If one were to watch India from a distant galaxy through TV channels and social media feeds till before the Union Budget on February 1, the aliens could well have thought that we are a nation of economists. Going by the trend of the universe, they may be grappling with an economic crisis of their own. So, they may have considered sending emissaries to earth for expert advice. But even before the spaceships and astronauts could be ready for the space voyage, they would have found that overnight, all Indians had turned into stock market experts following the Adani meltdown.
However, that was only on the surface. A closer telescopic observation would have revealed that it was only a superficial affliction limited to a minuscule section of the country’s upper crust. The masses, comprising an overwhelming majority of the population, were leading their lives as usual, unconcerned about the developments in the higher echelons of society.
The problem with India’s elite is they tend to extrapolate their opinions to the rest of the people without realising that the concerns of the common person are often quite different. This is what astute politicians like Narendra Modi get, which is why they repeatedly prove the naysayers and critics wrong. This phenomenon is not limited to economics and stock markets alone. It extends to perceptions of democracy, governance, and social equity as well. On such matters, too, the view from the bottom of the pyramid is, at times, diametrically opposite from the top-down projection. This is frequently demonstrated in elections, where the results contradict popular predictions. This gulf in understanding has again been laid bare in the reactions to the budget and the Adani episode.
This is the fourth consecutive budget presented by Nirmala Sitharaman. Pundits greeted her selection as finance minister by Narendra Modi with loads of scepticism, and during her early days in the North Block, many a snide comment was passed about her competence. However, to her credit, she stayed the course resolutely and proved her mettle during the pandemic. No doubt she was executing the vision of the prime minister, as ought to be the case in any government. But the credit lies in execution. Going by multiple economic indices and sustaining India’s GDP ahead of most major economies, she has come out with high marks among many of her predecessors and finance ministers in the world. Her most creditable achievement has been, perhaps, management of the short term without short-selling the future through populist profligacy.
As an election-year budget, many expected it to go overboard on populism. But the government eschewed the temptation of freebies and instead focused on putting the building blocks in place for longer-term growth. This has been the trait of Narendra Modi. In his decision-making he exudes the supreme confidence of a person who is sure about himself being around for a long time. This explains the massive thrust on Infrastructure Creation, increasing the capital investment outlay by 33% to ₹10 lakh crore. Extending 50 years of interest-free loans to states for infrastructure creation contributes towards the same end. So do projects like Pradhan Mantri Awas Yojana and Jal Jeevan, which also improve ordinary citizens’ quality of life.
Modi understands that direct taxes affect less than 8% of the population. Even the definition of “middle class” has changed. With the raising of tax limits and growth of the services sector, many of them do not come under the income tax net. They are affected far more by indirect taxes (GST), which no longer come under the purview of the Union Budget and will be decided by the GST Council. Hopefully, one will see greater rationalisation in the GST structure and exclusion of certain items of mass consumption (such as food grains sold in loose form) in the coming days—given the higher collection of GST and increase in the tax base with the formalisation of the economy increasing registration and above-the-table transactions.
Two issues that bother the “Other India” or Bharat, living away from the echo chambers of the big cities, are employment and inflation. Infrastructure creation not only creates jobs in the future but also during the building phase, given the labour-intensive nature of construction. A substantial part of the earnings from this sector gets ploughed back into the rural economy. Over time, there is a multiplier effect of infrastructure development, especially roads, in employment generation. Similarly, the attention to revive the MSME sector—with a special focus on micro-enterprises by increasing lending to this segment—is also aimed at job creation. But this takes time. So, welfare schemes like free ration must bridge the short-term needs of the poor in a targeted manner, minimising system leakages. Inflation must be controlled through fiscal discipline, something which the Finance Ministry and the Reserve Bank of India have displayed remarkable restraint in through the testing period of Covid.
However, we live in a volatile and disruptive world. The Adani upheaval—a bolt from the blue—is a prime example of that. What Adani Group does with its public issue is its concern. Where it affects the economy is the impact on the stock market and the effect it might have on future foreign investment in the infrastructure, which is critical for future growth. This is an area where the government must work in tandem with private players without leaving them to the wolves. It is a matter of national interest, and the government cannot look the other way, cowed down by accusations of crony capitalism. It is not about Adani but about India. One can say with reasonable confidence that going by its track record, the Modi government will not shy away from doing what is right for the country.
Sandip Ghose
Current affairs commentator