Trust the Union Budget to be a sound and light show
PM’s stimulus package was less than what seven Indian billionaires earned last year. But the Government likes to appear both good and grand. But beyond optics, can it think out-of-the-box?
The only thing that has seen growth in these desperate times has been the respected Prime Minister’s snowy beard and the wealth of a handful of billionaires.
Seven Indian billionaires here added USD 64 billion to their kitty while the pandemic felled the economy and citizens. Even the USD 40 billion economic stimulus package offered by the government was less than what was earned by these seven!
With companies cutting salaries, the real threat of layoffs, and the suddenly economically bereft being left high and dry, it is no surprise that everyone got back to work as soon as lockdown was lifted. The haphazard implementation of providing food packages to those most affected, lack of real assistance from the government in terms of debt relief, interest moratorium etc was a brilliant coercive strategy to kick start the economy. The government spent only 1% of the country’s GDP on relief.
As the country heads towards Budget Day, one is quite uncertain of the country’s socio-economic fundamentals. The government does not have any idea of the number of migrant workers rendered jobless by its SARS-CoV2 decisions and remains chary of releasing socio-economic data.
Before we discuss the factors that will influence the 2021 budget, let’s look at the reality that SARS-CoV2 pointed us to. Lack of healthcare infrastructure, lack of support to the daily wagers, insufficient telecom connectivity in rural and remote areas of the country, citizens and NGO’s taking over the role of the welfare state and the local administration ill-equipped to handle large scale disasters.
So, it would stand to reason that the government would use the budget to make up what has been shown lacking during SARS-CoV2.
However, if one thing is known about the Modi led BJP government it is their penchant for grandiosity and to look good. Given the government is going ahead with its Central Vista project when this money could have been spent on SARS-CoV related issues suggests there is every chance the Budget will be a sound and light show.
The effort will be to make true the much hyped ‘V’ shaped economic recovery without really getting into the fundamentals. Further, the Finance Minister cannot not pay attention to the ongoing farmers agitation and the upcoming West Bengal elections. She could use the budget to build bridges with farmer’s and make inroads into W Bengal.
One cannot ignore the irrational market behaviour. It suggests that there is going to be a slew of disinvestments in FY2021-22 as the government is going to need money. The buyback schemes of listed PSUs put money in the hands of the government and retail shareholders was the first step in this effort.
Initiatives under the new avatar of Make In India-AtmaNirbhar Bharat- will also be in the spotlight in the 2021-22 budget. Unfortunately, this may make banks susceptible to accumulating more NPAs.
But the Budget needs to concentrate on the following – improving the public healthcare system, increasing and strengthening internet connectivity, and promoting use of technology in government schools, protecting jobs and income of migrants and daily wage earners.
Along these same lines is the need to review the country’s legal system. Over 70% of the prisoners in India are undertrials. 1.6 crore criminal cases are pending in lower courts. This is a socio-economic disaster because undertrials cannot join the workforce thereby reducing the earnings of their families who anyway spend on visitations or on legal fees. The government needs to take cognisance of this not only as a human rights issue but also as an economic one. The government needs to invest in releasing them as citizens ready to participate in the economy.
There is a certain duality in the government’s approach to Climate Change – there is the government’s international focus on solar with the International Solar Alliance which seems to be more of a geo-political tool created by India. At the same time, the government has been unable to tackle the causes of air pollution be they from industry, stubble burning or vehicles.
So even with the increasing proportion of solar and other renewables in the country’s energy mix, there has not been much improvement in air quality and therefore impact on climate change. Besides the issue of climate change is also the health consequences of air pollution. According to Lancet, approximately 1.67 million deaths were attributable to air pollution in India in 2019. The article goes on to state ‘Lost output from premature deaths and morbidity attributable to air pollution accounted for economic losses of US $28.8 billion and $8billion’. This is 1.36% of the country’s GDP. Will the Budget stem this bleeding by focussing on public transport, incentives for cleaner fuels and technology, prevention of stubble burning to name a few problems related to air pollution and Climate Change?
Of course, the defence budget will shoot up given the posturing of China. However, the government needs to come up with a well thought out, non-military, response to the Chinese string of pearls strategy and the Belt and Road Initiative.
At the end of the day, the 2021 Union Budget can either be an opportunity to plan for the nation’s future or it can fund the government’s saffron tinged ambition. Given its brute majority in Parliament and the short memory of citizens, one need not have a crystal ball to know the government’s choice.