Too Little, Too Late

The last budget of the Modi government comes against the backdrop of severe agrarian and rural distress. It is also the last opportunity to undo the damage caused to the rural economy by this government in the last four years. While the government has finally acknowledged the gravity of the situation, its response has been limited to empty rhetoric without any financial commitment. Going by the past record of the government, it is clear that it is serious neither in its commitment nor in its intent. The half-hearted measures are not only too little and too late, it is also clear that this budget is unlikely to revive the rural economy.

Over the years, budget documents have lost relevance both as a statement of account and also as a statement of intent of the government. Economic policy decisions are no longer restricted to what is stated in the budget documents with major policy announcements made throughout the year. This is true for big economic decisions such as demonetisation that has consequences for the overall economy, as well as for issues of taxation such as goods and services tax (GST) that was rolled out on 1 July 2017. Budget documents have also lost relevance as the statement of account of the central government, with most governments not adhering to the expenditure commitments made in the budget. What is promised in the budget is not spent. Nonetheless, they continue to be eagerly watched for the expenditure priorities of the government for the coming year.

This being the last full budget of the National Democratic Alliance (NDA) government, expectations were high that this budget will be populist. Pre-election budgets have been known to be populist, but more importantly political, with immediate political priorities getting precedence over economic fundamentals. Budget 2018 presented on 1 February 2018 is certainly not populist but is also not political, even as this budget was presented in the backdrop of unprecedented rural distress and electoral reverses suffered by the incumbent government in elections in the last six months.¹ Economic indicators relating to rural economy also suggest that this has worsened in the last four years of the present government led by Prime Minister Narendra Modi. Given this context, this budget was expected to provide some relief to the rural economy and undo the damage caused by its own policies in the last four years. A close reading of the budget documents certainly belies any hopes of this budget contributing to a revival of the agrarian economy, much less the revival of rural economy.