The Union Budget 2016-17 had a
pressing context for the Modi-led NDA Government. Over the past few months,
there was a crisis of confidence brewing across the country with regard to the
economic agenda of the government. There were left-leaning accusations of the
Government trying to hide it’s economic failings through the cloaks of communal
sentiments, divisive politics, so on and so forth. There was a convergence of a
gamut of issues pertaining to governance that had descended to face the
government in the past couple of weeks, which made this Budget not only
important for economy but in a lot of ways for the body-polity of the nation at
large.
In the past, many a budget has
been accused of trying to parry to every possible sector and in the process not
doing enough for any of them. An economist and planner would contend that the
planning problem in an economy with resource constraints, would not allow
him/her to wield the magic wand for every sector simultaneously. The Economic
Survey distinctly made certain aspects of the economy come out wide in the open
such as the prevalence of weak external demand, the global slowdown and its
impact on the Indian Economic growth, the need to revive agriculture and on
sustenance of the growth aspirations in an environment of not-so “benign”
macro-economic factors. In such a backdrop, the budget would set for the
Economy became of crucial importance for nationwide politicians, economists and
observers.
The NDA government in addition to
propagation “sabka saath, sabka vikaas”
and introducing schemes such as Digitial
India, Start-Up India, Make in India, Stand Up India, has been
predominantly seen as one with large corporate leanings. Make in India in itself was touted as a game-changer for the
manufacturing sector of our country, giving us certain dimensions of a possible
manufacture-centric and export-led growth. In an environment of such a massive
recent impetus to manufacturing, entrepreneurship and exports thereof, the
initial sections of the Budget did seem to be coming as a slight shocker with
it’s repeated emphasis on the infrastructure, social sector and the rural
sectors of the economy. Even with the enunciation of the 9 pillars of a budget
which was just touted as a “transformative”
one, the departure from the usual lines of economic discourse was
prominent. Five out of nine pillars
enunciated were oriented towards wider notions of economic development thus
breaking the very monotonous Growth Mania
that our country and the corporate sector finds itself immersed into, with
sectors such as Agriculture, Infrastructure, the Rural and Social Sectors
getting a key spotlight with the Finance Minister’s Speeches.
Albert Hirschman had once
famously pointed out that for an underdeveloped Economy to accelerate and carry
forward with a growth in it’s GDP, it would best be suited with focus on
certain key sectors of the economy which would carry the rest of the economy
forward. His tract on Unbalanced Growth
seems to have resonated far and wide within the corridors of the Finance Ministry
which decided to make this budget a primarily pro-poor one with major
announcements in the five areas I have mentioned above. For a government to be
pressurized to maintain on its promises to the electorate on one hand and keep
up the “bright spot” image of the economy
in front of the rest of the world on the other, the direction of the budget was
bold and rather beautiful on paper, on the hindsight at least.
What has interestingly occurred in
this budget, as a continuation from where I left off in the last paragraph, contrary
to a lot of popular opinion, manufacturing and services (predominantly the
urban sector) were not seen as the focal points in the growth story for the
economy for the next fiscal year. The Finance Minister seems to have re-sparked
the Lewisian divide very well by focusing a lot of the push on the rural sector
of the economy, be it from the goal of doubling the average farmer’s income by
the year 2022 to the massive impetus on schemes pertaining to irrigation,
ground water management, crop insurance, and most importantly the MGNREGA. As
someone who has been observing the economy with somewhat magnified detail, one
aspect of this impetus was made clear. The government is no longer relying on
external demand to drive production in our economy forward. The rural sector
has been rightly identified as one where domestic demand generation would be
able to plug certain demand gaps in the economy and thus begin a positive cycle
of demand led output and growth via domestic means in the Economy. Indicative
of this massive push is the allocation of 87,765 crores for the rural sector,
2.87 lakh crores as Grants in aid to Gram Panchayats and Municipalities along
with the 38,500 crore package for MGNREGS. For agriculture and the rural sector
to be the beneficiaries of the mantle in this budget, the unbalanced stimulus
of expenditure met out to them seems to bear promise of economy-wide
reverberations in the coming months. If I have to look at it from a Keynesian
perspective, the investment in the sectors economy which have been very much
out of the focus in the recent past would certainly help the multiplier to prop
up demand and output in the economy.
The second broad area of focus
would be infrastructure, which has also experienced a massive injection of
funds. The investment of 97,000 crores in the road sector and a total outlay of
2.21 lakh crores for infrastructure have been only indicative of the path
forward that the government wants to be adopting. A lay-man would probably
wonder behind the logic of this entire injection into the economy on
infrastructure and transport alone. What got me thinking is the linkages, that
the transport and infrastructure sector, provide in an Economy as vast as
India. The economic potential of developing and accelerating work on two
sectors with as massive as linkages of railways and roads is something that
reeks of a lot of Keynesian sense of government investment to spur growth in an
economy. Let’s be honest and look at the long list of allied industries which
are going to benefit from these investments. Each of those allied industries
will have allied industries of themselves and this is only the beginning of an
economy-wide ripple effect of increased investment in the Economy, which would
be heralded as a massively positive step toward positive a growth and
development environment in the Economy. The benefits to these allied industries
that I did speak of just now would only translate into demand creation for the
corporate houses and potential markets for the very same entities which are
sobbing at the moment for no up-front benefits per se doled out to them in
today’s budget. Let us not forget here, the lessons in the roadmap for Europe suggested by the erratic marxist, former Greek Finance Minister, Yanis Varoufakis, who prescribed a very similar stimulus through infrastructure spending in the economy rather than the adhered to quantitative easing, to accelerate growth in the European Union.
A lot of people contend and will
carry on doing so throughout the evening and the next week that this is not a
populist budget. The need of the hour was not a populist budget but one that
accelerated growth and improved the parameters of performance in the economy on
fronts which would draw in greater investments into the economy in the near
future. What the government has essentially done is to take it’s two biggest
eggs and place them in two sectors which it feels would help it spur domestic
demand, domestic output and national growth. It is very akin to a football club
having a transfer kitty of 100 million pounds and spending 75 million on two
marquee players around whom they would prefer to assemble a team, keeping those
two as the focal point of the club’s future. The Government has in essence done
the same thing with the rural, agriculture, social and infrastructure sectors
being earmarked as its engines for growth in the coming years. The criticism to
this budget on this very front would come in the form of barbs and jibes, with
regard to the other sectors of the Economy. However as an economy, it is very
important for us to take the case of China where the most recent “slowdown” or
as I may put it “major hiccup” (not the one it is currently under) in the wake of
the 2007-08 financial crisis, was dealt with through massive investments in the
rural, agriculture and infrastructure sectors in order for the Chinese Communist
Party to sustain those surreal growth rates for a few more years. If we as a
body polity are ready to tout China’s story as a growth success in the recent past,
we must also be ready to take certain steps that the former took in contending
with sustenance of growth in the wake of weakened external demand and dampening
global macro-economic cues.
The populism of this budget does
not lie in the schemes and outlays announced, along with the trajectory of
growth set by the economy but much in the potential payoffs of these very schemes
and investments that they shall undertake. Gerrymandering in the name of a
budget has probably not happened today, and the sooner people realize the
potent of the direction of this budget, the better the body-polity of the
economy would do in contributing to the growth story of India. For a government
branded as neoliberal, pro-corporate and so much more, this budget has the
potential to be a watershed one in the short and medium term growth story of
the nation with the entire world steeped into a mode of slowdown.