BJP Budgets: Omissions and Expectations
The dilemma faced by the government, to be seen as pro-poor and yet not appear profligate, represents the consequence of errors, omissions and messed up opportunities.
By Shankkar Aiyar |Published: 27th January 2019 04:00 AM |
How have the five budgets presented by the BJP-led NDA government fared? The anxieties around the 2019 exercise illustrate the saga of unfinished agenda. As always, context is critical — agri distress, middle-class angst and the forthcoming polls haunt the regime. The buzz is about big-tag sops. The question is: where is the money, and who will pay for it?
By definition spending power is determined by earnings and efficiency in expenditure. The 2014–15 Budget said the “Government is committed to the principle of Minimum Government and Maximum Governance,” and appointed the Expenditure Management Commission (EMC) headed by former RBI Governor Bimal Jalan.
Inexplicably, the report was not made public and little is known about implementation. Parliament was informed in 2016 that the EMC’s recommendations under 15 heads “have been shared with the concerned ministries/departments for necessary action”. The picture of savings achieved is fuzzy. Ironically, the government has now tasked a committee under Jalan with determining how much money RBI can transfer from its reserves to the government.
Among the domains covered by the EMC was Central Public Sector Enterprises. The state of the public sector is best illustrated by Air India and public sector banks — the total market value of all the PSBs is Rs 4.83 lakh crore, while that of HDFC Bank is Rs 5.69 lakh crore. Budget 2015–16 promised “disinvestment in loss-making units, and some strategic disinvestment.” In 2017, the government chose 24 entities for strategic disinvestment. Only one — HPCL, which was bought by public sector ONGC — went through.
Meanwhile, 82 CPSEs are making losses. The total loss of CPSEs, between 2007–08 and 2016–17, was Rs 223,859 crore — juxtapose this reality with funding an income support scheme.
The BJP had charged the UPA government with unleashing “tax terrorism” during the campaign and promised change. Following up on the words, Budget 2015–16 assured “improved and non-adversarial tax administration”. In 2014–15, tax demands of over Rs 4 lakh crore were in dispute in courts and appellate authorities. The number of cases pending is over 4.69 lakh.
The tax amount stuck as per Budget 2018 is Rs 7.38 lakh crore — roughly half of the tax expected this year and a whopping 4.45 per cent of GDP. Do the math to get a fix on the consequence of adversarial conduct on the economy — both revenues and growth have stalled.
The missed opportunities span policies in expenditure management and in propulsion of growth. That urbanisation is a growth multiplier is well established. The most alluring aspect of the 2014 campaign was the promise of 100 new smart cities. Budget 2014–15 stated: “The prime minister has a vision of developing 100 smart cities,” and made an initial allocation of Rs 7,060 crore. The promise of new cities was binned and in execution the idea of smart cities was dumbed down.
Four years later, in July 2018, the Parliamentary Standing Committee observed that among flagship schemes, utilisation for smart cities “was the lowest at 1.83 per cent, i.e, Rs 182.62 crore of the released Rs 9,943.22 crore.”
The updated data shows that while Rs 10,504 crore was released, certified utilization was only Rs 931 crore.”
The quest in 2019 is to assuage farmers. Distress in agriculture is not new. The huge disparity in rural and urban per capita incomes is evidence enough. Political parties tend to treat agriculture as a charity case whereas agriculture, as this column has repeated, needs to be liberated and provided with access to markets and credit (http://bit.ly/24uW8bm).
The institution of e-NAM or Amul II could help, but governmentalized structures daunt the most vulnerable — farmers dealing in perishables are expected to classify/certify moisture levels.
Opening up contract farming can bridge capacity issues, but the model law on contract farming promised in February 2017 is yet to be adopted by states.
The need to improve living conditions and provide human resources to run panchayats and municipalities could be leveraged to create employment and growth, and the challenge is an opportunity. Indeed, the 2014 manifesto listed empowering panchayats with funds and functions as a goal. Three years later, Budget 2017 said panchayat raj institutions lacked human resources to implement schemes, and announced a programme of “human resource reforms for results” for this purpose. What should have been a priority is yet policy in the works.
There is much applause for maintaining fiscal discipline. It is equally true that there is a silent crisis of dues owed but yet to be paid by the government.
There is also the parking of debt and therefore deficit in the books of parastatals like FCI, and monetising of assets of the Peter-buys-PSU-pays-Paul kind (http://bit.ly/27PSUs). The saga of bad loans is well-documented, and some of the aggravation in the real economy stems from poor tactics. The question is not what other governments did, but if tactics are being confused with strategy.
The dilemma faced by the government, to be seen as pro-poor by voters and yet not appear profligate to markets, amidst dimmed expectations, represents the consequence of errors and omissions through the five years.
Shankkar Aiyar, political economy analyst and Visiting Fellow at IDFC Institute, is author of Aadhaar: A Biometric History of India’s 12 Digit Revolution&Accidental India. You can email him at shankkar.aiyar@gmail.com and follow him on Twitter @ShankkarAiyar. His previous columns can be found here. This column was first published here.