"Jumla Budget"

Budgetary charades

Print edition : March 01, 2019

At a construction site. The pension scheme announced for workers in the unorganised sector is actually a savings scheme without any substantial government contribution. Photo: T. Singaravelou

Patients outside a hospital in Hyderabad. Only nominal additions have been made in the Budget to the already paltry allocations in 2018-19 for the National Health Mission and the Maternity Benefit Scheme. Photo: G. Ramakrishna

Budget 2019-20 is a “jumla”, and little thought has gone into formulating the schemes it has announced such as the largesse to “vulnerable landholding families” and pension for 10 crore workers in the unorganised sector.

When one continuously watches charades, one begins to mistake charade for reality. This is what the Narendra Modi government has been banking upon, in presenting one charade after another as cover for its real activities. This is not an unfair accusation: Bharatiya Janata Party chief Amit Shah himself admitted as much when he used the word “jumla” to describe some of Modi’s promises, meaning a substantial and self-serving public fib. Amit Shah’s philosophy, which one assumes must be that of the government too, is that democracy entails the presentation of competing “jumlas” before the people by the different aspirants for political power. This, however, is a dangerous philosophy since in a democracy there ought to be no place for “jumlas” of any kind.

The 2019-20 Budget alas is such a “jumla”, which is not the same thing as its being “populist”. Consider its piece de resistance, the scheme to transfer Rs.6,000 annually to “vulnerable landholding families”, defined as those with two hectares or less. It is obvious that very little thought has gone into formulating this scheme. No distinction is drawn between irrigated and unirrigated tracts, whose thresholds of vulnerability are vastly different. No clarity is offered on whether “landholding” refers to “operational” or “ownership” holdings. The figure of 12.5 crore beneficiaries mentioned by Piyush Goyal suggests that he was referring to “operational holdings”, as the Agricultural Census puts their number around this figure (see Jayati Ghosh’s article on page 28), but “operational holdings” include tenant-cultivated holdings, and data on tenancy being notoriously unreliable, especially on the widely prevalent “informal tenancy”, identifying targeted beneficiaries in such a case would be almost impossible.

One may think, therefore, that perhaps he meant ownership holdings. But even ownership data are unclear since land records are in a complete mess over much of the country. What he meant by “landholding” and how the government proposes to go about identifying beneficiaries thus remain a mystery. The government, on its part, has issued no clarifications to date on this issue, leading one to suspect—especially in view of the abysmal state of its finances, which would scarcely permit such a scheme as long as the fiscal deficit target is adhered to, and whose precariousness is itself covered up by a “jumla”—that the scheme, at least for 2019-20, is just another “jumla”.

This impression is confirmed by a curious fact. The very day after the Budget, Finance Minister Arun Jaitley stated that for 2019-20 the Centre would ask State governments to share 40 per cent of the financial burden of the scheme. And we now hear that Aadhaar would be mandatory for drawing benefits under the scheme in 2019-20, though not in 2018-19, when Rs.20,000 crore will be disbursed under it. The impression is unavoidable that the government simply proposes to distribute Rs.20,000 crore to “small and marginal farmers” before the Lok Sabha election and has no real plans for what should happen thereafter in case it comes back to power. And since immediately identifying all the “small and marginal farmer” beneficiaries to pay Rs.20,000 crore to within two months is virtually impossible, this sum would be used basically for disbursing largesse to some specific sets of people in rural areas in the run-up to the election. As a general scheme, this centrepiece of the Budget is a mere charade.

This impression of the Budget having the character of a charade is confirmed by the other talking point it has thrown up, namely, the pension scheme for 10 crore unorganised sector workers. This not only does not provide pensions to the existing old, not only does not provide a pension amount that is half of the minimum wage, as has been demanded for long, but is also contributory in character. What is more, the promised contribution of half the pension amount by the government is nowhere discernible.

A simple calculation shows that a male worker, just turning 29, who opts for the scheme and pays Rs.100 a month regularly until he turns 60 in order to get a pension of Rs.3,000 a month thereafter, would be virtually getting the pension out of his own savings. At 8 per cent compound interest rate his own contribution when he becomes 60 would have added up to nearly Rs.1,50,000, and given the average male life expectancy of 65 years, this sum would suffice to provide him with almost Rs.3,000 a month for the rest of his expected life.

The scheme is thus more of a savings scheme for unorganised sector workers, giving them an additional saving instrument, rather than a pension scheme with any substantial government contribution. The government’s claim of providing pensions to 10 crore workers thus turns out to be yet another “jumla”, and the meagre amount earmarked for it under the Budget suggests that it does not even expect many takers for it.

Thus, the only two real takeaways from the Budget are the income tax concessions, whereby persons earning up to Rs.5 lakh a year will not be paying any income tax from 2019-20 onwards, and the expenditure of Rs.20,000 crore in the current financial year as cash transfers to farmers, a promise on which presumably it will be too costly for the government to renege on just before the election. Curiously, the income tax concessions are expected not to hurt income tax revenues, which are in fact supposed to go up by 17.2 per cent between 2018-19 Revised Estimate and 2019-20 Budget Estimate. There is an important point of principle here, which is often missed. Since income tax revenues are shareable with the States, the Centre’s unilateral announcement of income tax concessions when such concessions are likely to affect the size of the divisible pool adversely, to the detriment of State governments, goes against the federal spirit. It is a sign of the centralisation of decision-making that has occurred of late, especially under the Modi government, that while the States have to seek the permission of the Goods and Services Tax Council for raising resources within their own domains (as Kerala recently had to do for imposing a 1 per cent cess on the sale of goods and services within the State, for financing recovery from the devastating flood), the Centre feels free to make unilateral changes in tax rates even when such changes may hit State finances. The assault on federalism that has occurred is an important aspect of the attenuation of democracy, which we are witnessing in India at present. In providing the income tax “sop”, the Centre is being “generous”, at least in part, at the expense of the States.

But it is also a symptom of our times, of State governments being cowed down, that hardly a voice has been raised on this. This is in sharp contrast to the earlier times, when the Centre’s decision on one occasion not to raise the income tax rate but to levy a surcharge on income tax instead, which was not shareable with States, had caused huge protests from the State governments.

Exclusion of the poor

What is particularly striking about this Budget is its exclusion of the poor. Agricultural labourers, unrecognised tenants and small peasants with over 2 ha in unirrigated areas are excluded from the cash transfer scheme, and given the state of land records, when the money is actually disbursed, several of the targeted beneficiaries among small peasants will also get excluded in practice. The Mahatma Gandhi National Rural Employment Guarantee Scheme, which has been allowed to get run down for some time, is now set to be further run down: its budgetary provision for 2019-20 is actually Rs.1,000 crore less than for 2018-19. The allocation for the National Old Age Pension Scheme has also declined in absolute terms. And only nominal additions have been made to the already paltry allocations in 2018-19 for the National Health Mission and the Maternity Benefit Scheme, which would mean a decline in real allocations.

On the other hand, the raising of the income tax floor and the largesse to landholders, which is likely in practice to benefit some better-off peasants (a 2 ha holding in irrigated tracts is quite substantial), suggest an effort to woo the “intermediate classes”. If the Budget has any implicit electoral strategy underlying it, it is to reach out to the intermediate strata while ignoring the poor.

The importance of the (urban and rural) intermediate classes in Third World societies was underscored by the renowned economist Michal Kalecki, who had even seen this class as wielding state power under postcolonial dirigisme. While this was an exaggeration, not just now under neoliberalism when the big bourgeoisie’s dominance is palpable, but even for the dirigiste period for which his theory was advanced, this class certainly has considerable political significance.

In fact, a major reason for India’s easy transition from dirigisme to neoliberalism was the switch of loyalty between regimes by the urban middle class. There were many reasons for this: primarily, of course, the dead end reached by Nehruvian dirigisme but additionally also a waning of anti-colonial nationalism and the large-scale migration by educated urban middle class children to the advanced capitalist countries. And though under the neoliberal regime the peasantry (not just the poor peasants) got squeezed, significant segments of the urban middle class did quite well for a long time.

But as the neoliberal regime itself reached a dead end, causing large-scale unemployment everywhere, engendering protectionism in the United States and calls for curbs even on internal migration within the European Union, the urban middle class in many countries, including India, began to get restive. Modi cashed in on this restiveness by putting the blame for the dwindling fortunes of the urban middle class on the previous Manmohan Singh government, on its timidity (“shackled by the dynasty”) and its “populism” (under Left pressure). Modi promised the urban middle class a new boom.

That promise has come a cropper, as it was bound to do, since he had no inkling of even the fact of the dead end of neoliberalism, let alone any strategy to counter its effects on the Indian economy. Exhorting globalised capital to “make in India” by investing here can hardly be a game-changer when the world economy itself is virtually stagnant and very little investment is being undertaken anyway.

Modi selling ‘jumla’

In short, Modi was just selling a “jumla”, and as this fact has become clear, the restiveness of the urban middle class has once more manifested itself. And this has happened at a time when the peasantry, which always takes a long time to react, has been rising at last against the squeeze imposed upon it by neoliberalism, and further compounded by thoughtless measures like demonetisation. Unemployment now, unlike in the pre-crisis period of neoliberalism, afflicts not just the labourers and distressed peasants and petty producers who were squeezed by this regime but the urban middle class as well that had earlier done well out of it, with even the information technology-related service sector witnessing dwindling employment growth. The Modi government’s instinct has been to reach out to this significant intermediate strata. Its problem is that it has very little to offer to this strata, and nothing demonstrates it more clearly than this Budget. It was presented, against all constitutional propriety, to enhance the Modi government’s electoral appeal. What it provided, however, is no grand vision, no blueprints for change, no programmes for employment generation but only some paltry blandishments: just over Rs.3 a day per person to some peasant households and some rebate to a segment of income tax payers. The intermediate strata being wooed by Modi are unlikely to be much impressed by such paltry offerings.

What this means, however, is greater talk of “urban naxals”, more strident attempts at communal polarisation, more targeted CBI-activism and more determined efforts to conjure up a siege mentality with Modi being projected as a saviour, in the run-up to the election. Even these measures have started yielding diminishing returns, but there is little else for them to fall back on.

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