The PM’s speech in parliament at the end of the Budget session did not respond to criticisms of his government’s performance on all fronts: including unprecedented unemployment and inflation, and a criminally irresponsible Covid response that cost so many lives. Neither did he respond to questions demanding specific commitments instead of the vague budgetary phrases of “Amrit Kal” and the goal of “Bharat@100”. Instead he indulged in his by now predictable strategy of blaming the Opposition for all ills, and serving up outright lies.
In 2015, the Prime Minister and the Budget had announced a series of promises for 2022, the “Amrit Year” marking 75 years of India’s independence. These promises including doubling of farmers’ income, turning post offices across the country into payment banks for easy loans, ensuring potable water, toilets, a house, 24/7 electricity supply and road connectivity to every household in India. In 2022, the Budget – and the Prime Minister – have been totally silent on the failure to deliver on these promises. Instead, the same promises have been regurgitated or repackaged as fresh announcements. The sole difference that in 2015, the year 2022 has been called “Amrit Year” (the immortal year) when all these promises would come true; whereas in 2022 the Budget announced that we have entered the “Amrit Era” - and the promise will be realised by “Bharat@100” – that is, the centenary of India’s independence! So there is zero accountability on actual progress and performance by the Modi Government: the goalpost is just given a new “jumla” name (fancy name) and postponed by 25 years!
Budget 2022 promises to create 60 lakh jobs: without any detail on where these jobs are going to come from! There is no mention of filling the huge number of vacant jobs in government services – a demand that young educated unemployed people have been voicing for years with only police beatings to show for it. The Budget has slashed allocations to food subsidies, MNREGA, healthcare and public health. There is of course no transparency on how much the Government spent from the treasury on Pegasus software which has been used to spy on Indian citizens. But the Prime Minister’s response to any questions on these issues is to brand those asking the questions as anti-national.
The Prime Minister in his speech termed the Opposition to be “urban Naxals” and “tukde tukde gang” – terms coined by his propagandist media to suggest that all critics are traitors to the country. Worst of all, he chose to lie outright on the Government’s Covid response. He blamed the spread of Covid on Congress and AAP governments in Maharashta and Delhi for arranging transportion for stranded migrant workers during the lockdown. Shamelessly, he said this even as the Chief Minister of UP is making the false claim to voters in his state that he and none other arranged buses for stranded workers right at the start of the lockdown! Likewise, the BJP had boasted to voters in the Bihar elections that the BJP had “brought migrant workers safely home”.
The dominant sections of the media may trumpet the PM’s lies. But anyone can look around and see that the poor do not have houses, potable water, toilets, roads, jobs, loans, electricity; farmers’ incomes have not doubled; in fact unemployment, hunger and farmers’ distress is worse than ever. Everyone can recall the migrant workers forced to walk home during the pandemic, enduring starvation, beatings and sickness on the way. Everyone can recall that it is not migrant workers that caused Covid to spread: it was the Kumbh Mela and Bengal election rallies the PM insisted on holding that caused the deadly Covid second wave in India. And they can recall that it was criminal shortage of oxygen and hospital beds that caused most of the deaths.
In elections and on the streets, India’s people are keeping accounts of the PM’s falsehoods and the Budgetary betrayals.
Economic Survey and Budget 2022: Rubbing Salt In People’s Pain
Throughout the Economic Survey, Budget and debate after their presentation, the BJP Government effort was to present a rosy picture of state of the Indian economy with the underlying message that the worst of the Covid Pandemic was over due to 'clever and effective management' of the pandemic under the able leadership of Narendra Modi who is 'now steering India to a grand vision' of Aatamnirbhar (self-reliant) Bharat. But the real picture is very different.
The government celebrated the fact that the revised real GDP for FY 2021-21 outstripped the pre-covid level achieved in FY 2019-20. The fact is that growth in that last pre-covid year was pegged at just 4%! To make the picture clear, the real GDP numbers (revised) of 2021-22 is estimated at around Rs 147 lakh Crore while it was more than 145 lakh Crore for FY 2019-20. This at best is evidence of stagnation especially in the second year of the pandemic when the worst was supposed to be over.
The truth is that many important economic indicators such as employment, tax numbers, inflation have not yet reached pre-pandemic levels. Many other important measures such as fiscal deficit, public capex, confidence level of decision makers as portrayed in the RBI study, rupee dollar exchange rate and global clues in terms of the emerging geo-political scenario, global inflation including crude prices and the consequently hardening interest rates in major economies of the world and the likely effect of it on India – none of these indicators are at a comfortable level. To claim that all is well by spinning stagnation as growth – that is an act of deceit perhaps only the Modi regime would attempt.
Borrowed Growth
While it was quite obvious that the days of easy credit would be over soon, the Government did not recognize that in clear terms in the economic survey and budget. It took less than one month for CPI (Consumer Price Index) to breach the bearable higher level of 6 %. The fact that fiscal deficit (fd) for FY 2021-22 had to be revised at higher level than budgeted to 6.9 % makes it obvious that whatever growth was claimed in FY 2021-22 to paint rosy picture is basically in the nature of borrowed growth, and not genuine growth based on naturally achieved economic activity level.
The citizens’ expectation naturally was for a pro-people’s budget but that is a far cry. The Budget cut subsidies on food, fertilizers, fuels; lowered budget for MSP procurement and rural development while extending tax favours to Corporates in name of promoting Start Ups. Out of the total budget size of Rs 39.44 lakh Crore, as much as 16.61 lakh Crore is projected to be borrowed i.e. more that one third (around 42 %).
BoP situation and Rupee situation: Difficult to tell till when the cushion will hold
On the BoP (Balance of Payments) front, the survey claims that things are stable and recovery of capital flows has, ‘…led to augmented foreign exchange reserves crossing the milestone of US$ 600 billion and touching US$ 635.4 billion at end-September 2021. India’s external debt at end-September 2021, estimated at US$ 593.1 billion, grew by US$ 22.3 billion (3.9 per cent) over the level as at end-June 2021. But with considering the fact of tightening liquidity globally, hardening interest rates and hot nature of FIIs flows especially, this supposed comfortable situation may take a hit by factors which are essentially not in Government control.’ It won’t be out of order to point out that it may not look alarming but the rupee has devalued to about Rs 75/$ under present ruling dispensation.
Exaggerations
The budget paper states that nominal GDP will grow at 11.1 % in FY 2022-23 and Chief Economic advisor and the Survey said that real economic growth is likely to be in range of 8.0 to 8.5 percent. With WPI at double digit and CPI crossing 6 percent even before FY 2022-23 begins, is it being suggested that inflation would be only at the level of about 3 percent for FY 2022-23?
As per Economic Survey itself, ‘this projection of 8 to 8.5 percent real growth is based on the assumption that there will be no further debilitating pandemic related economic disruption, monsoon will be normal, withdrawal of global liquidity by major central banks will be broadly orderly, oil prices will be in the range of US$70-$75/bbl, and global supply chain disruptions will steadily ease over the course of the year’. This is a clearly an unlikely scenario especially with emerging global clues of hardening interest rates and rising Crude prices (its already above $ 90/bbl!) and it won’t be out of order to say that economic growth has been shown and projected at much higher level devoid of concrete realities just for gaining political points with election in five states approaching.
Uncomfortable fiscal situation
The historical baggage of earlier borrowing coupled with this third year of pandemic situation where, in this period, successive budgets have seen high fiscal deficit has created the situation where interest payments account for almost one fourth of total budget size. To put this in perspective, interest payments are pegged at Rs 9.41 lakh Crore while the total budget for central schemes is at just Rs 11.81 lakh Crore!
Thus, it is amply clear that with the Government’s reluctance to tax Corporates and HNIs despite the glaring rise in inequalities, the fiscal space for policy making is waning fast. The Tax-GDP ratio in the current budget is projected at a mere 7.5%, with Net Central tax revenue projecting at Rs 19.34 Lakh Crore. Adding non-tax revenue, capital receipts and borrowings to it, and the budget size is pegged at Rs 39.45 lakh crore (i.e only 15 percent of GDP). Thus, it’s no surprise that the BJP Government has put its hope on National Monetization Policies (NMP): the indiscriminate privatisation and sale of public assets and PSUs. The household budget analogy would be to sell the family jewels for daily household expenses.
Amrit Kal: Rhetorical Shifting of Goalposts
‘Amrit Kal’: this grand phrase coined by the PM, was used by the FM to claim that this budget is not for merely one year but contains the vision of India at 100 and thus is a statement of a visionary govt for the next 25 years! Framing the budget in this manner allows the government to evade any accountability for the promises it made in previous years, and any obligation to make specific commitments in this specific budget!
What was missing in the budget speech was any concrete assessment of big-ticket announcements of this very Modi government for this very year - 2022- i.e. doubling of farm income, Housing for All, Power for All etc. This is the penultimate full budget of Modi-2 Government, yet it was silent on Modi’s projection of a “5 trillion economy by 2024”.
Buoyancy in tax revenues claim: What the reality?
A big claim made by the economic survey is that of buoyancy in tax collection with a jump of more than 67 percent. But this claim is belied by fact that the Fiscal deficit for 2022-23 is projected at 6.4 percent of GDP and RE for 2021-22 stands at 6.9 percent of GDP - much above FRBM targets. In the medium term, the public debt of the Central Government was Rs 58.66 lakh Crore in 2014-15 when the Modi government first came to power but it now stands at 117.04 lakh crore. As acknowledged by the survey, ‘with the enhanced borrowings on account of COVID-19, the Central Government debt has gone up from 49.1 per cent of GDP in 2019-20 to 59.3 per cent of GDP in 2020-21.’ This puts pressure on public finances and cuts the window for public and social welfare expenditure.
The reality is that this supposed jump in tax revenue too is attributed to sucking up people’s savings and looting their little pockets in this time of pandemic-induced distress, through a record increase in tax collection on essential things of everyday use including petrol and diesel. This is reflected in a record collection of Union excise duties in revised estimates for 2021-22 to the tune of Rs 3,94,000 lakh Crore. To put this in context, it was also higher in the previous pandemic year at Rs 3,91,749 in 2020-21 but was only at Rs 2.39 lakh Crore level in the pre-pandemic year of 2019-20. The second major source of the claimed jump in non-tax revenues comes from withdrawal from RBI surpluses which is pegged at RE of Rs 1,47,353 Crore for 2021-22 and budgeted at Rs 1,13,948 Crore for 2022-23; which amounts to selling household gold in distress. As accepted by the Survey itself, ‘…the key component of dividends and profits during this period was 0.99 lakh crore surplus transfer from RBI to the Central Government.’
Allocation for Subsidies and Social Welfare Takes A Hit
The Govt plans to cut subsidies on food to Rs 2,06,831 Crore in the coming year, as is evident from revised estimates of Rs 2,86,469 Crore for 2021-22. Similarly, for fertilizers it wants to cut subsidies to Rs 1,05,222 from RE of Rs 1,40,122 Crore.
For important sectors, the budget has tried to cover up stagnant allocation through some window dressing and catchy phrases. But the facts speak for themselves. The allocation for Agriculture and Allied Activities is pegged at Rs 1,51,521 Crore (RE 2021-22 Rs 1,47,764 Crore), Health even when the impact of Covid has not waned away completely at Rs 86,606 Crore (RE Rs 85,915 Crore), Rural Development at Rs 2,06,293 (RE Rs 2,06,948 Crore). Considering the impact of inflation this is actually a cut in allocation in real terms. In Education there is a slight increase of 18 percent to Rs 1,04,278 Crore but this is far from sufficient, given that the survey itself acknowledge that rural India is witnessing a shift from private schools to public schools, which means the latter will need additional allocation.
The middle classes were expecting some relief in form of relaxation in income tax rates but government did not change income tax slabs. The Corporates continue to enjoy the lowest Corporate tax rate in the world, and ordinary people are made to share the revenue burden, with collection from indirect taxes reaching same level as direct taxes.
Privatization remains unabated
The privatization spree is continuing with the announcement of the sale of Air India and IPO of LIC in spite of protests by employees. The Economic Survey says that privatisation “will help the government to make use of disinvestment proceeds to finance various social sector and developmental programmes while disinvestment shall infuse private capital, technology and best management practices in the disinvested CPSEs. …Thus, the policy on public sector enterprises provides a clear path for disinvestment in all non-strategic and strategic sectors and strengthens the idea of Minimum Government - Maximum Governance.” This means that the Govt has openly declared privatization of PSUs and selling of national assets through National Monetization Policy (NMP).
Supposed recovery from NPAs of SCBs
The economic survey claims that the situation on the Non-Performing Assets (NPAs) front has recovered, and credits this to the Insolvency and Bankruptcy Code (IBC) and other mechanisms adopted by BJP government. The fact is that that impression of recovery is thanks to demonetisation which infused liquidity in the banking system; and to socialization of losses by unprecedented levels of write-offs of corporate credit under the present dispensation achieved through capital infusion in SCBs from the public exchequer.
The early recognition of NPAs and supposed fast settlement mechanism through IBC of ‘distressed financial assets’ has resulted in write offs of a record Rs 10 lakh Crore since 2014-15 (Indian Express, Dec 13, 2021). The capital infusion in banks during the Modi tenure has been to the tune of a whopping Rs 3.37 lakh Crore and it is this which has made possible the supposed improved capital adequacy ratio, controlled level of NPAs and return to profitability with clean balance sheets.
It is these PSBs with clean balance sheets that are now being merged despite opposition of bank unions, as a prelude to selling them out to private interests like other PSUs. It is the people of India who have paid for this in both ways – depositors and tax-payers - and it is their public assets PSBs which will now be offered on a platter to financial and corporate interests.
Unemployment issue goes unaddressed
The FM announced that the government will create 60 lakh jobs in five years; but she provided no roadmap for even this meagre announcement. This promise, it seems, will meet the same fate as the BJP’s election-time promise of 2 lakh Crore jobs per year. On the demand side, the economic survey concedes that private consumption which is main force driving aggregate demand is yet to pick up which shows dampened confidence, and continued distress in household earnings and employment. CMIE data showed that 5.2 Crore Indian were unemployed as of December 2021. The unemployment rate is already at high level of 7.9 % in urban area and 6.5 % in rural area.
Labour Force participation rate under Modi regime has come down to a historic low of almost 40 percent which shows that people have already given up hope of finding jobs. Can any economy prosper when 60 percent of employable persons have simply given up hope of finding jobs and employment? Remember, the unemployment crisis began prior to the pandemic, and has only worsened during the pandemic. Far from acknowledging and addressing this urgent job crisis, the Government did not even announce its intention to fill the 8.72 lakh central government posts that are currently vacant.
The FM also decided not to speak on MNREGA while cutting its allocation by almost 25%. Small and Medium Enterprises have taken a hit in terms of closure, drop in revenue, and are cutting jobs to cut costs for survival, despite the government’s tall claims of extending emergency credit support to them.
Conclusion
Internationally, crude oil prices are picking up (reflecting a likely tightening of liquidity by major central banks which will may hit FDIs and FIIs, on which Modi Govt put over-reliance for sustaining growth). India’s own WPI index at double digit level, which indicates in the direction that even the government’s artificial strategy of addressing aggregate demand shortage through credit infusion announced first in the celebrated 20 Lakh Crore relief package is now reaching its limit. Still the Modi Government has failed to provide any fiscal stimulus to the economy either through immediate relief to people and/or hike in public investment at a substantial level. With even the Credit route option in crisis how can the Indian economy achieve 8 to 8.5 percent level of growth in 2022-23 as claimed in Economic Survey is anybody’s guess! It will not be out of order to point out that growth was less than 5 percent in 2019-20, the pre-covid year.
Budget 2022 is thus a betrayal of youth, farmers, workers and common people, even as it panders to India’s billionaires.
