Opinion | Budget fails to live up to the promise of providing ‘sabka saath, sabka vikas’3 min read . Updated: 01 Feb 2020, 11:54 PM IST
Cutting down food subsidy is bad for rural demand as well as nutritional outcomes
Nirmala Sitharaman’s second budget came amid heightened expectations and suggestions of a serious slowdown in the economy. It was also clear that the slowdown was the result of a severe demand crisis, particularly in rural areas. Against this backdrop, the budget was supposed to present a roadmap for economic revival through demand injection. There was also widespread consensus that the best way to achieve this was to increase public spending, primarily in rural areas. While the budget speech waxed eloquent on the importance of agriculture and the rural economy, the actual estimates from the budget documents paint a different picture.
It was well known that the government has failed in its target of revenue projections, which were based on unrealistic assumptions, but it was also expected that it would not cut expenditure on essential social schemes, which are crucial for generating demand. What has happened is exactly the opposite, with the government deciding to give tax breaks to corporates, while cutting expenditure by an equivalent amount.
The government underspent ₹75,532 crore on budgeted food subsidy. One consequence of this was that it was sitting on huge food stocks of over 70 million tonnes in January, as against the buffer requirement of 21 million tonnes. Even for FY19, the actual expenditure was ₹69,971 crore lower than the revised estimates provided by the government in its July budget documents. At a time when consumption expenditure data and reports by newspapers, including this one, have documented the decline in food expenditure, cutting down food subsidy to the poor in two consecutive years is not just bad for rural demand, but for nutritional outcomes too —more so at a time when food inflation is close to 14%.
This cutback has already hit the food consumption of the poor, who are struggling with high food inflation and declining wages. But it has also hurt the agricultural sector, with a decline in food procurement, which was reduced to less than half of the procurement of last year. But the farmer will also be hurt by rising input costs due to a ₹8,689 crore cut in fertilizer subsidy. Despite all the grand pronouncements made by the finance minister, the reality is that the revised expenditure on agriculture in FY20 has declined by ₹30,683 crore—one-fifth of the budgeted agri sector budget. Even the flagship PM-Kisan scheme has seen a downward revision from the budgeted ₹75,000 crore to ₹54,300 crore. At a time when the sector is in a crisis, the cutback in spending and reduction in fertilizer subsidy will only aggravate the agrarian distress.
Even allocations for the schemes for rural development and infrastructure have not been spent, pushing them further into stress. The flagship rural infrastructure scheme, PMGSY, has seen a reduction by ₹4,930 crore from the budgeted expenditure, and the irrigation scheme has seen a ₹1,786 crore cut. The cuts have not even spared schemes for children—midday-meal budget was reduced by ₹1,088 crore and the ICDS scheme by ₹2,629 crore. Two other flagship schemes, skill development and Ayushman Bharat, have seen expenditure cuts of ₹1,511 crore and ₹3,242 crore, respectively. Most of these expenditures benefit the poor and have sustained them in the face of rising inflation and shrinking income. While it will certainly push more people into poverty, it also implies that rural areas have borne the brunt of the government’s largesse to the corporate sector.
Most of these schemes, which were expected to see an increase in budgeted expenditure, have seen the same expenditure as last year’s budget. The fact that these allocations have not been spent raises doubts on the government’s intention. It also raises questions on the integrity of the budget numbers announced with a high dose of political rhetoric. This is not only evident in case of expenditure estimates, but also in case of receipt estimates, which have projected unrealistic disinvestment targets and recoveries that are unlikely to materialise given past trends. The burden of unmet receipts is likely to fall on expenditures, mostly on items and heads, which matter for the poor and rural residents.
But it is not just a Bharat vs. India story. The expenditures in the rural economy, including in agriculture, are essential for any recovery of the economy, which is staring at the worst slowdown in recent memory. At least, at this juncture, the fortunes of India are very much dependent on Bharat. The budget fails to live up to its rhetoric of India realizing its growth potential. But it also fails to live up to the promise of providing sabka saath, sabka vikas, with the burden of adjustment falling on the poor and the farmers.
Himanshu is associate professor at Jawaharlal Nehru University and visiting fellow at the Centre de Sciences Humaines, New Delhi.