The 2019 Union Budget has touched on all the components of the social sector in bits and pieces. However, the overall framework for the sector is not clear. Though a key initiative of the current government has been the increase in direct benefit transfers for welfare schemes, there is a need for increasing the state capacity, particularly of the poorer states, as the major social sector expenditures, mainly on health and education, are done by the states.
Despite the rhetoric in the budget speech of the finance minister, the larger picture emerging from the recent data is a slowdown in growth and a net decline in employment. Not only is this a case of jobless growth, but also one of job-displacing growth. Men have gained and women have lost. The rural economy has suffered the most. In the meantime, there is a process of downgrading the rights of labour. There is very little to cheer about the economy.
The budget articulates a vision for the growth of the manufacturing sector which is built on three pillars: (i) increase in investments, private investments in particular, (ii) enabling of conditions for small firms to grow and move into the next strata, and (iii) enhancement of the rate of growth of exports. However, as it turns out the vision has been clouded by some illusions. The challenge of growth acceleration of the industrial sector is confounded by the fact that factor augmentation is at a slow pace despite an increase.
The 2019 union budget has neither proposed any bold policy moves, nor any big allocations for investments in the agri-food sector. What it has is massive welfare programmes, predominantly the remnants of its predecessor government’s welfare policies. It appears that India has already become a welfare state before generating enough wealth. Has the budget for the agricultural sector actually put the cart before the horse?
The announcements for the financial sector in the 2019–20 budget are either too little or too grandiose relative to the actual requirements of the sector. Given this, the author questions the razzmatazz about the budget as the “auspicious” occasion for which government policy initiatives need to wait to be announced.
Budget 2019–20 is more concerned with getting private finance for investment, especially in infrastructure, rather than with finding ways to finance much needed state action to address slowing growth and welfare shortfalls. However, even that stance does not free it from the neo-liberal fiscal bind it finds itself in.
There were great expectations of fast-tracking reforms in the budget. However, it disappoints in setting a road map for creating a virtuous cycle of investment and growth. On the fiscal front, the overambitious revenue projections raise questions of credibility and feasibility of containing the deficits at the budgeted level. The wait for banking and financial sector reforms continues. The selective increases in import duties are retrograde, and increase in the taxes on the super-rich complicates the tax system without much gain in revenues. The centralisation through the levy of surcharges does not match the lip service given to cooperative federalism.
