By Indira Hirway
An important observation about the presentation of the Budget by Finance Minister Nirmala Sitharaman is that the speech was just too long and unilluminating, making it come across as a rather tired effort. The speech, despite its length, did not dive into the broad strategy or the overall approach underlying the myriad schemes and the numbers. In that sense, we heard many items but not much clarity on critical directional issues that is particularly required at this time of international turmoil and its cascading effects on the domestic economy. Instead, the FM spent too much time on the minutiae of the expenditure on different schemes. As a result, we missed hearing from the executive about the big picture of the Budget.
The main expenditure is on capital goods. The budget proposes to spend Rs.17.15 lakh crores used on creating capital assets. This is a positive. Capex builds for future and is an investment that is meant to deliver long term physical assets that offer a multiplier effect and can attract private investment as it stimulates demand in the economy. As regards the budget expenditure, the highest share in total expenditure is on interest payment or debt servicing (26.20%), followed by defence (14.67%), transport (11.20%) and civil pension (5.54 %) which goes up to 8.75% when defence pension is added. We remain low on expenditure on education (2.60%), health (1.96%) and social welfare (1.17%).
The emphasis on Vikisit Bharat is to be welcomed. Who would not want India to be developed fully but there remain huge questions in terms of the direction of this development and what the nature of development ought to be in an India where inequality remains high, health services are poor and education poses many challenges that have been highlighted time and again. Consider that the total percentage on education (Centre and State expenditure on education combined) is merely 3.3% of GDP, and on health it stands at just 1.5%. This is a shockingly low number, unbelievable because it is well acknowledged that with a population that is not healthy and is poorly educated, the nation can never achieve the goals of Vikisit Bharat. Our experience in the last decade shows that unless both, education and health sectors are put under the government’s management, these cannot reach the bottom 40% of population. Yet, matters have moved in the reverse direction in recent years and the budget has been unable or is unwilling to take a bold stance on this. Note that the push toward privatisation of health, most visibly seen in the rise of private equity investments in hospitals, is a trend that in effect works to raise treatment costs and reduce health access, not widen it.
Next, the expenditure on all centrally sponsored schemes in this current year is much less than the expenditure budgeted last year. That is, these schemes are not taken seriously by the government. And the increase in the budget on these schemes is only marginal. Considering price rise, one can state that overall, the expenditure on the centrally sponsored schemes has remained almost stagnant. This gives the picture of schemes that cannot and will not deliver as intended or advertised.
The expenditure on scientific departments is a mere 1.04% of the budget expenditure. How will India achieve Vikisit Bharat goals with not enough investment in evidence-based high quality scientific impetus and efforts alongside to build a scientific temper and the right attitude of the people? Considering the fact that India is lagging far behind other emerging countries in R&D, this low number is a big negative. Anecdotal evidence shows that scientific temper has taken a hit with what is sometimes called “cow-dung science” and reports that money has been spent on research that may not meet the strict demands of modern science. A proper allocation with a cautionary note on where this money would go would have helped correct this slide.
Apart from this there are several urgent problems which are not even covered in the budget. To start with, these are related to MSMEs, rising inequalities of wealth and income in India, and climate change. MSMEs are expected to play a critical role in the implementation of EU-India FTA. There are several challenges with regard to the implementation of the FTA. These are particularly related to non-tariff barriers: the FTA requires that production of goods should be of standard quality. Also, production of goods should be without the use of child labour, strict environmental norms should be followed, and so on. Our MSMEs today do not mostly follow these norms. However, nothing has been included to help in these fields by the budget.
There is a lot of discussion on wealth and income inequalities these days. It seems that the goals of Vikisit Bharat cannot be achieved with these wide inequalities. Climate change, according to the government, is limited to solar energy. However, it also includes widespread pollution, flooding experienced by almost all regions and deforestation including the worsening conditions of the Himalayas – there is no attempt to address these emergencies.
Unemployment, particularly of youth, is rising continuously in India. The budget does not even mention this burning problem. To sum up, the budget has either excluded our serious problems or given a kind of lip service to them. The country can never achieve sustainable development with such a budget. The path is not right and to that extent the dreams of development will remain just dreams.
The writer is Professor of Economics at the Centre for Development Alternatives, Ahmedabad, and Associate, Levy Economics Institute of Bard College, New York
