Kochi: The Union Budget 2023-24, presented last week by Finance Minister Nirmala Sitharaman fails to address the immediate concerns of the citizens, Dr Biswajit Dhar said here on Monday.
The Budget while focussing on the development agenda for what the government terms ‘Amrut Kaal’ – the next 25 years upto the centenary of India’s Independence – has fallen short in catering to the immediate concerns of the common man, Dr Dhar, a professor at the Centre for Economic Studies and Planning, Jawaharlal Nehru University (JNU), said. He was delivering the 24th annual Malayala Manorama Budget Lecture at Gokulam Convention Centre, Kaloor here.
Driving his point home, Dr Dhar flagged the shortage in the allocations for key poverty alleviating programmes under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and the National Food Security Act (NFSA). Highlighting the low allocation for health sector also, the renowned academician said he could not see a promising future for welfare schemes in the Budget even as the economy was in distress.
Dr Dhar spoke from the premise that contrary to the government’s claim, the economy has not fully survived the distresses caused by the pandemic among other reasons.
“In view of the ongoing stresses on the Indian economy, it was logical to expect that the focus of the finance minister could be on a combination of short-term welfare measures as well as medium-term measures by strengthening the critical sectors of the economy. This would have involved in the first instance providing adequate budgetary support for programmes like MGNREGA, and the NFSA that can alleviate the problems the working population is facing due to uncertainties in the job market. The government was required to invest both in human and physical capital, provide adequate resources for this and compliment them through targetted medium-term programmes for improving the overall efficiencies of the major sectors of the economy, including both agriculture and manufacturing which have been facing serious crises,” he said.
Dr Dhar said that instead of such a combined approach, the focus of the finance minister was on Amrut Kaal. “The Union Budget 2023-24 underlines the vision of the government for the ‘Amrut Kaal’. It includes technology-driven and knowledge-based economy with strong public finances and a robust financial sector. The economic agenda for achieving this vision according to the finance minister has a three-fold focus. One, facilitating ample opportunities for citizens, especially the youth to fulfil their aspirations; two, providing a strong impetus for growth and job creation; and three, strengthening macro economic stability. These are all commendable medium-term objectives but where Sitharaman’s budget falls short in my view is to factor in the immediate concerns of the citizens. This limitation of the Union Budget stems from the view the government had taken since 2022 that the Indian economy has rebounded to the pre-Covid level,” Dhar said, making his concerns clear.
Is govt reluctant to spend on MGNREGA?
Dhar spoke at length about the fall in the budgetary allocations for MGNREGA, a trend which made him doubt the government’s intentions on the scheme. He wondered why the government was hesitating to spend on the key programme even as a government panel has hailed it as a project ensuring right to employment as recently as last year.
“Effective implementation of MGNREGA has become critical in view of the mounting levels of unemployment and underemployment. Better implementation of MGNREGA can provide the desired outcomes of engaging the distressed and also creating vial assets in rural area. The Parliamentary Standing Committee on Rural Development and Panchayati Raj had in its report in February 2022 had commented that the Act provides the ‘right to employment’. However, over time several problems in its implementation had become evident. One of the major factors behind this is inadequate budgetary allocations that can be seen from the past few years’ trend. The government has been extremely conservative while providing budgetary allocations in each of the past four years. This is despite the fact that the annual demand for work under the scheme has always exceeded the projection for work that the government seems to have made while making budgetary allocations,” he said.
“If you look at the budgetary figures for MGNREGA, and you would see how much actually the government has spent is substantially higher. It can’t be justified under any circumstance. The question is does this trend in budgetary allocations and actual spending show some kind of a hesitancy on the part of the government to support the scheme which the parliamentary committee said provides right to employment. I think it possibly does,” he said.
Dhar drew a parallel between the spending on the employment guarantee scheme and the food security scheme. He said he was doubtful over the future of the NFSA in the wake of the government announcing a new integrated food security scheme from January 2023.
“We don’t really see a promising future for the welfare schemes at a time when distress is extremely high. The earnestness with which the government has been investing to develop the country’s physical capital is not seen in social sector spending. There’s only one exception which needs to be mentioned which is the proposal to establish 157 nursing colleges in core locations with equal number of medical colleges established in 2014. It will not only improve the medical services in the country but will also help India in realising its potential as an important provider of medical services in the global market,” he said.
The JNU professor also sounded disappointed with the budgetary provisions for the health sector.
“If you look at the bigger picture and the budgetary provisions for the department of health and family welfare which is the largest segment of the health sector, then it is not very encouraging. The spending on the sector was significantly increased in the wake of the Covid pandemic from Rs 63,000 crore to 82,000 crore between 2019-20 and 2021-22. But with the pandemic seemingly behind us, this sector seems to have fallen down the pecking order. In the current fiscal spending on the core component of health, excluding research in the field, this is expected to decline by 8 per cent over the budgeted amount, and the budget estimates for the next fiscal are above this year’s estimates by just four per cent. It doesn’t even cover for inflation. These trends are contrary to the objectives of the National Health Policy laid down by this government in 2017 which seeks to strengthen and prioritise the government’s role in shaping the health systems in all dimensions, investments in health, organisation of healthcare, prevention of diseases and promotion of good health across all sections,” he said.
He said though the policy had called for the need to increase health expenditure to 2.5 per cent of GDP by 2025, the current figure stood at way below two per cent.
High capital expenditure
Highlighting Sitharaman’s trend of consistently increasing capital expenditure, Dr Dhar expressed doubts over the minister’s rationale behind the move.
“The sequence of high capital expenditure continued unabated even during the pandemic. The finance minister’s argument that high level of public investments would crowd in private investments may not be universally accepted. The market friendly economists would argue that if the government undertakes high level of capital expenditure and starts investing by running up undesirable levels of fiscal deficit, the private investments could be crowded out. This implies that when governments borrow they would be competing with others in the economy who wish to borrow. This is diametrically opposite to the finance minister’s view. Moreover the premise that higher level of public investment could encourage private investment was not validated by facts. Private sector remains largely wary of stepping up investments,” he said. However, he said enhanced investments in agriculture could generate much higher income in the sector and this would considerably boost demand side, particularly at a time when the economy is facing a demand crunch.
New I-T regime from Kelkar report?
Dr Dhar was also critical of the new proposals regarding personal income tax as he feared it would force people to do away with the culture of savings.
“The new income tax regime will be the default tax regime, although the tax peyees will have the option of paying taxes under the old regime. By introducing the new regime, the government seems to have taken steps towards implementing one of the proposals of the Vijay Kelkar Committee which was set up by the Vajpayee government in 2002. The committee had made sweeping recommendations about cutting out all the deductions that we normally do from income tax for various reasons, especially the small savings that we do. Several of the deductions have got a nature of savings which provide financial security to the middle class in the later years. In a country where we do not have social security like in the west these savings are very important. So with the rising cost of healthcare among other things I was wondering what my wife and me would be faced with now if the Kelkar committee recommendations were implemented in 2002. I think we would have all been flattened,” he said.
Later while answering a question by a former income tax professional who shared the view that doing away with deductions make the tax regime simpler, Dr Dhar said there was no need to implement the Kelkar recommendations after all these years as technological advancements have already made tax calculations easier.
People from different fields and a large number of students attended the talk. Siji Joseph, vice president, Finance, Malayala Manorama delivered the welcome address while Stanley Thomas of The Week delivered the vote of thanks. Mathew Varghese, editorial director, Malayala Manorama presented Dr Dhar with a memento.