Budget
2019: Foundations For A $10 Trillion Economy By 2032
People think that a liar gains a victory over his victim- Ayn Rand in Atlas Shrugged
A farewell budget that lays out a 10 year road-map
and a pot of gold $ 10 trillion strong at 13 years from now, is unusual to say
the least. If you think of 2032, when most of our 65% of the population that is
under 35 will be around; remember $10 trillion puts you in the top three
economies of the world in nominal terms, and probably at the very top in PPP
terms.
This is due to India’s 7-8% GDP growth per annum,
year on year compounding away, and expected to power on for the next 30 years.
No other major economy can hope for as much with the near certainty that we
can. Of course, it presupposes that the great Indian electorate does not plunge
this country into chaos by throwing a spanner in the works.
Modi’s audacity is in his assumption of continuity.
He is banking on the good sense of the electorate to see him through. And very
deftly, he has moved the time dial for himself forward. In 2014, he used to
speak of the need for 10 years to get many things done. At the end of the first
five, he wants, health and God willing, a further 13 years – some two-and-a-half
terms to retirement or worthy Lotus branded successor.
There is no pleading or grandstanding Congress-style,
of “if we are voted back to power”. And this, weeks before the declaration of
dates for the general elections 2019. And in the face of a howling cacophony of
an Opposition contemplating a life of irrelevance and powerlessness.
The whole country registered the point that Modi
thinks he has done well because he has not hesitated to list his government’s
achievements so far. But, he also needs more time to see his vision through to
its logical conclusion. Given that the other side had nearly 6 decades, most of
them mired in low growth, scarcity and poverty, it seems like a very reasonable
implied request indeed.
The foreign media was quick to join a chorus of
domestic observers that called it a “campaign budget” because it tried to
include over 70% or more of the electorate in its reach.
It was campaign promise, yes, but also an American
style “state of the union” address, and
a vision statement,besides being at its minimum the usual set of proposals
towards the annual accounting exercise.
The new NSSO data on jobs on which the Opposition
has jumped with all the vigour of a pack of ravenous hyenas, is clearly
spurious, resignation of its authors notwithstanding.
This talk
of a 45 year high in unemployment is absurd, because 45 years ago this country,
in the sadistic grip of the Licence-Permit Raj and minus growth rates, was
barely allowed to manufacture a sling shot.
It therefore reads like an old Soviet crop report
in its exaggeration and inaccuracy. The
half baked NSSO report was leaked just before the tabling of the interim budget
on February 1st, despite being disallowed by the government.
It has clearly done no more than a shoddy job of
surveying the formal economy. That the Private Sector in it, mostly benefited
by Congress and its payola systems, and in a sulk ever since it was booted out,
along with a mostly unproductive Public Sector, is not the whole truth, is
obvious.
The formal private sector, deprived of loans they
understood they were not required to pay back, leading to a massive bad debt
problems at all the public sector and some private sector banks, has indeed not
grown much.
The informal economy however, which is at 80-90%
of the whole, and fuels the robust GDP growth too, is ignored by the lazy babus
at the NSSO, who can’t be bothered to survey and enumerate it. But this cannot
be ignored with impunity. Certainly not without serious distortions of data. Because,
it, the domestic service, the self-employed small entrepreneur, the street
vendor, the drivers, helpers, cooks, guards, construction site workers, chowkidars
even - is growing very much faster than the formal economy!
Along with it are the poorly documented small and
medium enterprises, estimated to employ some 200 million people at least. In
this budget, this MSME sector has been given an interest subvention of 2% for
loans up to Rs. 1 crore.
The broad informal sector has been offered a small
monthly pension of Rs. 3,000 per month after the age of 60. It is a benefit
that will accrue to millions of people. This comes on top of the other
insurance schemes for the poor, announced earlier, including those for medical
insurance, life, and accident insurance. In addition to bank accounts,
Aadhar-based identity authentication, and a massive thrust towards
digitization, the insurance vehicles are definitely a Modi favourite.
The larger benefit for the country is the
inclusion of the same millions who work in these sectors, on the statistical
rolls. We will know who these people are, where they work, as the pension
scheme identifies millions of workers for eligibility. They can qualify for the
scheme only by making a monthly contribution of between Rs. 55-100, depending
on age. It will be therefore, to an extent, self supporting, like most
insurance schemes are.
In this “interim budget” as a whole, there was the
careful balancing act of distributing sops, incentives, and largesse, without
impacting the admirable fiscal deficit number as it stands. Certainly not by more than 0.1 per cent, even projected into
next year. This was made possible by a doubling of direct tax collections for
the very first time.
It was a
budget that was responsive to the needs of various sections of the population,
and thanked the taxpayer, a first for any Indian government, for enabling the
development programmes of this administration to go forward.
The Modi Government presented, via a stand-in
Finance Minister who is also the Railway Minister, what might have been a
vote-on-account. That is if it was an administration with less self-confidence
and more reverence for convention.
Minister Piyush Goyal, young, fit, fluently
bilingual in Hindi and English, presented a substantial budget though a long speech.
The Prime Minister, Narendra Modi was there,
thumping the table along with his colleagues on the Treasury Benches, in
repeated approval of many of the announcements that were made.
The media and the middle classes saw to it that
the best received announcement bar none was
the one that exempted up to Rs. 5 lakhs in taxable income, from Income tax. It
will benefit an estimated 3 crore people. And there were hints that people in
higher tax brackets might also see some relief when the budget proposals are
confirmed after the elections.
This even
as a small payment of Rs.6,000/- per annum to farmers who own less than 5 acres
of land, has nevertheless remembered another12 crore people.
This too, like the pension scheme for the informal
sector will help identify by name, Aadhar Card and bank account some 12 crore people who qualify, and will
also improve our statistical abilities. States will need to cooperate by
supplying much of the information from its land records. But the uses of this
captured information will be handy for other benefits too, as they roll out in
future.
The Congress was quick to mock at this one,
announced early in the budget speech, seeing their plank of being the farmer’s
champion melting away. At just Rs. 17 a day, Rahul Gandhi called it an “insult” to the
“Indian farmer”. Internet wags promptly mocked him on social media, calling it
0.02 paise per second. This, even as the BJP said the States, particularly the
Congress ruled ones, were at liberty to enhance the amounts to the extent that
their purse and conscience could afford.
This was probably in oblique reference to the
already floundering farm loan waiver schemes announced by the Congress in the
three Hindi heartland states they have recently won as well as in Karnataka.
This token amount, of course, comes on top of
other benefits such as minimum price guarantees for produce, subsidized
fertilizer and low cost loans and interest waivers - also extended by this
budget to those in fisheries, poultry and dairy industries.
The moribund real estate sector that accounts for
at least 10% of the GDP, ignored for the entirety of the Modi government so far,
despite being a significant employer, has at last been given some benefits.
Perhaps the government saw its relentless emphasis on infrastructure
development in preparation for facilitating a $ 10 trillion economy, as
attention enough.
However the housing, office, retail shopping
centres and so on, are definitely a distinct, largely urban area category, and
deserve encouragement. Having seen the light on this at last, the present
budget moves on relief in notional rents from second homes. It also includes
long term capital gains from property concessions. This permits the buying two
homes after the sale of one to a capital gains value of Rs. 2 crore, without
attracting any tax, but only once in a lifetime.
There were a number of efficiency oriented
announcements including income tax
assessments and refunds within a day, digitized and anonymous scrutiny, single
window clearances for domestic film-makers, and a massive push for furthering
the digital in general as a tool to curb corruption and increase efficiency.
Bank fixed deposits might experience a revival
because the TDS threshold has been raised from applicability at just Rs. 10,000
earned to Rs. 40,000/-.
The Opposition was visibly upset at a near full
budget instead of a mere vote on account, and whined about this for a day or
two after the 1 hour 45 minute presentation by Goyal.
It was nevertheless called a good budget by
experts, the captains of business and industry, the ordinary people, the stock
market, and the media.
Various Congress Party grandees, including the
Gandhis, sat on in parliament through Goyal’s cheerful speech making faces as
if they were suffering the full rigours of purgatory.
Undaunted, the budget laid out a 10 point vision
statement. It wants to build physical infrastructure fit for a $ 10 trillion
economy. This cannot be faulted, because infrastructure bottlenecks have hampered
our progress for decades and stigmatized India as a third world country.
Modi also wants a fully digital economy by 2030,
probably in line with all of the developed world. Electric vehicles will become
de rigeur, as will renewable energy
to curb bad air, ground, and water pollution.
Rural industrialization is an inevitable priority,
as more and more people migrate to the cities as a corollary to development
seen all over the world. So there will be mechanization, productivity
enhancement, village industry and so on, to transform the countryside.
Clean rivers are starting to become a reality for the
first time with sewage and chemicals being processed instead of being allowed
to pollute the rivers. This trend will be strengthened going forward even as
Ganga waters have shown improvement for the very first time. Let us remember
that there were no fish in the Thames because it was so polluted before
conservation measures were put in place.
There will be a scaling up of the Blue Water
Economy using the flagship Sagarmala and other projects.
The Space Programme will send an Indian to space
by 2022 and India will become the world’s go-to place for the launch of
satellites.
Food self sufficiency , already a thing achieved,
must be maintained using sustainable farming practices. Comprehensive Education
and Healthcare for all is on its way to becoming a reality, but is also a basic
requirement for a developed economy.
Improved government efficiency as a goal is probably
the hardest to achieve, but can come about if permanent tenure is removed.
The biggest defence budget ever at Rs. 3 lakh plus
crores however, is grossly inadequate considering the back log of work towards modernization
of the equipment for the armed forces. This will have to be reinforced
liberally off budget.
The budget for the Indian Railways towards modernization,
greater connectivity, and growth, has been enhanced, as it is on its way to
revival and profitability once again. It is indeed a proud achievement that all
unmanned level crossings on the broad guage network have now been eliminated. People
need not die at them anymore.
Civil aviation is growing in leaps and bounds as
over a million people use it daily to travel to and from 100 airports
domestically.
There are many other aspects of this budget both
in the headlines and the fine print. But suffice is to say that it plans to
increase expenditure significantly without wrecking the fiscal deficit. Let us
hope the government’s substantial divestment PSU programme, which has not gone
particularly well, does not queer the pitch. The lending and rating agencies
will be watching for fiscal slippage.
Is this
budget, responsive as it is, too little too late in the day to seriously
influence the coming elections? This depends on what one things of both public
memory and attention span. Modi clearly thinks that it is best to do welcome
things as close to the general elections as possible.
The coherence and signature represented by the six
Modi budgets is in the emphasis given to long term nation building and modernization
over populist sops.
It is this that has given us the good
macroeconomic profile and the international recognition of an economy on the
move. Of course, at the grass roots level this budget acknowledges there is
much that remains to be done. But the Opposition seems to be considerably
behind the curve on this, because it relies heavily, as always, on the
gullibility of the voter and its response to the promise of immediate benefit,
however fraudulent. It has even worked for them to an extent electorally very
recently. Will it do the trick in a couple of months?
My guess is that it is advantage Narendra Modi all
the way, particularly if he can inject the emotional appeal of a start to the
construction of the Ram Mandir at Ayodhya, to follow on from the success of
this budget.
(2,345
words)
For:
The Sunday Pioneer AGENDA
February
3, 2019
Gautam
Mukherjee
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