Much to redress

The Union Budget, which is not just a simple annual accounting exercise anymore, but a statement of India's economic policy, will be tabled on February 1 this year. An entire session of Parliament will be committed to discussing and debating the Budget and a whole host of bills that the Centre will want to pass. The crux of these discussions, however, will be dedicated to the current state of our economy, in particular with the ghost of demonetisation still haunting a majority of India's populace. This policy misadventure, announced by our Prime Minister on November 8, has not only resulted in the death of 150 people but also destroyed the livelihoods of millions of innocent, hardworking Indians. Experts contend that the Union government will use the Budget to fix all the damage done by the currency exchange measure and present the impression that all is well with the economy. In the previous Winter Session of Parliament, the opposition did not do an adequate job of putting the Centre on the mat. In this session, they should test every provision and proposal in the Budget vis-à-vis demonetisation. It has become apparent that little black money was unearthed, with most of the cash returning to the banking system. According to the All India Manufacturers' Organisation (AIMO), which represents over 3 lakh micro, small scale and medium and large scale industries, in the first 34 days of demonetisation, micro and small-scale industries suffered a 35 per cent loss in jobs and a 50 per cent fall in revenue. These figures are set to worsen by the month of March. It's the same story across medium and large scale industries engaged in infrastructure projects and export-oriented activities. Allied with the massive losses suffered by farmers, who were unable to reap the benefits of a reasonable harvest season and sow their winter crop, there are millions in dire need of compensation.

With the Centre and RBI attempting to obscure and evade hard questions about their ill-advised policy measure, the opposition must press on and ensure that the Centre does not escape through the backdoor. If it's a pro-poor Budget, as some quarters in the government feel, the Finance Minister must focus on compensating the poor, especially the daily wage earners, farmers and petty traders, who have taken a massive hit in the past three months. A large segment of India lives in its villages. In the previous three years, India's agrarian distress has reached extreme proportions, and the Budget must find a way to ensure that farmers receive adequate returns for their labour. Successive droughts, ill-timed demonetisation and unseasonal rain have put farmers in distress. Allied with a lack of secure income and the vicious debt trap, many farmers have resorted to suicide. The Budget could address means to fix the faulty compensation mechanism in the Centre's flagship crop insurance scheme, the Pradhan Mantri Fasal Bima Yojana, besides greater expenditure in the expansion of irrigation systems. Finally, there is a need for increased expenditure on public health and education. Past governments have spent woefully low sums to deal with critical shortfalls in health and teaching infrastructure—the backbone of any healthy society. Allied government welfare programmes in these sectors should receive a greater share of the Budget than they have in the past. Any attempt to address these concerns requires a clear plan of action and definitive deadlines. Rural India can't wait. In his year-end speech, Modi announced a slew of welfare measures. One includes a 4 per cent rebate on interest for loans up to Rs 9 lakh. It does little to assuage the pains of millions of daily-wagers and small farmers, who have lost their livelihood in the past two months. One positive is the promise to deliver the Rs 6,000 stipend per month for pregnant women under the National Food Security Act, which has been left unimplemented for the last three years. In his address, the PM also assured people that demonetisation had brought more money into the banking system than ever before to the benefit of the poor and the middle-class, giving the government headroom to extend the benefit to taxpayers. Of course, he did not present any sufficient data to back this assertion. Nonetheless, the assumption is that the government will raise the income tax slab and introduce a slew of other such benefits to offset the impact of demonetisation.

Despite the Centre's contention that all is well with the economy, as per the new International Monetary Fund projections, India's GDP growth in this financial year is now estimated to be 6.6 per cent as against 7.6 per cent earlier because of disruption caused by the move to invalidate high-value currencies. The government's official estimate of 7.1 per cent GDP growth this financial year hides certain uncomfortable truths about the state of our economy. The government often projects the belief that India is a very attractive destination for foreign investment, considering the economic slowdown in other parts of the world, especially China. Moreover, the last three budgets seem to indicate that greater public spending, especially on infrastructure, will adequately attract further private investment. Despite these contentions, private investment has fallen in the past three-quarters. India's requirement for greater investment and better infrastructure cannot be overstated. Attracting private capital is essential to fulfilling these twin objectives. In other words, a lot more work is required to incentivise the flow of long-term capital into the country. With our banking system in dire straits under the weight of non-performing assets (NPAs), the Budget will have to issue concrete solutions and present greater political will to resolve it. Without a healthy banking system, local businesses have little space to expand and manoeuvre.