The Union Budget was preceded by the Economic Survey, which was more aspirational than realistic as it anticipates the revival of economic growth despite shockers such as rise in oil prices and fall in public investments, to name just two. The biggest challenge for the government is to fulfil, if not legitimise, its poll promise of huge employment growth.
The growth story till now has shown that it need not necessarily result in employment growth. Employment growth even when it accompanies growth in the economy, relies on more money in the pockets of people and investment sops.
The Budget has hardly come up with any credible measures on the job front. It is clear that the government is more interested in numbers and not on job quality as its sops and employment policy is short-termist. Further, by tweaking provident fund rules, the government is sending a wrong signal to the economy at large that short-term job cards and a temporary pay bulge matter more than long-term employment and social security.
Not sustainable
As for corporate tax, the rate reduction for a large number of MSMEs should be contingent on the fact that the net gains in profits should be reinvested in a manner that would promote jobs and some kind of share of the benefits should be reflected in the wages of employees. Such measures would show that sustainable employment is the government’s core concern.
The toning down of corporate tax should be complemented by providing relief to the wage-earners and salaried classes; this has not taken place. With the introduction of a most ambitious scheme of providing health insurance cover for up to ₹5 lakh to 10 crore families, set to help 50 crore beneficiaries (roughly half the country’s population) what will happen to Rashtriya Swasthya Bima Yojana (RSBY) programme, whose performance anyway is not credible – the out-of-pocket expenses of those covered have not been addressed and there are other delivery problems not dealt with.
Further, with the tailoring of a meagre 3.1 per cent fiscal deficit, this ambitious programme is more likely to be left to private players as the government has no fiscal space to devote extraordinary sums for this. The Budget is more about ideas and not hard number and, in this sense, it is a dreamer’s Budget.
The hike in Customs duty on mobiles and other electronics will make some gadgets costlier but may not really jack up production in India as innovation is not yet India’s strength. This move, expected to strengthen Make in India, may affect Digital India as mobiles will be costlier, thanks to higher duty.
Misses the reality
The assured rise in MSP over the cost of production could be a tricky, though welcome, move. However, peddling the dream of doubling farmer income even in the medium term continues still sets its sights on high numbers while missing out on empirical realities.
There has been no talk on MGNREGA in the Budget though it has stood the test of time despite problems. The disinvestment target has been hiked to ₹80,000 crore which, again, has negative implications for employment creation. In passing, the pro-reformers will ask: is the credit note of disinvestment realisations for 2017-18 being higher than the target of ₹72,000 crore worthy of jubilation?
It is ONGC bailing out the government. Again, nothing has changed in terms of strategic management of disinvested enterprises. Hence neither the pro-reformers nor the unions are happy about this progress. FDI in aviation and Defence should bail us out in terms of jobs, and research shows that FDI is not job-intensive. So where are the jobs? Job growth failure will, it seems, haunt India yet again!
(The author is a Human Resource Management professor at XLRI, Xavier School of Management.)