The Indian Finance Minister (FM) Nirmala Sitharaman has introduced a new concept in the Budget 2020-21. Putting together the social and human facets of her government, she has coined a new phrase ‘Aspirational India’ in which all sections of the society seek better standards of living, with access to health, education and better jobs.
This is a welcome move, although the expectations from this Budget were different from what they were in the past. The basic expectation in the budget till date revolved around financial stability and/or distribution aspects of growth but this time the country was waiting for bold measures from the FM to revive the economy. The FM promised many things- from raising farm income to lowering tax burden of middle income group- but the impact of economic slump or measures to come out of the impasse were hidden only in the fine print of her speech.
Admittedly, pessimism on growth sentiments, an increased fiscal deficit on account of lower GST collections, a cut in corporate tax rate and the continuing credit issues did not provide a comfortable backdrop for the Budget. The fiscal deficit, as apprehended, increased to 3.8% in the revised estimates for 2019-20, restraining her from going for immediate fiscal stimulus.
Amidst fiscal constraints, the FM looked at the Budget from a different angle for a change and based her proposals on three themes: aspirational India, economic development for all, and creation of a caring society. “This is the Budget to boost people’s income and enhance their purchasing power. Let our businesses be healthy, solvent, and tech-led. Our people should be gainfully employed, our businesses should be healthy …” she said and claimed that “the Budget aims to fulfill all their aspirations.”
These are good words but the question is: Does the Budget have enough provisions to fulfill these aspirations? The concept ‘Aspirational India’, is based on three components: a) agriculture, irrigation and rural development, b) wellness, water, and sanitation, and c) education and skills.
Reiterating the commitment of doubling farmers’ income by 2022, the Budget allocated more than Rs. 2.83 lakh crore on agriculture, rural development, irrigation, and allied sectors. Announcing a 16-action point plan for farmers and towards the goal of doubling farmers’ income, the FM said that these measures are underlined for the development of the farm sector. The government has already provided resilience for 6.11 crore farmers insured under the PM Fasal Bima Yojana. Agriculture credit target for 2020-21 has been set at Rs. 15 lakh crore. All eligible beneficiaries of PM-KISAN will be covered under the KCC scheme. Moreover, comprehensive measures for 100 water-stressed districts, proposal to expand PM-KUSUM to provide 20 lakh farmers for setting up stand-alone solar pumps and for another 15 lakh farmers to solarise their grid-connected pump sets, and setting up of efficient warehouses at the block/taluk level have also been incorporated.
These projects once implemented would surely benefit the farm sector. But has the FM increased allocation for the sector accordingly? The answer is: No. Rs. 2.83 lakh crore may look a huge amount but it is just about 2% higher than the budget provision of 2019-20. If the price rise is taken into account, the actual allocation will be lower than that of the previous year. For example, at a moderate 5% inflation rate, the effective allocation in 2020-21 would be about 3% lower than that of 2019-20.
As for wellness, water and sanitation, the second theme of aspirational India, the FM has allocated Rs. 69,000 crore for health care including Rs. 6,400 crore for Prime Minister Jan Arogya Yojana (PMJAY). She said, under the PMJAY, there are more than 20,000 empanelled hospitals in tier-2 and tier-3 cities for poorer people. Setting up hospitals in the PPP mode mainly in aspirational districts, using machine learning and artificial intelligence in the Ayushman Bharat scheme, expansion of Jan Aushadhi Kendra Scheme to all districts by 2024 are some of the other wellness measures in the Budget.
On the sanitation front, the government is committed to create an open defection-free country. In order to sustain this vision, the FM has allocated Rs. 12, 300 crore for Swachh Bharat Mission for 2020-21. Aiming to provide piped water supply to all households, the Indian Prime Minister had announced the Jal Jeevan Mission earlier and approved Rs. 3.60 lakh crore for the scheme. The present Budget has allocated Rs. 11,500 crore towards this scheme.
The FM promises to provide healthcare to all, promises to make the country open defection free, promises to supply piped water to every house but for all these she could only raise the allocation for wellness, water and sanitation by less than 4% from the last Budget. And here again, if the price rise is taken into account, the actual allocation will be less than that of the previous year.
The third aspect of aspirational India is education. By 2030, India is set to have the largest working-age population in the world. Not only do they need literacy but they also need jobs and life skills. For this our education system needs greater inflow of finance to attract talented teachers, innovate and build better labs and she has said that “steps would be taken to enable sourcing External Commercial Borrowings and FDI so as to able to deliver higher quality education.”
This may be a good idea but needs elaborate discourse with academicians as well as other concerned parties. On paper, the proposal, however, seems a good alternative to update our education facilities. As such, the share of education in the Budget is not only low but has been declining over the years. The share of education in total budgetary allocation has fallen to 3.3% in the 2020-21 Budget from more than 4% in 2014-15. Besides, the lion’s share of this expenditure goes to pay the salaries and pensions of the teachers and other staffs leaving little to pay for new facilities or for upgradation.
What is disturbing is that the disbursement of even these small increases in allocation in agriculture, healthcare and education will be subject to realisation of revenues projected in the Budget. For example, owing to a shortfall in revenue earnings, the spending on agriculture was cut by Rs. 26, 470 crore or about 10% of the budgetary allocation in 2019-20. Healthcare received Rs. 3,676 crore or about 4% less than the budgetary allocation.
And such possibilities are not far-fetched for the current fiscal. The government targets Rs. 2.1 lakh crore via divestment and IPO of LIC. It is expecting to raise Rs. 90,000 crore through stake sale in LIC and IDBI Bank, and another Rs. 1.2 lakh crore through other disinvestments. If past experience is any indication, revenue projection based on possible disinvestment income is vulnerable. For 2019-20, the government had to revise down its estimated receipts from disinvestment to Rs. 65,000 crore from Rs. 1.05 lakh crore in the budget estimates.
Postscript: The Budget 2020-21 has been presented and the country is busy analysing its pros and cons. The FM has given the financial accounts of her government and has narrated the policy direction. But these are not sacrosanct like in the past and can be altered or amended as and when the government wants. She may change the tax rate outside the Budget, like she did with the corporate tax rate last year. She can come out with new policies relating to FDI or import duties.
Granted, the changing macroeconomic scenario requires immediate action on the part of the government but since policy decisions are now often taken before the Budget or after it, the Budget itself is losing its importance.