The budget’s stab at trickle-down economics
The overall philosophy manifested by the interminable speech was to leave ill alone
This year’s budget speech was the lengthiest on record. It went on for so long that the American actor Pamela Anderson could have had a wedding after Nirmala Sitharaman began the address and filed for divorce before the finance minister’s concluding remarks. Few had believed the Baywatch star’s latest relationship would last, given the way her previous marriages had progressed. So, why did intelligent people convince themselves this budget would offer something fresh, despite the evidence of the six previous editions?
The overall philosophy manifested by the interminable speech was to leave ill alone. The economy will recover by itself, the way the body recovers without treatment, it seemed to say. Primum non nocere, or “First, do no harm", is a maxim taught to doctors across the world, based on the idea that doing nothing can be better than risking doing more harm than good. Coming from the political party that gave us demonetization, a primum non nocere budget is not a lamentable thing. It should be borne in mind, however, that bodies occasionally fail to heal themselves, and treatment gets more difficult with time.
Considering the widespread feeling that some serious intervention was necessary at this juncture, what could the Bharatiya Janata Party (BJP) have done differently? Perhaps Sitharaman should have been invited to Prime Minister Narendra Modi’s meetings with entrepreneurs, managers and bankers leading up to the budget, where she might have chanced upon an idea or two for reviving growth. It is sensible, as a matter of form if not principle, to include high-ranking ministers in discussions related to their domain. It might also have helped if minister of state for finance Anurag Thakur had pitched in rather than spending most of his time at election rallies doing stuff like leading chants of Desh ke gaddaron ko, goli maaro saalo ko.
Left to fend for herself, Sitharaman made some odd choices, one of the oddest coming in the section devoted to education. I am not referring to the cut in Central funding relative to gross domestic product which, while misguided, was expected, because it has been the trend since Modi became prime minister. No, the peculiarity lay in her quoting from Harappan artefacts. Since the Harappan script is yet to be deciphered, declaring that Indus Valley seals spelt words like “Sreni", “Sethi" and “Poddar" did not make a great case for the government’s commitment to rigorous scholarship. It was like speaking of alien abductions while announcing the outlay for space research.
The minister claimed India continues to encourage foreign investment, but the government’s actions in the past month belie that assertion. Jeff Bezos, who is occasionally the world’s richest individual, visited Delhi in mid-January expecting to meet high-ranking ministers, if not Prime Minister Modi himself. Instead, he was told to go fly a kite. Since it was Makar Sankranti, that is precisely what he did. It made a nice photo-op, but he must have been steaming. As if that snub was not enough, commerce minister Piyush Goyal belittled Bezos’s promised billion-dollar investment, saying the founder of Amazon was doing India no favours by financing the losses his company had incurred through predatory pricing.
Coming back to the budget, five smart cities were added to the existing list of a hundred. I have been to many of them in the past couple of years and without exception the experience made me wonder what a dumb city would look like if these towns were considered smart. Not one offered potable water or clean air. There was no credible plan for decongesting overcrowded neighbourhoods. Traffic was terrible and the noise on streets unbearable as honkers tried to get their message past the glass shields of air-conditioned vehicles.
Today, Delhi residents suffer more hearing loss due to street noise, on average, than inhabitants of any other city. Bengaluru has the worst traffic congestion, according to the latest TomTom Traffic Index. Four Indian cities feature in the top 10 on that list, which is three fewer than the seven classified among the 10 most polluted towns in the world, according to air data company AirVisual’s live air quality ranking.
Maybe the government believes catchy labels matter more than the underlying reality. Simplifying taxes is a catchy idea. That is what the finance minister said she was doing when she introduced six new tax slabs as part of a scheme that will coexist with the established structure of slightly higher slabs, coupled with many deductions. In what universe could this be considered simpler than what it replaced?
Perhaps the idea is eventually to migrate entirely to the newer format. Speaking personally, I welcome the idea of slightly lower tax rates coupled with no deductions. It will definitely save me money, since I don’t invest optimally in tax-saving instruments.
The government estimates it will forgo ₹40,000 crore annually as a consequence of the new rates favouring people like me. It might have made sense to put money in the hands of the poorest Indians rather than follow up a tax giveaway to corporations with one to well-off citizens. Instead, Sitharaman slashed funding for the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), cut the amount promised to the National Health Mission, and kept outlays for most other welfare programmes flat.
There is, moreover, a gap between what is promised by the government and what is actually spent. The Beti Bachao Beti Padhao Abhiyan, the success of which the finance minister touted in her speech, was allocated ₹280 crore in the previous budget, not a massive amount by any reckoning. Fifty-six per cent of all funding for that programme has thus far been spent on advertising and, as of January, only 15% of the ₹280 crore allotted for the current financial year had been utilized.
What we see in the budget and in the pronouncements of the past few months is India’s stab at trickle-down economics. If firms have a lower tax burden, they will hire more people, the thinking goes. If individuals pay less tax, they will spend more and stimulate the economy in the process. I have no idea how that will play out across the country. Speaking for myself, come December, I plan to use the money I save to give Sri Lanka’s economy a tiny boost.
Girish Shahane writes on politics, history and art.
FIRST PUBLISHED07.02.2020 | 12:56 PM IST