If Piyush Goyal is an economist, I am a Kathak dancer at ‘interim budget’ 2019
Pro-BJP economist Jagdish Bhagwati had famously said of RSS-BJP experts, if they were economists, he would be a Bharatnatyam dancer. This budget is a reminder of their penchant for selling illusions
India has a part-time Finance Minister who presented a full-time budget on February 1 2019. The irony was palpable. Thus, we have a daylight exhibition of Bharatiya Janata Party’s (BJP) unprincipled, immoral and unethical behaviour that defied time-honoured practice that in an election year, the government maintains status quo on taxes/expenditure and focuses on basic housekeeping till a new elected government assumes charge.
Former Finance Minister P Chidambaram was correct in sarcastically dubbing it not as a Vote on Account but an Account on Votes budget. He was right. In effect, Prime Minister Narendra Modi’s government has presented six budgets during its five-year period.
One thing was apparent; the government appeared fearful of a rout in the general elections a few months away post the ignominious drubbing they received in the state assembly elections of Rajasthan, Chhattisgarh and Madhya Pradesh. But at best this was a band-aid panacea for an economy requiring surgery to fix a deep muscle tear.
However, Piyush Goyal has set up a dubious precedent, and politicised economic policy-making. But then Modi had already done that bombastically with his grotesque demonetisation. You have to give it to the BJP, they do not try and conceal their contemptuous disregard for parliamentary traditions. They care a damn for those who are particular about institutional integrity, dismissing them as over-enthusiastic purists who have a political agenda, or marinated left-wing ideologues. Or anti-national.
Frankly, I am finding it a challenge to do a budgetary analysis because it is hard to trust government data anymore. This is statistical blasphemy courtesy a paranoid government. Fact-checking sites trashed Goyal’s several tall claims as codswallop. Fact is, the government breached the fiscal deficit target at 3.4%, but the billion-dollar question remains as to what is the real revenue shortfall? As reports clearly indicate, the government has been bleeding India’s profitable cash-cows in the public sector to do off-budget financing. Some of India’s profitable blue-chips are being systematically stripped downwards in their cash balances, whether it is ONGC, LIC or HAL. It is hardly surprising that there is underperformance in GST collections, reflecting the ham-handed manner in which it was executed. We are still recovering from the bizarre implementation of an important indirect tax reform by the creation of a complex labyrinthine of tax rates.
After living in denial for five years, dismissing farmer protests as politically motivated “Urban Naxal” movements, the government in its last days woke up to the disturbing agrarian crisis. In the process, they offered a synthetic compensation of ₹500 per month per household, which works out to ₹17 per day. Assuming an average size of four persons per family, the number shrinks to a laughable ₹4/-per day. So, Modi effectively accentuated rural misery equivalent to a miserly cup of chai at a local dhaba. It is adding grievous insult to a scalding injury. This is the same opaque government that has refused to release data on farmer suicides. And the burgeoning calamitous disaster of unemployment.
Incredibly, Goyal’s full-budget was extraordinarily silent on the dire straits of jobs. Clearly, Pakodanomics has landed Modi Sarkar in a pickle. A day earlier, the National Sample Survey Organisation (NSSO)’s report was scooped by a business daily that stated that India faced distressing record unemployment levels of 6.1% in 2017-18 which was a stunning 45 year high.
What is particularly astonishing is that it was just 2.2% in 2011-12, one of the toughest periods during UPA 2 when we were resurrecting ourselves from the aftermath of the 2008 Great Recession. A panicky NDA government tried to suppress it, forcing the resignation of two senior members from the National Statistical Commission, including its chairman, PC Mohanan. These are unprecedented developments that tell us of the systematic deconstruction of organisational independence. The RBI, CBI, CVC, NIA, ED, IT has all been asphyxiated by a repressive regime intolerant of truth.
The middle class has been pulverised over the last five years by Modi, particularly over the huge Great Oil Robbery (the government has collected ₹16 Lakh crores excise duties on oil products), job losses, retail corruption and crumbling urban infrastructure. Modi offered them a token rebate of ₹1040 per month if their taxable income was below ₹5 Lakh. This was at best a synthetic ruse or a bad joke; one non-subsidised LPG cylinder or two multiplex tickets in Mumbai would consume most of that relief.
But where we are missing the woods for the trees is the state of the Indian economy, because the fundamental assumption behind annual budgetary prognostications is a certain assumed GDP growth rate and private sector buoyancy. The macroeconomic headwinds have risen for India, which include firming of Brent crude oil prices, Brexit gridlock, US-China tariff war, Chinese economy slowdown and the US Fed rate hike.
Fresh new investment proposals in India are at a 14-year-low, while stalled projects are close to ₹18 Lakh crore. Non-Performing assets have crossed ₹11 Lakh crore. For all the hype on stock-market exuberance, the fact is that the corporate profits to GDP ratio at 2.8% is a 15-year low. Lower inflation (mostly due to fuel and food) accompanying lower demand suggests the beginnings of a clear slowdown.
The Gross Fixed Capital Formation remains at an unremarkable 28.6% of GDP. The Indian economy cannot be sustained by capital asset creation through public expenditure alone. It is unsustainable without growing exports, private investments and rising domestic consumption. Disturbingly, India’s government debt stood at ₹82 lakh crore in September 2018, up by 49% since Modi became PM.
It is hard to find a silver lining amidst darkening clouds. The elephant in the room is the annihilation of the integrity of India’s official data. Our GDP back-series data tampering is legendary. These are silly self-goals at window-dressing for cheap political gains. Listening to the endless baloney of BJP ministers and spokespersons manipulating data shamelessly, one is reminded of what Prof Jagdish Bhagwati once said of the RSS/BJP experts, “if they are economists, then I am a Bharatanatyam dancer”.
I think I am a classical Kathak dancer.