Expectations From Union Budget 2023: The Great Leap Forward

As an annual accounting exercise for the nation, the Union Budget has been a fairly prosaic thing with incremental steps, underlined, almost always, by a constraint from the resources available. Even then, it is not as if, the occasional budget such as P Chidambaram’s ‘Dream Budget’ of 1997, with its emphasis on lower taxes and the Laffer Curve that expected lower taxes to furnish bigger yields, did not happen.

After 1991, and the era of liberalisation, the breaking away from the Licence-Permit Raj, it was in a way expected.

The last year’s budget for FY23 speeded things up considerably, when capital expenditure for infrastructure development was enhanced 24% to Rs. 7.5 trillion, more than double what it was in FY20. It will no doubt be enhanced to at least Rs. 10 trillion for FY24, which represents about 3% of GDP. This more so because this budget has been spent at a rate 63% greater in the first eight months of this fiscal up to November 2022, at Rs. 4.47 trillion. Infrastructure development is something of a hallmark of the BJP/NDA government.

 But now, as the nation reaches out to Amritkaal over the next 25 years, bolder steps and an even quicker pace are called for.

The nation must lay the groundwork for huge resource mobilisation, not just via sovereign borrowing, but massive private sector investment from home and abroad. This means the India story, with its huge domestic market and large work-force, must turn even more attractive. The paradigm shift called for is for this Amritkaal vision to drive the Union Budget, rather than a constant worry about deficits going out of control.

We may not meet the fiscal deficit target of 5-4.5% of GDP for a couple of years more, but if the extra money is spent in a worthwhile manner, this will not matter. Particularly since most development commitments are paid out in tranches over several years.

This could be the last full union budget to be presented by the incumbent Modi government. Next year, 2024, it is likely to be a vote-on-account to service the government’s liabilities, till a new government is sworn in. But, like 2019, the Modi government, in its confidence, may choose to submit a full budget in 2024 as well, with the proviso that large portions of it must be voted into effect after the new government takes charge.

As before in 2019, the new government too is likely to be a BJP/NDA government once more, giving them a consecutive three terms. The Opposition at present, disunited, disparate, under-funded, at loggerheads with the electorate, does not seem capable of mounting a serious challenge. This state of affairs must be calculated into budget 2023 and 2024.

For 2023 what should we expect? There may be some easing of direct taxation norms to please the salary earning middle class as the nation goes into 9 assembly elections before the general election in 2024. Likewise enhancements in rural spending to revive demand, and a slew of populist welfare measures to blunt the opposition tendency to offer freebies.

GST collections have been growing, and is expected to top Rs. 273 trillion in this fiscal against an earlier estimate of some Rs. 237 trillion. GDP too is growing at about 7% year-on-year and is expected to do so for a decade to come.

Any election year duo of budgets for 2023 and 2024, must work in the prospect of higher revenue collections and growth in GDP to deliver both immediate and longer-term benefits.

There may be some incentivisation of existing business and industry by way of tax reliefs, with a much greater incentive for expansion into new areas and greenfield joint ventures with foreign entities. This might be incremental and not really the bold moves called for.

With the government’s massive spending plans on infrastructure, defence, civic services, healthcare, education, and welfare, many are expecting the current account deficit to be let slip by 0.5%. Based on projected revenue and GDP growth, India can certainly afford it.

 Where should India enhance its budgets- certainly in defence manufacturing and procurement with an effort at keeping the money in country as much as possible. Accordingly, the amount set aside for domestic defence procurement in 2022 is 68% of the defence services capital acquisition budget of Rs. 1.24 lakh crore. To encourage private sector participation from the likes of L&T, Mahindra and Tata, certain dockyards and so forth, some 25% of the domestic procurement budget, or Rs. 21, 149 crore, has been earmarked for them.  Policy wise, these are good steps, but the sums involved are much too modest.

This defence acquisition budget of 1.24 lakh crores is itself all too paltry for our needs, both in terms of domestic capacity enhancement, and export ambitions. 68% may sound impressive as a domestic manufacture figure, but the pie is much too small, and then there is just a small amount going to the private sector. It is not incentive enough for domestic armaments manufacture to take off substantially as required. That is why it takes us so long to manufacture a single Tejas jet at HAL for example. It has near cottage industry capacity.

We have long been first or second in defence purchases in the world, fattening the purse of the Russians, French and Americans while being hamstrung for spare parts and ammunition. And indeed hard pressed to get them to stick to agreed prices, purchase, and post-purchase commitments.

Relatively, things have improved dramatically compared to a near non-acquisition for some quarter of a century, citing paucity of funds. This deeply compromised our national security and emboldened our enemies.

Today we have revamped ammunition production domestically and emergency purchased armaments to plug a lot of yawning gaps, but we still have a long way to go to develop a proper deterrent capacity.   

The fact that in the Republic Day parade 2023 the government chose to only display Made in India weaponry emphasised the change in our strategic thinking.

But the defence procurement budget should be more like Rs. 5 trillion with a 10% increase year-on-year. The percentages of domestic and foreign procurement may well be narrowed further as a consequence. Our latest commissioned submarine has a lot of India made parts. So does our aircraft carrier.

This is the only way we can create a formidable deterrent, and grow an export market in weapons to rival the vastly more expensive and sometimes not as innovative offers from the West and Russia. Our indigenous light combat helicopter and the recently commissioned Prachanda helicopters can operate with full weapon loads at 18,000 feet, unlike any of the imported helicopters even from the US.

Israel is a very useful joint venture partner and a fund of information on how to get the domestic armaments industry going as well. The 30 centres of excellence in various states that India has developed with Israel in the development of crops for semi-arid regions and advanced agricultural techniques, is a step already in the works.

No country that will be No.3 economically by 2028 can afford to be begging the big Western manufacturers for high technology weapons.

Next, we need a brand new, state-of-the-art and well-funded department of Research & Development, for defence- with much bigger budgets for DRDO, industry, manufacturing, construction, pharmaceuticals, agriculture, perhaps even a fresh ministry to look after it. DRDO now boldly says it can develop all sorts of engines for aircraft and ships. It has just supplied the propulsion system for the new Kalavari class submarine. A few years ago it was thought to be incapable. What is its future with political encouragement and lavish budgets?

This emphasis on R&D is essential as India aspires to become the new manufacturing hub of the world, as well as develop its own technology breakthroughs via its heavy industry, electronics, software and the world’s largest number of Unicorns and Start-ups. Artificial Intelligence, fighter, payload carrier and passenger drones, breakthroughs in alternative energy deployment, could all result in short order.

The pharmaceutical industry, expected to grow to $ 130 billion by 2030, particularly in generics, needs a major injection of funds and incentives to truly emerge as an unchallenged pharmacy to the world. This, with a wide range of life savings, drugs, medicines and vaccines. Our internal checks and balances and quality standard maintaining procedures must be made fool -proof if we are going to take on the global pharma industry- and avoid black marks such as the recent cough mixture controversies.

What is already being done to modernise and develop infrastructure, roads, ports, tunnels, dams must continue at a fast pace. The Indian Railways is being made financially viable and changed beyond recognition from its 19^th and 20^th century versions. The multiplying city Metro systems are renewing travel in logjammed cities. The long sea bridges, near sea coast transport including RO-RO ships, riverine transport at a fraction of the cost, all this must continue surging ahead, and not suffer any paucity of funds. This is the big push to reduce logistic costs from a high of 14% to less than 9%. It sets up a virtuous cycle for industry and attracts more and more foreign investment. The government seems well seized of this.

The commendable launch of an indigenous 5G system and burgeoning digitisation must continue apace. This is conjunct on India’s space programme because it will be satellites that will now connect the remotest parts of the country rather than terrestrial towers alone. The Spacex satellite system that has provided Ukraine its communications during this war are a great illustrator of what is possible. Of course, with India’s sheer numbers, unit costs soon become manageable and commercially viable.

 The new Indian operating system to rival Android and the IOS platforms is an exciting development and must be backed with sufficient funds. It is said to be superior to IOS and Android but that needs to be proved on the ground as soon as possible.

The various PLI schemes expected to attract investment of Rs. 4 lakh crores must be vastly enhanced. Since its introduction in 2020 it has done much to galvanise 14 sectors of industry it applies to. India put out Rs. 2.5 trillion, which, in turn, is expected to add almost one percentage point to GDP per annum, and create 4 million plus new jobs. But the window of opportunity will not stay open for long. China is weak now. We should increase the PLI scheme to Rs. 5 trillion as well. It could attract as much as Rs. 10 lakh crores in investment at this time. We would be flattening the uneven field to compete with rivals trying to attract the China manufacturing ‘refugees’ at this time.

India will want to encourage more and more foreign entities to set up manufacturing here, not only for the exciting semi-conductor industry, but for every other company in any field that wants to relocate from China or elsewhere. This surge of manufacturing activity will grow our export markets exponentially, strengthen our currency to a desirable stability, and provide millions of new jobs backed by a much improved logistics infrastructure.

Budget 2023 must lay strong foundations and glide paths for Amritkaal even as it looks and feels like an election year budget.

(1876 words)

January 26^th, 2023

For: Firstpost/News18.com

Gautam Mukherjee

 

Pharmaceutical Giant Pfizer Was Surprised By Indian Audacity At Refusing Indemnity To Its Expensive But Inferior Covid Vaccines

Red China is in the throes of an impossible Covid situation, persisting in 2023, as the Chinese New Year is being celebrated. It is an unstoppable movement of millions to meet with family, and go on holiday, mostly to Thailand, where Chinese are being let in with minimal restrictions.

Complete lockdown of entire cities, ruinous economically, have not prevented the infection of most of the population, with Covid variants. And deaths in their millions. The problem, even three years after it all began, is a flawed and ineffective Chinese-made vaccine, and a vaccination policy that concentrated on China’s armed forces and the young. Coverage was low, sporadic, never in excess of 30% of the population. The Chinese vaccine, exported to island idyll The Seychelles, where the Chinese have garnered influence, resulted in almost the entire population being infected.

India’s example in contrast, is nothing short of a golden beacon for friend and foe alike.

But recent remembrances were catalysed by the ongoing conference at Davos, with the Pfizer CEO refusing to answer questions on its lousy vaccine, as well as a tweet from Indian Union Minister of State for Skill Development and Entrepreneurship, Rajeev Chandrashekhar. The latter pointed at a thick-skinned trio of misinformation peddlers. They are vociferous Congress cheerleaders, including crafty senior lawyer Chidambaram, still facing various criminal cases, the vacuous Rahul Gandhi, also out on bail on financial irregularity cases, along with his mother Sonia Gandhi, and no-holds-barred amplifier cum His Master’s Voice, the impractical and Leftist Jayaram Ramesh.

All three bayed loudly for the importation of unproven Western foreign vaccines at the height of the pandemic, and cast doubt on the effectiveness of Indian vaccines being manufactured and disseminated at the time.

Pfizer, now much criticised globally, initially claimed more than 80% efficacy for its vaccine, quite fraudulently, just to boost sales. But it knew the truth internally, and therefore asked for indemnity against the vaccine’s ineffectiveness from India, which fortunately was not granted.

Later, on examination it was found, that the Pfizer vaccine had only 12% efficacy, and did not prevent transmission. Millions around the world were cheated and bodily harmed. In India, those who think ‘West is Best’ used Pfizer vaccines too, paying through their nose for vaccines that did not work.

The Indian fifth column, true to form, wanted to do everything in their power to derail the Indian response to the pandemic. Their prime agenda was to discredit the Modi government by hook or by crook. India’s home-grown vaccine, Covaxin, had 77% efficacy, and was provided to most people completely free-of-charge.

In addition, millions of doses were donated to other countries abroad and exported to the West. The Astra Zeneca vaccine, Covishield, also provided free to many, made under licence in India, had similar levels of effectiveness. Boris Johnson, then prime minister of the UK, was administered Covishield from India, and made a complete recovery.

India vaccinated over a billion of its own people using made-in-India Covid vaccines, and created herd immunity amongst a massive population of 1.4 billion. This is serving us in good stead today.

For an emerging economy born out of centuries of colonial domination by the British, followed by a spiteful British instigated partition that killed more than half a million people, displacing and beggaring millions more - getting a raw deal has become routine, almost as if it is fated.

Initially, it was expected, because of our hopelessly anglophile leadership, but persisted for decades after independence, because of continued Indian post-colonial attitudes of servitude and lack of confidence.

In fairly recent times also, unequal treaties have been the bane of a weak and politically fragmented coalition government in India. The most humiliating in recent memory, was the hard fought for but blighted nuclear power deal. Prime Minister Manmohan Singh, ever the installed puppet, made a success of the nuclear power deal, with the out-of-the-way help provided by the Republican US President George W Bush. But the blockers who hate India making progress found another way. They asked for an indemnity against liability for any nuclear accidents for the reactors the American supplied. The French followed suit. This bogged it down, and the only nuclear reactors commisioned at Kudankulam I and now 2, are those supplied by old reliable Russia.  They are also India’s biggest reactors. India and Russia are planning to go ahead with Kudankulam 3 and 4 as well.

Of course, the American NGO universe riled up the locals to delay both reactors commissioned in 2013 and 2016 by several years. They had done likewise to retard the progress of the Narbada Dam that has fed water to large dry areas, by quite a few years too.

The fact that emerging economy India is now a middle-income economy at No.5 in GDP in the world amongst major economies, is leading to a lot of discomfort not just amongst enemy countries like China and Pakistan, but the G-7 countries of the West too. Combined with a markedly nationalist tone in the conduct of trade, foreign affairs, and defence today, it is giving the erstwhile colonial powers the jitters.

We have vastly increased our petroleum imports from Russia, fighting its war with the West, NATO, EU and Ukraine. This independent line taken that has greatly suited Indian interests is infuriating to the West. It realises that as long as the Hindu nationalist government succeeds in retaining the confidence of the Indian people, they cannot dominate our policies to suit themselves. As a consequence, the latest salvo is aimed directly at Prime Minister Narendra Modi by the UK government owned BBC. The national broadcaster has used discredited and unproven innuendo to paint Modi as a communalist, responsible for the Godhra Riots of 2002. The purpose of dredging up the topic from twenty years ago is to influence the forthcoming assembly elections of 2023, and the general elections of 2024, against the BJP.

The reaction on the ground to BBC’s scurrilous propaganda has been sharp and prompt, and is likely to consolidate the BJP vote further. Further efforts of this order from the West bent on maligning and taming the present government in India cannot be ruled out.

However, at the same time, it is being recognised by the World Bank, the IMF and others, that India will become the No.3 economy by 2028, if the BJP wins another majority in 2024. So, the West, led by America, is keen on ostensibly allying with India, particularly in the QUAD, AUKUS, G-20 and other fora, both to contain China, and recognise the inevitable rise of a power whose time has come. Other alliances such as the I2U2 are also full of promise.

Middling powers such as Britain, burning with post-colonial envy, is setting about it all wrong if it wants to sign an FTA with India in the near future. Not only does India have options, it is quite willing to exercise them to its benefit.

Making up lies about India may be all that countries like China, Pakistan, Turkey, and indeed their fifth column supporters in-country are left with. But such shenanigans will neither unseat a highly popular government, nor provide any succour in the coming general elections. The visible progress that India is making on multiple fronts is a matter of pride for its citizens, and the Opposition are looking more and more like dangerous anti-national dissidents. Dissidents being aided and abetted by those forces who don’t want to see India grow and prosper. It is a back-handed compliment that we could well do without.

(1,255 words)

January 20^th, 2023

For: Firstpost/News18.com

Gautam Mukherjee

 

Prime Minister Narendra Modi Is India’s Deng Xiaoping And Has Been Thus Inspired From The 1980s

Prime Minister Narendra Modi has been Chief Minister in Gujarat from soon after the dawn of the millennium in 2001. He was installed in the hot seat by the BJP party leadership including Prime Minister AB Vajpayee and Home Minister LK Advani, after a spell of some years in New Delhi as an assistant, an RSS Pracharak, and sometimes, an arresting TV commentator.

Of course, Narendra Modi has been an RSS Pracharak, winding his way through the dusty roads of Gujarat, and even in many places abroad, while on tour with his modest jhola, since before the Emergency, and at least the 1980s.

His ideas on development formed in those early years when not in power. He was not just spiritually inspired by Swami Vivekananda and others, but often wondered why a country with the calibre of its great men through the ages and recent times was not progressing as much as might have been hoped. Speeches he made in the eighties at RSS gatherings, that have survived, have made this clear.

In Gujarat, he was at the helm for fifteen years continuously, leading a majority BJP government.  During these years, he pulled close ideologically to the Deng Xiaoping model of development, its immense talent at manufacturing in China, which he sought to replicate in Gujarat. He was also drawn to the discipline and aesthetics of Japan. He met his friend and like-minded leader Shinzo Abe, during these years at the helm in Gujarat. There were regular Gujarat based development jamborees to which many foreign entities came.

Of course, some of his efforts were stymied and marred because he was perceived as a major threat by the UPA government.  Chief Minister Modi and his Home Minister Amit Shah were constantly put under pressure by the Centre, branded as Hindu communalists, and everything possible was done to tarnish their reputation. This even stretched to requesting foreign governments, including the US, to not even grant Modi a visit visa!

Modi’s innings in Gujarat did get off to a stormy start with the infamous Godhra riots in Ahmedabad in 2002. However, the people of Gujarat stood by his leadership, as they still do as prime minister, and gave him an uninterrupted three terms. Modi transformed Gujarat, his home state, into one of the most prosperous and developed states of the Indian Union in this time. There were no more communal riots in Gujarat after Godhra at all, and they have not returned even after Modi personally moved to New Delhi as prime minister in 2014, with Amit Shah in tow.

Modi’s imprint on the administration of Gujarat was so deep, and his continued nurture of the state so attentive, that the BJP has retained the state without interruption in the eight years since, winning yet another five-year term recently.

Today, Prime Minister Narendra Modi’s great emphasis on modernisation and infrastructural development continues at great speed. He seems singularly determined to transform India into a developed state, certainly in the top three of all major economies, but also into a major pilar of a multipolar world that is emerging in geopolitics.

Deng Xiaoping could only come back into contention after the end of the Mao Zedong era, and used 30 years of double-digit growth and exports to the US and the West to propel China into the No.2 slot. That Xi Jinping, now in his third-term in power, is increasingly trying to bring back the Mao era, replete with disastrous economic notions and hard imperialistic tendencies, does not bode well for the CCP, and the future of China under its leadership. It could even bring Communism in China down before very long.

This current state of affairs in China, including the resentments worldwide caused by the Covid pandemic perceived to have originated in, and still perpetuated by China, is seen as an economic opportunity by Modi’s India.

The BJP has always sought to steer a path between Socialism embraced by the earlier dispensation, and Capitalism, as in the private sector. A Welfare Statism, aimed at the bottom of the pyramid, has been in place in the Central Government, but alongside huge expenditure on infrastructure, to encourage entrepreneurship and manufacturing.

Now, the time has finally come to see manufacturing growing to claim more than 30 per cent of the economy, or more, up from about 25% now. This is expected to manifest via multiple fields, including electronics, automobiles, the digital revolution, space, the blue economy, alternative energy, defence manufacturing, semiconductors. A page, if you like, out of the Gujarat development book, that saw a higher growth rate for over a decade than the national average, with greater productivity, and indeed that of Deng Xiaoping’s keep your head down but work hard economics.  

As a democracy, introducing the GST regime, the bankruptcy law, demonetisation to reduce the influence of the cash economy, widespread digitisation of the financial and credit systems, amongst other initiatives such as the administration of the richest cricket club in the world- the BCCI, and even the ICC for a spell, have also contributed immensely.

Privatisation has been a bumpy road so far, though unloading Air India to an eager Tata has been a stellar accomplishment, because the government just ran it into the ground with ongoing and massive losses.

Modi had no occasion to try privatisation in Gujarat. It is, overall, much simpler to run one’s home state. At the Centre, to find buyers willing to pay fair value for badly-managed government assets is problematic, both politically and economically. Asset strippers are readily available, but not nurturing entrepreneurs, willing to take on largely unproductive government employees, and superannuated assets, besides the land and buildings.

However, the three Gujarati stalwarts, Ambani, Adani, and Tata, have been of the greatest assistance in moving into high investment infrastructure areas such as ports, airports, power, as well as in acquiring struggling businesses. Others, such as L&T, Mahindra, and Tata again, are now prominent in defence manufacturing too.

While India is broadly in favour of globalisation and free trade, the Modi government has placed national self-interest stage centre in the mix. It wants reciprocity and mutual advantage, or it tends to lean towards aatmanirbharta.

In a sense, both the tendencies of the RSS/BJP economic thought that favour globalisation on the one hand, and protectionism on the other, are being served via the prism of national self-interest.

Other thorns such as the failure of the Farm Laws in the face of stout opposition from vested interests; when to go in for genetically modified seeds for bumper crops at a cost; labour reform, and land acquisition difficulties, keep Modi’s India shackled to its feudal/socialist past to a significant degree. And this despite two majority governments at the Centre, that might become three in 2024.  

In reaction, the Opposition becomes more rigid in its cling to obsolete socialist dogma, but mainly because it does not want to be obliterated altogether.

All in all, a 7% odd growth in nominal GDP rates year-on-year, expected for the next ten at least, suggests the mixture of policies adopted by the BJP government with no hard-line ideological moorings works quite well. It is not only the fastest rate of growth in any major economy in the world, but is proving consistent in the post Covid scenario.

Modi’s own instincts to take over the world’s manufacturing and supply chains from China, including the raw materials and components, have to work alongside our democracy and historical baggage. However, India is not threatening in the perception of foreign investors. It is stable, and has the largest intelligent and young work-force in the world. Most understand the global lingua franca English, and can be readily skilled.  

Circumstances and contours are different from when China was inducted into the Western geopolitical matrix in the 1970s. Mao Zedong and Nixon may have agreed to cooperate, partially to bring the Soviet Union down, but it was Deng Xiaoping, domestically exiled under Mao, who could bring the promise to flower and fruit.

Likewise, a man of destiny in the shape and form of Prime Minister Narendra Modi is not only making a reality of his early vision, but opening the gates wide to the Amritkaal he often speaks of, this time, for the country.  

(1,372 words)

January 10^th, 2023

For: Firstpost/News18.com

Gautam Mukherjee