Home >Opinion >Online-views >Budget 2017: High on rhetoric, low on delivery

This was the fourth budget of the National Democratic Alliance (NDA) government. Coming at a time when the world around is full of uncertainties, more was expected from the budget than what has been delivered.

The domestic uncertainty is certainly the outcome of demonetisation. While there is consensus that the economy will slow down by 1-1.5 percentage points from the growth rate of 7.9% (as per final estimates) in 2015-16, the exact nature and quantum is yet to be made clear.

At a time when the estimates of GDP growth for this year have already been revised downwards and the macro indicators of private investment and non-food credit growth are pointing south and non-performing assets of banks are still a problem, the revival of the domestic economy is the first priority. But this is all the more difficult with the external environment becoming unpredictable after Donald Trump took over as president of the United States.

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The uncertainty is not just around the political environment but also over the impending rise in petroleum prices and growing protectionism in the industrialized world. The Economic Survey had correctly highlighted some of these and so did the budget documents.

But what is certain is that the demonetisation exercise did lead to suffering for many of the small and marginal farmers. It also led to suffering for the small and medium enterprises, particularly the informal sector, with stories of job losses and businesses closing down. Some of this may have come to an end with money supply increasing but there is no denying the fact that this did add to the misery of an economy already suffering through demand compression for the last two years.

The surest way of reviving the economy and alleviating the suffering of the people was to step up expenditure in rural areas and in agriculture. But it is here that this budget failed to stand up to its own rhetoric. Two areas where the government was expected to spend more were agriculture and rural development. In fact, these formed the starting point of the budget speech by the finance minister. But a closer look at the budget numbers belies any hope that enough has been done in these two sectors.

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While the increase in budget of the Mahatma Gandhi Rural Employment Guarantee Scheme (MGNREGS) appears to be massive, it is actually lower than the total spending this year. Excluding the money spent for delayed payments, the overall budget is same as that of last year. But this is where the story ends.

Much was made of the Universal Basic Income (UBI) proposal of the Economic Survey and one way, according to the Survey, would have been to pilot it among vulnerable groups. The surest way of doing it would be to expand social pensions. But here is a case where not only has spending been kept intact but also there is no mention of increasing access as proposed in the recently submitted SECC (socioeconomic and caste census) expert group report.

The total budget for social pensions for widows, elderly and disabled remains at Rs9,500 crore. The least that was expected was for the government to have increased the paltry sum of Rs200 (fixed in 2006) that is given as pension to these vulnerable groups.

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This is also true of the other flagship schemes on which much time was spent. The budget for the Pradhan Mantri Gram Sadak Yojana (PMGSY), which could have been used to create rural infrastructure as well as rural employment, has remained stuck at Rs19,000 crore. This is despite the fact that the amount from the Central Road Fund which is used to fund the scheme is expected to fetch Rs3,000 crore more. The silver lining in the rural development budget is the increase in the amount for rural housing which has followed an announcement by the prime minister.

The second big area which required some spending was agriculture which again was highlighted as a pressure point. Here again the increase in the budget is nominal—and only to the extent of the increase that the government expects from the increase in revenue from the Krishi Kalyan Cess. But it is not the spending alone but also the approach which does not reflect the kind of seriousness that this sector warrants.

The focus on insurance, credit and marketing has now been there for several years. These do not require much money and the growth of agricultural credit since 2004-05 has actually been phenomenal. So is the case with the insurance scheme whose coverage has increased but slowly.

The real problem in agriculture is declining investment in basic infrastructure, including irrigation. These have not seen any significant step-up. But so is the case with marketing infrastructure where the focus remains on legislative and other reforms such as e-marketing and Agricultural Produce Market Committee (APMC) Act. But these require support from the state governments and are more of policy decisions on which progress has been stuck.

On the other hand, what is required is spending on infrastructure on warehousing, creation of new markets and making the markets accessible to farmers. Unfortunately, these have not seen the budget do much.

While there have been some positives, including the reforms on political funding, the real test of the budget was the ability to manage spending to revive the economy. The problem with the economy, as is clear by now, has been a decline in consumer demand, more so in the rural areas.

Unfortunately, while the speech made all the right noises and also agreed on the diagnosis, the prescription as revealed in the budget documents suggests a wide gap between rhetoric and reality. While the budget speech may deliver political dividends in the electoral arena, the ability of the budget to deliver growth is certainly doubtful.

Himanshu is an associate professor at Jawaharlal Nehru University and visiting fellow at Centre de Sciences Humaines, New Delhi.

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