Congress parliamentarian and former finance minister in the United Progressive Alliance government, P Chidambaram, termed the Bharatiya Janata Party-led government’s Budget presented on Thursday a “big letdown” and listed out eight areas in which it had disappointed.
Chidambaram released a statement in which he said the Budget’s promise of raising minimum support prices for farmers lacked detail and held no indication that the actual incomes of cultivators would increase. He also said the Budget lacked new ideas for job creation and accused Finance Minister Arun Jaitley of falling back on tokenism.
Chidambaram termed the government’s healthcare promise of Rs 5 lakhs per family for 10 crore families “a big jumla” and pointed to the absence of any tax relief for the average taxpayer.
Here is the full text of his statement:
The Budget for 2018-2019 was presented today. It is the last full budget of this government, and I should add “thank god for that”.
Let me recall the economic context in which this Budget has been presented. I draw my facts from the official document of the government, namely, the Economic Survey that was presented on January 29.
- There are two macro-economic situation vulnerabilities — fiscal account and current account.
- The real effective exchange rate has appreciated about 21% since 2014 affecting India’s export competitiveness, but the domestic political economy (meaning BJP) favours a stronger, less competitive exchange rate.
- In the last four years, the level of real agricultural gross domestic product and real agricultural revenues have remained constant.
- Jobs is the number one issue. Jobs are not being created. Industry — especially micro, small and medium enterprises — create jobs. Industrial gross value added growth has declined from 9.8% in 2015-2016 to 6.8% in 2016-2017 to 2.7% in 2017-2018. In the same period, manufacturing gross value added growth has declined from 12.7% to 7.9% to 3.1%.
- The last number on investment (gross fixed capital formation) was 28.9% of gross domestic product in the second quarter of 2017-2018. The last number on consumer price index inflation was 5.2% in December 2017. The last numbers on credit growth are: non-food credit 10% and credit to industry 2.1%.
The big disappointments of the Budget
In light of the above, the Budget proposals should have been bold and radical, and backed by adequate provision of funds. Unfortunately, the Budget proposals are a big letdown.
Let me list the big disappointments:
- Fiscal deficit: The finance minister failed the fiscal consolidation test. All deficits have crossed Budget estimates. Against a Budget estimate fiscal deficit target for 2017-2018 of 3.2, the final number will be 3.5. Even that is questionable. Similarly, for 2018-2019, against a target of 3, the finance minister has pegged it at 3.2. Both these slippages will have serious consequences and raise grave doubts about India’s commitment to fiscal consolidation.Â
- Exports: I did not hear any measures to boost exports. Because the government has run out of ideas to boost exports, the finance minister has imposed additional customs duties to restrict imports. The prime minister’s speech at — and the spirit of — Davos has been forgotten within a few days.
- Agriculture: There is a promise to increase minimum support price 1.5 times, but there are no details. (The Swaminathan Committee has been remembered in the last year of the government’s tenure!). Besides, Rs 2,000 crores for e-markets and Rs 500 crores for Operation Green (whenever the cabinet will approve the schemes) amount to a pittance. There is nothing to indicate that farmers’ real income will rise. Farm sector distress will continue and deepen, putting in peril the lives of a majority of the people primarily dependent on agriculture.Â
- Healthcare: The promise of Rs 5 lakhs per family for secondary and tertiary healthcare is a big jumla. The target group is 10 crore families. There is, as yet, no scheme. Assuming that each family will avail of Rs 50,000 (one-tenth of Rs 5 lakhs), the amount required per year will be Rs 5 lakh crores. If the insurance companies will foot the bill, the premium at Rs 5,000 to Rs 15,000 per family will require an outgo of Rs 50,000 crores to Rs 1,50,000 crores per year. Is the finance minister serious?Â
- Jobs: The finance minister has no new ideas and has fallen back on the tried and failed Mudra scheme. The average size of the Mudra loan is Rs 43,000. This is tokenism and will not create even one job. More Mudra loans will mean more tokenism, but no additional jobs.
- Investment and credit: There was nothing in the Budget to boost private investment. There was nothing in the Budget to encourage banks to lend, and investors to borrow, for new investment. The finance minister seems to have given up on private investment altogether.
- Tax relief: There is no tax relief to the average tax-payer. Only corporates with income up to Rs 250 crores get a tax relief of 5%. For individuals, standard deduction is back but long term capital gains tax is also back. For the middle-class earner and saver, one cancels the other. Actually, by way of long term capital gains tax and 4% cess, taxpayers will pay the government Rs 31,000 crores more whereas the gain through standard deduction will be only Rs 8,000 crores.
- Slashing allocations: The most disappointing part of the Budget is the cut in outlays on major schemes for 2018-2019. Some important schemes that will get constant or reduced outlays are: the Mahatma Gandhi National Rural Employment Guarantee Act, Pradhan Mantri Awas Yojana, National Drinking Water Mission, Swachh Bharat Mission, National Health Mission, Mid-day Meals Scheme, Interest Subsidy for Short Term Farm Credit, Northeastern Investment Promotion, Price Stabilisation Fund and Gram Jyoti Yojana. The finance minister will have much to explain when Parliament debates the Budget next week.