No political economist can afford to overlook the imminent bias in the Budget, particularly so when it is doubly biased and kinked. It has its corporate bias and a region bias. If the latter is the result of political lobbying by NDA allies, the former is down to its corporate-Hindutva state.
What matters for the Modi 3.0 government is power, not the demos, not even the crisis in social reproduction of its working people — migrants, informal workers, petty traders and small peasants. The government’s refusal to embrace the right to work and its lack of concern for the cost of social reproduction crisis are demonstrated by the fact that no additional funding is given for MNREGA.
The corporate bias is clear in the case of a reduction in tax on foreign companies from 40% to 35%, expecting a boost in growth and employment. It must be noted that it is extended corporate bias as the last few budgets let Indian corporate tax reduce from 30% to 20%, and for new enterprises, it is only 15%. The Centre’s patronage of global FDIs is unlikely to bring in benefits as the trend in FDI flows is towards developed countries with a declining share to India and they would further be attracted to digital manufacturing, in which India is still lagging.
Revenue has increased by some 14% while expenditure increased by some 6%, most of the remaining parts being directed towards reducing fiscal deficit. This helps the government satisfy global rating agencies, nothing more. Sadly, this kind of “fiscal consolidation” is taking place at a time when inequality in the country is at a new high post Independence.
And the government lost the opportunity to introduce a wealth tax on super rich, which would have raised enough revenue to address the developmental expenses of the state. Real growth rate might be close to 6%, if inflation is considered. With low domestic demand and no tool in motion to address it, supply side economics of aiding the corporate will not help in addressing the issues of its working people.
Yet another striking feature is that a state like Kerala, which is neither corporate-biased nor Hindutva-leaning, seems to have vanished from the budgetscape even though its economic situation is worsening as a result of the Centre’s own finance commission’s recommendations over the years. Another significant area in which Kerala can negotiate is the amount earmarked for infrastructure projects, and the state should persist in demanding the extension work in Vizhinjam and the national highways.
Ravi Raman
Expert member, Kerala State Planning Board