Finance Minister Nirmala Sitharaman delivered the longest Budget speech in recent memory—all of 160 minutes—and it was not longer only because portions of it were “taken” as read in Parliament. However, despite her gruelling effort, the economy has not moved an inch back from the precipice it was at before the marathon speech. It was a truly remarkable achievement in not achieving anything at all.
There is neither a nudge to growth nor is there a pretence of promoting social justice at a time of widespread distress. For all the talk of unleashing the spirit of private enterprise, there is no hint of a measure that would draw private investors into any segment of industry. Agricultural incomes, both of peasants and labouring households, continue to slide, yet there is no hint of any move to improve the situation. In short, there is neither a focus on providing a coordinated stimulus nor on protecting those worst hit by the economic slowdown that has been a continuum since at least the demonetisation move of 2016.
Budget crafting in the Narendra Modi years has acquired certain special characteristics. The formula appears to be to get an irritable task done, with little regard for the propriety that reflects the tradition of the solemnness of the occasion of Budget presentation. The now-familiar tactic is this: since the Budget is being presented in early February, data for a full quarter of the year, traditionally the last quarter which brings in a rush of not just revenues but also expenditures, is out of the picture. Finance Ministers in the past too would inflate expenditures, especially if they wished to highlight a pretence of their “commitment” to the poor and the vulnerable, while also inflating projections of tax collections for the forthcoming year. Thus, Revised Estimates of budgetary allocations would reveal to what extent the Finance Minister deviated from the commitments made a year earlier. The crucial three-month period missing from Nirmala Sitharaman’s budgetary exercise enables her to take this game to an entirely new level. On both sides of the government’s balance sheet, the Revised Estimates are completely out of tune with the estimates presented last year, and the presentation of estimates of expenditures as well as receipts pretends that this misstatement never occurred. Curiously, and in this too Nirmala Sitharaman leaves her unique imprint, by referring to all allocations in absolute numbers and not in relation to what the point of reference was—whether it was the budgeted estimates last year or the Revised Estimates that are based on dubious projections based on data that was available to the Ministry in December 2019.
GST collection
To understand how the accounts have been dressed, one has to look at the collection of goods and service tax (GST). Last year’s Budget projected revenues amounting to Rs.6.63 lakh crore from GST, which, it turns out, would have been 14 per cent higher than the “actuals” presented by Nirmala Sitharaman in February. However, the Revised Estimate for GST collections in 2019-20 (the current year) reveal that she missed last year’s target set in the previous Budget by about Rs.50,000 crore, or about 7 per cent.
Undaunted by this shortfall, coming as it does on the back of large shortfalls during the tenure of her predecessor Arun Jaitley, Nirmala Sitharaman has projected a collection of Rs.6.91 lakh crore for 2020-21. To put this in context, it is useful to recall that Revised estimates for the current year indicate an increase of just 5 per cent over the 2018-19 actuals. Her projection of raising Rs.6.91 lakh crore indicates a 12 per cent increase in tax collections over what she projected in her previous Budget speech.
The past record of tax collections, especially during a period of anaemic growth, clearly shows that this will be difficult to achieve. But when the tactic of shifting goalposts pervades an entire Budget, in expenditure allocations made for departments, projects and schemes as well as in terms of resource mobilisation, it robs the exercise of any sense of accountability, which is the raison d’etre of Budget-making in a democracy.
Even revenue projections from non-tax sources are suspect. For instance, the Finance Minister has projected a revenue of Rs.1.33 lakh crore from communications services, which is clearly based on the windfall that would accrue from the clearance of the backlog of charges levied on spectrum and licence fee dues after the recent order of the Supreme Court. This is highly questionable because reports indicate that the Department of Telecommunications has been asked by the government to go slow on imposing any fee for failure to comply with the court’s order. Clearly, that projection is going to be missed significantly.
Disinvestment
A similar resort to subterfuge is seen from what the government expects to mop up through disinvestment in public sector undertakings. Consider this: last year’s estimated revenues from disinvestment were Rs.105,000 crore, but information in the public domain shows that only Rs.18,000 crore was mopped up on this account. Undaunted by this large gap, Nirmala Sitharaman’s revised figures show that disinvestments will amount to Rs.65,000 crore. To meet this, in the less than 45 days that remain in the current fiscal, disinvestments amounting to Rs.47,000 crore would need to be made. The only way this can be done in such a short time span is by scaling down the price at which public assets would be sold to rock-bottom levels.
The Modi regime is betting heavily on disinvestment to get over the constrained fiscal space it finds itself in. Nirmala Sitharaman has projected a disinvestment target of Rs.2.10 lakh crore, of which Rs.1.2 lakh crore would come from the sale of non-financial public enterprises and Rs.90,000 crore from the sale of shares of financial institutions, including an audacious move to issue “shares” of India’s biggest insurer, Life Insurance Corporation, which does not yet have shares to issue.
More disinvestments are being planned, including several entities that now function under the Ministry of Railways. These disinvestments defy logic, especially when the economy is going through its worst slowdown in decades.
Instead, the Modi government, just like the first National Democratic Alliance government under Atal Bihari Vajpayee, is now hell-bent on making “strategic” disinvestments. This would mean handing over control to a private company even when it holds less than 50 per cent stake in the disinvested entity.
The sale of Container Corporation of India Ltd (CONCOR), India’s sole nationwide container transportation company, is a case in point. In effect, the private buyer would have control over a monopoly simply by virtue of having a stake of just over a little more than a third of the shares in the company. Even more critically, the disinvestment forecloses the possibility of the government providing a stimulus directly and much more effectively through these companies.
For instance, more investments in Railway projects, especially in much-needed capacity enhancements, would have provided a boost to the economy. There is much irony in the expectation that the private sector, whose unwillingness to invest is directly responsible for the economic slowdown, is now expected to “invest” in grossly undervalued public sector companies.
The Finance Minister’s long-winded speech had many announcements for agriculture, but none of them were given any meaningful allocations. The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) , which could have been scaled up significantly to provide relief to rural labour households and build meaningful assets in the countryside, suffers the same fate. Allocations have been cut precisely at a time when they ought to have been increased.
After the massive tax breaks given to the large corporate sector last year, the government has been under some pressure to provide some relief to the middle class. This it has done by way of tweaking the tax rates applicable on incomes ranging from Rs.5 lakh to Rs.10 lakh. But even this was done after satisfying the dividend distribution tax. While the loss of taxes forgone on the middle class incomes would amount to Rs.40,000 crore, the losses arising from the waiver of the dividend distribution tax, which would benefit a far lower number of well-heeled taxpayers, would amount to Rs.25,000 crore.
Formally, the Modi government remains committed to doubling farmers’ incomes by 2022, investing Rs.104 lakh crore in infrastructure in the next five years and increasing the size of the Indian economy to $5 trillion by 2024. It is evident that the first is extremely unlikely, given the all-round collapse in farm gate prices of agricultural commodities. The second is so vaguely stated and is based so heavily on shifting goalposts that it is impossible to verify. As for the third objective, the current rates of growth make it highly improbable, akin to an unlikely victory amid a climbing asking rate in the slog overs of a limited overs cricket match.
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