Points to Ponder. Reckoning with the Budget (like no other!)

What should budgets do?  

Would it be legitimate for the ruling dispensation to convert it into an opportunity to blow its own trumpet or, dress up dubious data as authentic and push through proposals without adequate discussion, with typical majoritarian hubris? 

Well, we are told that India is now the fifth largest economy in the world, well on its way to achieving a GDP of 5 trillion dollars by 2025. But the following facts will, hopefully, point out steps needed to tackle the problem areas of the economy.

1. As per IMF, in terms of per capita income we are at 142^nd place out of 187 countries.
2. A mere 10 percent of the total workforce of 46.5 croreare regular employees who have a modicum of protection and cover of welfare legislation
3. The UN’s 2020 Global Hunger Index (GHI) ranks India a lowly 94 among 107 countries covered.  As per GHI, 14 per cent of India’s population is under nourished, 37.4 per cent of its children under five stunted and 17.3 per cent wasted.
4. The UN’s 2020 Human Development Index (HDI) placed India at the 129^th spot among 190 countries
5. As per UN World Happiness Report, India is a very unhappy country occupying 140^th place among 156 countries.  It means social support in India is poor, there is rising feeling of alienation, injustice and unfairness and a perception of increasing inequality.

So the question comes up again; what should the budget do?

1. Manifold increase in outlays on health and education with emphasis on building askilled and talented workforce. To begin with, a universal and accelerated vaccination programme to contain Covid-19 brooks no further delay. Such a programme would push up demand for all kinds of goods and services, including adversely impacted segments like aviation, tourism, hospitality and many such others. This would call for an estimated outlay of 80,000 crores. Despite the boast of India having launched one of the most effective vaccination programmes, the current pace of vaccination would require many years to cover the entire population.
2. Massive investment in infrastructure, which not only has a multiplier effect, mainly through job creation, but also is essential to improve productivity of our labour force and India’s competitiveness.Finance Minister has already announced National Infrastructure Pipeline (NIP) comprising 7000 projects with an outlay of Rs 111 lac crores calling for an annual outlay of Rs 22 lac crores. Bulk of this will be harnessed through private initiative through creatively formulated schemes. Of this at least 10 – 15 per cent will have to come from the government through infra bonds or directly as seed money. This would mean budget has to provide 2 to 3 lac crores towards infrastructure. This may also warrant creation of a pan India Development Finance Institution (DFI) which could deploy long term funds on infra projects.
3. Raise resources, not so much by increasing taxes as by divestment and sale idle government assets. As the erstwhile RBI Governor, Raghuram Rajan says, “Given the rich valuations that the capital market enjoys, divestment should have been undertaken from every rooftop”! Divestment on the scale required, calls for a political vision and commitment and cannot be left to bureaucratic  pussyfooting.
4. Generous recapitalization of banks, pending reform of PSBs which among other things would call for calibrated privatization. This will rev up the stalled wheels of growth through increased credit to all economic agents, particularly small and medium enterprises which are relatively labour intensive. Going past experience, for the economy to grow by 7 to 8 per cent, bank credit would have to grow by 16 to 18 per cent.
5. The above steps would definitely increase deficit financing. But given the crisis and fairly manageable inflation, it is time that we revisit Keynes and worry more about balancing the economy than budget per se, by launching adequate and effective countercyclical stimulus measures.

Alas, every budget boasts of a plethora of scheme and programmes covering health, security, skill development and what have you! But at the ground level, this thicket of fragmented schemes and programmes with hundreds of central and state agencies jostling in silos leave much to be desired in achieving their objectives.  The budget should reframe and rationalize these schemes in co-ordination with States who are enabled and incentivised to intervene and deliver at the last mile level.

Notwithstanding the pandemic, increasing frequency of disasters caused by relentless climate change and the insensitivity of the powers that be, we live on hope and some of us on overdraft!