to Rs 21,41,975 crores in 2017-18 and Rs 24,57,235 crores in 2018-19 to Rs 27,84,200 crores in 2019-20. Thus, first Budget of the NDA-II was an increase of merely 6.68 per cent, which subsequently increased to 7.64 per cent in 2015-16, 10.30 per cent in 2016-17, 8.44 per cent in 2017-18, 14.72 per cent in 2018-19 and 13.31 per cent in 2019-20. If one scrutinises the proposed Budget in its totality, percentage increment in the proposed Budget has declined in comparison to the last Budget by 14.02 per cent, which increased to 14.72 per cent in the revised estimates. The overall increase with regard to the initial figure was 78.54 per cent, an increase of 2.12 per cent more than last UPA regime. This government has presented six Budgets in which there was on an average 10.18 per cent annual increase in expenditure. Percentage increment in the proposed Budget has been reduced to 13.31. This proportionate reduction will be reflected in various heads of the proposed Budget expenditure.

Revenue receipts in 2013-14 was Rs 10,14,724 crores, which was raised to Rs 12,44,885 crores in 2014-15, Rs 17,15,822 crores in 2016-17, Rs 14,35,223 crores in 2017-18, Rs 17,29,682 crores in 2018-19 (RE), that is, by 20.52 per cent. However, proposed revenue receipts for 2019-20 is Rs 19,77,693 crores, which is merely an increment of 14.34 per cent, that is, more than six per cent lower revenue projection than the current year. This will have serious implications on government expenditure. If one looks at capital receipts, recovery of loan has been declining from Rs 15,633 crores in 2017-18 to Rs 13,155 crores in 2018-19 and proposed recovery is still lower to Rs 12,508 crores. Therefore, other receipts which were reduced last year to Rs 80,000 crores in 2018-19 from Rs 100,045 crores in 2017-18 has again been pegged up to Rs 90,000 crores and borrowing and other liabilities which were Rs 5,09,164 crores in 2017-18 was increased to Rs 6,34,398 crores in 2018-19 and has further been accentuated to Rs 7,03,999 crores in 2019-20. Thus, the increase in borrowing and other liabilities in the last two years is about Rs 2 lakh crores, despite claims of higher returns through Goods and Services Tax (GST). Still the fiscal deficit, which was proposed at 3.3 per cent in 2018-19, was increased to 3.4 per cent in the revised estimates and may rise further because of implications of popular announcement for the current financial year. Therefore, rising borrowings and fiscal deficits will be further rising.

However, broadly on face value this Interim Budget sounds popular in many senses for labourers, farmers and middle classes, senior citizens to cheer up, such as the proposal for pension to unorganised workers up to Rs 3000 per month, assured income to marginal and small farmers up to Rs 6000 per annum, income tax rebate up to Rs 5 lakh, increase in allocation of agriculture and allied sectors, petroleum subsidies, tax administration, transfer to GST fund, and IT and Telecom sector, increased deductions on medical expenses to senior citizens, student loan interest, home loan interest, etc. If one examines a little further, it appears an altogether different scenario. No mechanism has been articulated for identifying labourers of unorganised sectors so far in the Budget. Even pension will be given after 60 years and the contribution has to be made periodically.

The proportionate share of agriculture and allied sectors has increased significantly in terms of proposed allocation from Rs 52,628 crores in 2017-18 to Rs 86,602 crores in 2018-19 and Rs 149,981 crores in 2019-20. It is a significant increase from 2.46 per cent in 2017-18 to 3.52 per cent in 2018-19 and 5.39 per cent in 2019-20. However, the major expenditure of this goes to farmers’ income support (Rs 75,000 crores) and crop husbandary (Rs 8664.32 crores). If one examines a little further carefully, expenditure on irrigation is important infrastructure for the development of agriculture. PM Krishi Sinchai Yojana for per drop more crop had expenditure of Rs 2819.25 crores. In the 2018-19 Budget a provision of Rs 4000 crores was made but the revised estimate had been reduced to Rs 2954.69 crores in 2018-19 (RE). This indicates the efficiency and seriousness of the government for agricultural development. Moreover, the budgetary proposal for the year 2019-20 has been reduced to Rs 3500 crores from a provision of Rs 4000 crores in 2018-19. This again revalidates the lacking political will to develop the agriculture sector which has been neglected in terms of irrigation and public investment.

Market intervention and price support scheme (MIS-PSS) has a provision of merely Rs 3000 crores in 2019-20, which is Rs 2000 crores in the current financial year. With this allocation of funds 50 per cent above the cost of cultivation is claimed for 22 crops. There has been a hype on initiatives for doubling the farmer’s income. However, the proposal for the allocation of funds for the PM Annadata Aay Sanrakshan Yojana (PM-AASHA), which was merely Rs 1400 crores in the current financial year 2018-19, is now proposed to be Rs 1500 crores in 2019-20. Pradhan Mantri Fasal Bema Yojana (PMFBY)’s allocation for the current financial year was Rs 13,000 crores which has been increased to Rs 14,000 crores. This may have another angle of a third party like insurance company in case of crop insurance to farmers. A response to a non-starred question in Parliament (GoI, 2018b) reveals that about 4,87,58,386 farmers were insured, 490,43,539.53 hactares area were insured. Insured sums were Rs 1,97,942 crores and gross premium sums were 25,140.54 crores and claims settled were merely Rs 12,409 crores. Hence, differential profit from premium paid and claims was to the tune of Rs 12,731.34 crores. A majority of the insurance companies are from private players. Therefore, crop insurance is more for the corporates than farmers. The provision of merely fertiliser subsidies has been reduced from 3.1 per cent of the total expenditure in 2017-18 to 2.85 per cent in 2018-19 and further reduced to 2.69 per cent in 2019-20. Expenditure on food subsidies has also been reduced from 6.97 per cent in 2018-19 to 6.62 per cent in 2019-20.

The income support scheme is a welcome initiative, which has a major allocation of Rs 20,000 crores for the current financial year and Rs 75,000 crores out of Rs 1,49,981 crores in 2019-20. In this scheme, there is proposal of Rs 6000 per annum or Rs 500 per month or Rs 16.44 per day or roughly Rs 3.29 per person for the dignity of a family of small and marginal farmers. This sounds still ridiculous when this Rs 6000 will be paid in three instalments Rs 2000 in each, creating unnecessary homework and pressure for line department and banking systems. Moreover, it is silent about landless farmers and tenant farmers who generally work and operate on owner farmers’ lands.

The percentage of proposed expenditure on education has been declining from 3.74 per cent in 2017-18 to 3.40 per cent in the 2018-19 revised Budget and further it was reduced to 3.37 per cent in the 2019-20 proposed Budget. This means clearly that the public education system has lost its priority for the government, which claims to be a savior of Skilled India and there would be no further strengthening of the public education system, be it school, college, university, or research and drive for privatisation of education will continue with growing require-ments. The expenditure on scientific department has been reduced from 1.03 per cent in 2017-18 to 1.02 in 2018-19 and 0.94 per cent in 2019-20. We all know that privatised education is meant for those who have purchasing power to buy education. This also implies that the present regime although its claims for skilled India for Sabka Sath Sabka Vikas, it is least bothered for the majority of the masses, who still survive on teacher-less and infrastructure-less schools, colleges, and universities.

Aayushman Bharat is being claimed to be the biggest scheme for health insurance but if one goes into the percentage figure of budgetary allocation for health, it has been reduced below the percentage share of 2017-18. In 2017-18 the health expenditure was 2.47 per cent of the total expenditure, which was reduced to 2.28 per cent in 2018-19 and left unchanged in 2019-20. By implication, if you discount inflation, it has further got reduced in comparison with the current financial year. Moreover, insurance does not mean health infrastructure, hard or soft. If a poor family gets ill he or she has to visit the health sub-centre at the village of the health centre in block or hospital in district headquarters. But if we provide money through insurance he or she may go to a private hospital, if there is no good hospital. Hence, insurance may not substitute the public health infrastructure. Private health insurance players get advantages and public health institution remains in dilapidated condition. If proper investment for the development of public health infrastructure (hard and soft) is made and a health-sensitive environment is created, there is hardly any need for health insurance. The Bhore Committee Report of the WHO in 1940 talked about preventive health care but that advisory was hardly taken care of, rather the entire emphasis has been and is being focused on curative health care. Privatisation of the health care system has thus been designed to syphon out hard earned public taxpayers’ money for feeding the private corporate health care system.

The percentage of rural development expendi-ture, which was 6.3 per cent in 2017-18, was reduced to 5.5 per cent in 2018-19 and 4.99 per cent in 2019-20. This indicates that rural development is relatively at a lower priority. About 1.31 per cent less expenditure in the rural development sector alone means Rs 36,470 crores. If one adds up the proportionate reduction in food and fertiliser subsidies, and the Centrally sponsored scheme sectors, the amount being claimed to be given to farmers is less. The PM of India in the beginning of the tenure of the 16th Lok Sabha asked MPs for adopting at least one village from his constituency; no update on this account has been placed about the situation so far. Obviously, nothing significant is available to report. Even the percentage expenditure for social welfare has declined from 1.89 per cent in the current financial year to 1.77 per cent in 2019-20. Percentage expenditure on Centrally sponsored schemes has declined from 13.33 in 2017-18 to 12.41 in 2018-19 and further reduced to 11.77 per cent in 2019-20. This implies that to keep the proportionate budgetary allocation to the tune of the current financial year would have required an additional Rs 43,433 thousand crores.

The percentage expenditure on establishment has declined from 22.08 per cent in 2017-18 to 21.04 per cent in 2018-19 to 19.44 per cent in 2019-20. Hence, no measure to strengthen the public sector, rather it will be weakened if appoint-ments have been kept in abeyance; and the public sector has been weakened and is being ignored despite growing unemployment. In order to keep the percentage of expenditure on establishment last year, additional allocation of Rs 73,503 crores investment would have been required. Even the proportionate share of pension in the total Budget expenditure has declined from 6.8 per cent in 2017-18 to 6.78 per cent in 2018-19 and 6.26 per cent in 2019-20.

Expenditure on energy has been reduced from 1.97 per cent in 2017-18 to 1.88 per cent in 2018-19 and further to 1.58 per cent in 2019-20. Expenditure on commerce and industry has been reduced in absolute terms from Rs 28,394 crores in 2018-19 to Rs 27,660 crores in 2019-20.

There was thumping appreciation by the ruling coalition in the Lok Sabha during announcement of income tax rebate up to Rs 5 lakhs. But there is hardly any change in the income tax slab, if income exceeds from Rs 5 lakhs without investment and Rs 6.5 lakhs with investment. If income exceeds Rs 5 lakhs without investment the tax slab of five per cent beyond 2.5 lakhs still exists. The GST was claimed to be self- reporting but expenditure on tax administration has been increased from Rs 67,448 crores to Rs 1,17,285 crores, a significant jump from 2.74 per cent to 4.21 per cent of the total Budget expenditure. Moreover, after introducing GST the Central Government claimed it good and simple but it has been so complicated that there has been some modification at every meeting.

The Budget is silent on measures of macro challenges such as the issues of employment generation to tackle the all-time high unemploy-ment. Petroleum subsidies in the last four-and-a-half years was reduced to pay the loans. But loan has increased by more than 49 per cent during the present regime and there is no significant effort to repay the loans. Therefore, this Budget does not offer any solution to the agrarian crisis of the farming community, not for rural development, nor for education, scientific research, health, nor for social welfare. It appears direction-less and sounds illusionary and populist without any proper homework on the economic fundamentals to address the basic issues and challenges.

References

Diwakar, D.M. (2018): ‘Are Budgets of NDA-II Budgets Farmer Focused and Rural Centric?’, Mainstream, Vol.LVI, No.10, February 24, 2018, pp. 17-21.

Government of India (2019): Union Budget, https://www.indiabudget.gov.in/accessed on February 1, 2019.

Government of India (2018): Implementation (Estimates of Gross Domestic Product for the Second Quarter (July-September) of 2018-19, Press Information Bureau, Ministry of Statistics and Programme, http://www.mospi.gov.in accessed on February 1, 2019.

Government of India (2018a): Response to question no. 3435 by the Ministry of Agriculture and Farmer Welfare, Agriculture, Cooperation and Farmer Welfare Department, on August 7, 2018.

Government of India (2015): The Constitution of India (As on 9th November 2015), Ministry of Law and Justice, Legislative Department, New Delhi, http://www. legislative.gov.in/states/default/files/coi-4March2016.pdf accessed on February 7, 2019.

The author is a Professor of Economics and a former Director, A.N. Sinha Institute of Social Sciences, Patna. He can be contacted at e-mail: dmdiwakar[at]yahoo.co.in

ISSN : 0542-1462 / RNI No. : 7064/62 Privacy Policy Notice Addressed to Online Readers of Mainstream Weekly in view of European data privacy regulations (GDPR)