The country could have a budget with total focus on reviving the MSMEs, addressing the concerns of farmers, significantly expanding the rural employment guarantee programme and beginning a national urban public employment programme, dramatically increasing outlays in health and education to enable wider social recovery from the pandemic and make up for the years of severe neglect, argues Nageshwar Patnaik.

The uncertainties due to the pandemic have made the annual budgeting and planning process for most countries hugely challenging. Nonetheless, the finance ministers of those countries are expected to read the writing on the wall and come out with a levelheaded budget keeping the interest of the majority in mind.

Our Finance Minister, Nirmala Sitharaman on Tuesday presented a budget that smacks of complete ignorance of the ground reality of the economy and the way most citizens are living today. There has been widespread talk of the economic recovery, but actually, the economy continues to be weak largely due to lack of domestic demand, which was already manifest before the pandemic hit as mass consumption had been falling.

Consequently, the most fundamental conditions of employment and livelihood: micro, small and medium enterprises (MSME) that employ the bulk of the Indian workforce are collapsing; farmers continue to suffer; hardly any new jobs are being created for the tens of millions of young people who have gone through tertiary education in the hope of bettering their prospects. Meanwhile, both public health and education services have been battered, pointing to a worrying trajectory for the future.

India has seen one of the biggest increases in the number of poor and hungry people in the world in recent years. The data on employment are horrific, especially for a country that was supposed to gain from a demographic dividend. The Centre for Monitoring Indian Economy (CMIE) had estimated the number of unemployed in India as of December 2021 at 53 million, of which a huge proportion were women. Some 35 million people were actively looking for work in December 2021, of which 23 per cent or 8 million were women.

An equally important challenge is to provide employment for the additional 17 million who were also not employed and were willing to work if work was available, although they were not actively looking for employment, the CMIE added. Both the World Inequality Report 2022 and Oxfam’s Inequality Report 2022 show one of the greatest increases in inequality of incomes and assets in recent years.

In our country, the top ten percent hold 58% of total income, while the bottom 50% languish with only 7% of total income. The top ten percent of the Indians virtually took advantage of high growth of about 7% since 2000 while the middle class and the poor had to silently suffer all these years.

As per the ‘World Inequality Report 2022’, India is among the most unequal countries in the world, with rising poverty and an ‘affluent elite.’ The report highlights that the top 10% and top 1% in India hold 57% and 22% of the total national income respectively while the bottom 50% share has gone down to 13%. And the super rich in our country continues to enjoy the largesse of the Narendra Modi government.

The average global corporate tax has been reduced from 49% in 1985 to 21% in 2020-21. Higher tax rate on the superrich could have been utilised for investment in quality education, health care and infrastructure, but the Modi government preferred to the option of borrowing. To-day, Tax / GDP of India is very poor 13%, as against 30% in most developed countries and 18% in China.

What is worse is the fact that public spending during the pandemic has been very inadequate compared to other middle-income countries. This has dispossessed most Indians of their basic rights and essential public services during the worst ever health crisis in decades and economic devastation. In an economy with an overall decline in employment and mass consumption, the increased capital investment could have played a crucial role, generating a new avenue for an immediate source of profits for the buyers of electoral bonds.

If the finance minister was seriously concerned about all of this, the country could have a budget with total focus on reviving the MSMEs, addressing the concerns of farmers, significantly expanding the rural employment guarantee programme and beginning a national urban public employment programme, dramatically increasing outlays in health and education to enable wider social recovery from the pandemic and make up for the years of severe neglect.

But Nirmala has disappointed as the crucial area for people’s well-being and livelihood remain massively underfunded with some critical sectors even receiving lower allocations than before. The finance minister in fact has slashed down the allocation to the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) to Rs 73,000 crore despite clear indications that at least Rs 1,20,000 crore would be required to meet the labour budgets of the states.

More shockingly, in the current financial year, health and family welfare received no increase in allocation beyond the current levels of spending. Most countries across the world have increased their education spending significantly to make up for the loss of learning during the pandemic; this is even more important in India where the sudden and prolonged closure of schools and colleges has had a devastating impact.

Yet, the Central government has actually reduced its education spending during the pandemic. The paltry increase suggested in this year’s budget is nowhere near enough to meet the enormous need. Instead, the finance minister appears to be promoting TV channels as substitutes for actual increases in public provision of functioning schools with sufficient well-trained teachers.

Instead of these crucial areas that matter for most people, the focus in this budget was more on capital investment, which is also very necessary. But these large infrastructure projects, too, would immediately benefit only the companies that are able to garner public contracts and they are likely to be those already favoured disproportionately by this government in recent years.