THE Union Budget for 2020-21, presented in Parliament by Union Finance Minister Nirmala Sitharaman, is as much of a non-budget as the one she presented in July 2019. It may be recalled that many of the numbers in the 2019 Budget were known to be wrong even when she presented them. For instance, as pointed out by Jayati Ghosh (as well as Surajit Mazumdar and other economists at that time), it was clear from the Statistical Appendix to the Finance Ministry’s own Economic Survey 2018-19 that “…the tax revenues retained by the Centre…were actually lower than the Revised Estimates by a whopping Rs.1,65,176 crore, or as much as 13.5 per cent of the Revised Estimates of total tax revenues”, a fact of which the Finance Minister could not possibly have been unaware. The same practice of concealing uncomfortable truths is evident in (non) Budget 2020-21 as well. Many items in the Revised Estimates of tax revenues for 2019-20 lack credibility as do the projections for 2020-21.
Let us move from (non) truth telling to the state of the Indian economy that the Union Budget was expected to respond to in a credible manner, at least to some extent. According to the data presented in the Economic Survey 2019 (Volume 2, page 5, Table 2), the rate of growth of the gross domestic product (GDP) at market prices and that of the gross value-added (GVA) have both been declining steadily for at least five successive quarters since the first quarter of 2018-19. The decline in the growth rate is steep in both primary and secondary sectors, but even the service sector has seen a decline. The significant decline in demand across several sectors has been widely recognised and commented upon by industry circles and other economy-watchers. A consensus has emerged that, apart from the negative impact on aggregate demand caused by rising inequality in a neoliberal policy regime, the slowdown in the economy has much to do with two specific policy measures of the National Democratic Alliance (NDA) government: the demonetisation measure of November 2016 and the ham-handed design and implementation of goods and services tax (GST) from July 2017 until now. Both measures have dealt severe blows to the informal sector and to employment. GST has also severely dented the resource raising ability of State governments. The periodic labour force survey (PLFS) of 2017-18, the release of whose report was thwarted by the government for several months and occurred only after the results of the Lok Sabha election of 2019 were out, showed unemployment rates at an all-time high since the late 1970s, with unemployment rates among the youths and among the formally educated sections hovering between one-sixth and one-fifth of the relevant segment of the labour force. More recently, the results of the national household consumer expenditure surveys for 2011-12 and 2017-18, done under the direction of the National Statistical Organisation, brought out the shocking fact of a decline in the average per capita consumer expenditure in rural India to the extent of 8.8 per cent and a rather small rise in urban areas during a period when GDP growth rates were not always unimpressive. The continuing distress faced by the majority of the population dependent on agriculture is also an undeniable feature of the Indian economy at present. In the midst of this clinching evidence of economic slowdown, we are also faced with a spurt in rates of inflation, with food inflation in December 2019 reaching an annual rate of 14 per cent. This suggests that the Indian economy may well be on the verge of entering into a phase of stagflation—slow growth of output with high rates of inflation. Unfortunately, the Union Budget does not address the triple crisis of deepening economic slowdown, high unemployment and collapse of livelihoods for the mass of petty producers and workers in both urban and (especially) rural areas.
As already noted, there are serious credibility issues with the Budget figures of Revised Estimates of tax receipts for 2019-20 as well as the Budget projections in this regard for 2020-2021. But, even going by the official numbers, it is clear that the budget does not provide any stimulus to the economy. The Budget Estimate (BE) of the total expenditure for 2020-21 is Rs.30.42 lakh crore as against the BE for 2019-20 at Rs.27.86 lakh crore, a rather small increase. Given the nominal growth rate of the GDP assumed in the Budget, this implies a decline in government expenditure as a share of the GDP. If the experience of 2019-20 when the revised estimate of expenditure was less than the BE by around Rs.88,000 crore is anything to go by, it is almost certain that the expenditure will be even less than budgeted. This is all the more likely since the tax revenue figures assumed for 2020-21 are rather exaggerated, and the government’s response later in the coming fiscal will once again be to cut vital expenditures to meet fiscal deficit targets. The sharp reduction in the expenditure of the Ministry of Food and Public Distribution for 2019-20 from Rs.1,92,240 crore in the BE to Rs.1,15,240 crore in the Revised Estimates and in the outlay for the Mahatma Gandhi National Rural Employment Guaranteee Scheme (MGNREGS) in BE 2020-21 at Rs.61,500 crore as against Rs.71,000 crore in RE 2019-20 suggest that the cuts will be particularly anti-poor.
The announcement repeated in this Budget of infrastructure investment of Rs.102 lakh crore over the period from now until 2024-25 seeks to give an impression of the government providing a big boost to demand while also addressing the farm sector needs. But it is substantially hot air. Expecting State governments to contribute 39 per cent of this figure when their finances are in such a poor state thanks, among other things, to the Centre’s fiscal policies of largesse to the corporate sector by way of significant lowering of tax rates, is rather fanciful. It also seems unlikely that the private sector will be able to contribute 22 per cent and the Centre the remaining 39 per cent.
It is not just that the Budget does not address the demand crisis by enhancing the purchasing power of the mass of the population through expanded employment programmes or address the agrarian crisis by significantly increasing investment in agricultural and rural infrastructure. In the run-up to the Budget, starting more or less within three months of the presentation of the 2019-20 Budget in July 2019, a series of moves saw the government forgoing more than Rs.2 lakh crore, with Rs.1.45 lakh crore forgone through reduction of the corporate tax rate to 22 per cent regardless of the annual turnover and Rs.50,000 crore by way of export-related concessions accounting for the bulk of the forgone revenues. The Budget has provided new tax and other concessions to the corporate sector and to foreign capital. Its strategy is to meet the fiscal deficit targets by selling public sector assets on a massive scale. The Budget for 2020-21 assumes a receipt of Rs.2.1 lakh crore by way of disinvestment.
Here again, the present regime demonstrates even greater loyalty to neoliberal policies than its predecessors. Disinvestment began with the reforms of 1991. The P.V. Narasimha Rao regime disinvested Rs.9,960 crore (all figures in 2019 rupees) over five years (1991-96), making an annual average disinvestment of nearly Rs.2,000 crore. The disinvestment in the two years of the United Front government, 1996 to 1998, amounted to hardly Rs.650 crore a year. The A.B. Vajpayee-led NDA government disinvested an average of around Rs.16,250 crore a year between 1999 and 2004. During the United Progressive Alliance (UPA) I regime, which was dependent on Left support, disinvestment averaged less than Rs.4,200 crore a year. Disinvestment picked up during UPA II, averaging Rs.30,000 crore a year between 2009 and 2014. But the NDA regime of 2014-19 smashed all these records, with disinvestment averaging nearly Rs.60,000 crore. The disinvestment spree is continuing in the present NDA regime. We have now reached a point where it is assumed that no economic rationale is needed for selling off public sector assets. This is a truly disastrous path. It will weaken whatever degree of economic and technological self-reliance we have built over many decades and sharply enhance inequality in a country that already displays obscene levels of wealth and income disparities.
The Union non-Budget 2020-21 is a clueless exercise, poorly crafted and seriously lacking in credibility, while also being harmful to the economy and the people.