The Budget provides no succour to the millions of people who have suffered the consequences of demonetisation. The large workforce in the informal sector, the migrant labour, the small shopkeepers and traders, the women who kept tiny savings in cash and the small farmers and agricultural workers — all of them were hit with the loss of livelihood, wages and savings. There is economic slowdown which got exacerbated by the demonetisation measure. All indicators show that there is a fall in output in all sectors and contraction of demand.
But the Budget has refused to acknowledge this reality and does not take any concrete measures to at least repair the damage done. What was required in such a situation was a substantial increase in public expenditure. This would have meant not sticking to any rigid fiscal limits. By setting the fiscal deficit at 3.2 per cent for the next year, this is a contractionary budget. The total size of the Budget has come down from 13.36 per cent of the GDP last year (Revised Estimates) to 12.74 per cent of GDP this year. The fiscal deficit target has been achieved through expenditure reduction.
Tax woes
What the Budget should have done was to garner more resources from direct taxes from the corporate sector and the richer sections. Instead, there is increasing reliance on indirect taxes which will burden the people more. The Government is expecting an additional revenue of ₹75,000 crore through indirect taxes, far more than the ₹20,000 crore relief to small-income tax payers provided in the Budget.
As far as direct taxes go, there is a huge accumulation of direct tax dues to the tune of ₹6.59 lakh crore according to the budget papers. The Government, which proclaims its earnestness in ending black money, has done nothing to recover these dues, even the ₹81,406 crore dues on which no dispute is pending. On the other hand taxes foregone due to budgetary measures have gone up by about ₹30,000 crore and are put at 2.1 per cent of the GDP.
Cut back on welfare
The Modi government believes in withdrawing from the welfare measures obligated on the State. The last two budgets saw the slashing of the outlays on health, education, women and child welfare. MGNREGA, one of the largest poverty alleviation programmes, was also targeted for curtailment. In this Budget too there is no departure from this trend. As far as the MGNREGS is concerned, despite the claim made by the Finance Minister in his speech, the actual allocation shows no substantial increase. ₹48,000 crore have been allocated to the MGNREGS while last year the Revised Estimate on this count was ₹47.4 thousand crore.
There is only a small increase in social sector expenditure, which given inflation, would be barely sufficient to meet even the increase in salary expenditure due to the Seventh Pay Commission. The allocation for school education and literacy has actually declined from 2.2 per cent in 2016-17 (RE) to 2.16 per cent.
The Government wants privatisation of education and health sectors and the Budget reflects this outlook. Only 1.48 per cent of total budgetary outlay is allocated for welfare of scheduled tribes and 2.44 per cent for the welfare of scheduled castes. This is way below the share of scheduled tribes and castes in the total population. Similarly, the amount classified under gender budget is only 5.3 per cent of total outlay.
Further, for a government, whose Prime Minister cannot cease talking about jobs, there is hardly anything in the Budget for employment generation. Even the claim of increased spending on infrastructure is illusory. The capital expenditure on infrastructure has fallen from 1.86 per cent of the GDP (RE of 2016-17) to 1.84 per cent.
So to sum up, the budget has only offered prescriptions which will further add to the burdens on the people and heighten the recessionary trends.
(The writer is the former General Secretary of CPI(M). The article first appeared in The Hindu BusinessLine.)