February 01, 2019
“As expected, a populist budget which misses the opportunity to introduce overarching structural reforms”, Pradeep S Mehta, Secretary General, CUTS International
The NDA government presented the last budget of its term earlier today. With general elections few months away, the budget, on expected lines, was replete with populist measures to woo voters.
Annual income support of Rs. 6000 to farmers owning land up to two hectares was announced, which is expected to cost Rs. 75,000 crores in 2019-20 and Rs. 20,000 crores in current fiscal. This will be fully funded by the central government.
“While additional income may help farmers tide through uncertainties, it can in no way be alternate to structural reforms required to alleviate farm distress and ensure that farmers get adequate returns from market for their produce. In fact, this is an abject admission of government’s failure in introducing necessary reforms for farmers’ welfare over the years and may end up creating opportunity costs for other sectors of the economy” observed Mehta. “Also, the move is unlikely to benefit landless farmers”.
The government has also proposed to raise the income tax exemption limit to Rs 5 lakhs, but has presumably left the implementation to the next government. Undoubtedly, this step is targeted to placate middle class voters, who are faced with increasingly diminishing income generating opportunities, and are still reeling under disastrous effects of demonetisation and sub-optimal implementation of goods and service tax.
Mehta observed, “Citizens need decent jobs to earn respectable income and become eligible for enhanced exemptions. The budget doesn’t strike at the core of this issue but just tries to beat around the bush by creating a mirage of providing some relief. Merely creating hypothetical correlations between growth, formalisation and job creation and mentioning that job seekers are becoming job creators will not make the cut anymore and voters will call the bluff.”
Unfortunately, the budget has not announced substantial measures to support micro, small and medium enterprises, start-ups, and their ilk. The announcement of pension scheme for unorganised workers, pursuant to which they will get Rs. 3000 per month after the age of 60, is a step in right direction. However, the benefits will accrue in distant future. The need of the hour was to provide some near term relief for workers in unorganised, informal and gig economy.
The importance given to artificial intelligence in the budget by announcing a national programme is welcome. It may be recalled that the NITI Aayog had issued a strategy paper on
artificial intelligence early last year, but it is yet to be followed through. The government will need to walk the talk at break-neck speed given countries like China have marched miles ahead in this area.
On how budget proposals will be funded, Mehta quipped, “the issue of financing budget proposals has always been the elephant in the room. Governments are notorious in overestimating receipts and underestimating expenditures. The fiscal deficit target for the current year has been revised upwards from 3.3 to 3.4 per cent of the GDP, thus deviating from the fiscal consolidation roadmap, which is not a good sign.”
The government has missed its last opportunity to introduce structural reforms in favour of populist measures. We will know soon if this will help it to remain in office.
For further details, please contact:
Pradeep S Mehta: psm@cuts.org
Vijay Singh: vs@cuts.org
Amol Kulkarni: amk@cuts.org