Interim Budget Generates Serious Questions From India's FinMin
Two resounding slogans, amongst many in the interim budget, relate to a profound transformation in the last ten years- Sabka Saath Sabka Vikas Sabka Vishwas. Analytical articles on this basic structure of the budget are few and far between, but eulogies abound in economic times of 2 February in particular, 3 and 4 February in general, as if u may miss the bus getting brownie points if you don’t complement. Higher capex on infrastructure, fiscal prudence and Viksit Bharat (developed India) gross domestic product (GDP) are the most commonly used expressions to convey this.
For a trained analyst who has no axe to grind, one way is to go with the flow, & forget the stock, the other is to take stock of the flow, the stock and ask pertinent questions that face you starkly, since the parliamentary debate is now conspicuous by its absence, & real questions s are begging right answers.
But before that, credit is due in five clear areas and needs to be expressed. The Railway Ministry, a sleeping giant, has been given a long-forgotten jolt by the minister, turning out super Vande Bharat trains, revolutionizing train travel, and assuring 40,000 more train bogeys with similar capabilities within five years. Kudos
The aviation ministry doubled airports, with 570 more routes connecting tier 2 and tier 3 cities, providing a huge stimulus for their growth with 13 million passengers. This has created a demand for 1000 more aircraft, already ordered by the four main domestic players now. Easy and fast mobility spurs varietal initiatives in the all-round development of these regions and is hence highly commendable.
Another notable outcome is the drop in processing time of tax returns from 93 days to 10 days, a huge relief to the middle class and the pensioners and deserves supreme appreciation.
Similarly, the logistics cost is going down slowly but steadily, with import consignments getting cleared in 71 hours at inland container depots, 44 hours at air cargo terminals and 25 hours at seaports, although I’m not sure if the port authorities are so galvanised into action.
Nevertheless, it’s a win-win for all and demands back-thumping if it can get sustained and further improved by the logistics wing, created for this purpose.
Finally, a perceptible change is noticeable as India’s three best brands are understood clearly and seven new IITs are added, making a total of 23, covering as many states, leaving a few left. About 15 AIIMS addition is even more pronounced as we touch 22 to ensure quality tertiary care in 75 per cent of the states. Also, seven more IIMs are a solid development which will bear fruit as qualified faculty can join and bring high management education to the doorstep in each state. The jump in the existence of 390 universities from 723 to 1013, if the figures are correct, is also a step in the right direction, to absorb the huge demand of students for tertiary education.
However, the shortest budget, very high on rhetoric, throws up serious questions which the discerning public demands answers to:
1. The government holds a meeting with all states in December 2023, to stop freebies and then the budget says free rations done for 80 crore. A big logical why on two accounts? Does more than 50 per cent of the Indian population require this? If 25 crore are pulled above the poverty line, are 80 crore still left to get freebies like this?
2. Coming to the other three focus groups outlined in the budget viz farmers, women and youth, again freebies galore dished out states the budget. DBT to 1.8 crore farmers is a huge dole and on what basis no one knows, because differentiating farmers on their income basis, in rural India is not easy.
About one crore women are lakhpati didis now and from where do such figures emerge, without even a census in 2021? Also, Rs 43 crore loans sanctioned to youth under the Mudra scheme are like free mudra, as there is no indication if they are written off or will get written off ultimately. When the parent does this, will the states lag far behind, as the election commission tentatively fixes 16 April 2024, as the D date for election commencement?
3. Under Fasal Bima Yojana, crop insurance is provided to four crore farmers and yet the incidence of farmer suicidal deaths is not eradicated. Why? Has any survey been done of areas where crops failed and the insurance amount was fully paid? How many suicides happened and why? No such statistics are available anywhere on record.
4. A big good declaration is the integration of 1,361 Mandis, with the eNAM portal which is one of the ideas in my book 100 Ideas to Improve Governance in India, available on Kindle and I am happy about its implementation.
But the question is - if the portal works, it will throw up daily shortages and surpluses of various commodities and immediate action can be taken to rush supplies from surplus to deficit areas. However, all three daily needs of the common man, with the potatoes, onions and tomatoes or POT, shot off the roof in the last six months, for weeks on end, before the supply lines were restored. Why? Is there a systemic problem? Or hoarders have beaten the government, on its game.
5. The G20 presidency arranged lavish meetings at 60 destinations in India with a GOI budget of over Rs 1,000 crore and state budgets undisclosed. No doubt it helped hotel chains mint money but outcomes from the G20 are yet to be made public. About 112 announcements are well-documented but have to be converted to outcomes and no word on that in the budget, which is also, a stock-taking exercise of all sorts, except this.
6. Rooftop Solar is an excellent idea and the Centre is going full throttle now to implement it, which gives me immense satisfaction. But isn’t one crore households getting 300 units of free power monthly again a freebie, from a finance ministry, which abhors freebies and dissuades states from doing it?
The government should enable all solar service providers to get subsidies for installation hassle-free. They will then approach willing households and all owners of adequate rooftop space, to create solar power and derive their returns on capex, partly from subsidies, the rest from power savings of the rooftop owner. A win-win for all and no freebies.
7. Declaration of more medical colleges by using more existing hospitals and making a committee is an arduous process, isn’t it? In ten years, it has not worked despite some feeble attempts. Why? Because of capex and MCI bottlenecks. If we have to get over the existing problems, my idea is to work bottoms up.
In those districts out of a total of 766, where there is no medical college and I am sure there are more than 250 plus such gaps, the collector has to identify the land and the government has to find a private player ( top 500 companies making 1000 crore plus profit), enable them to get requisite approvals quickly with adequate safeguards, to pump in the capex and start a medical college with an upper limit of five years. This is doable and wherever a hospital exists, it is doable faster.
8. Another similar thing to tackle the decade-old problem is Atmanirbhar bharat for oilseeds. Its production on mission mode has been going on for decades and yet 60 per cent of our demand is met from imports of nearly Rs 1.35 lakh crore as stated by FM. Is it rocket science? Is it a Herculean task to plan a demand-supply match for pulses and oilseeds and two major items of our imports costing over Rs 2 lakh crore? ICAR and a hundred-plus agricultural research institutes exist in our country. We have become self-sufficient in every food crop, except these two, why? Because the trader stakes are high and big money is involved.
Breaking the nexus and asking the agriculture ministry to make a district-wise production plan with due incentives, will see the issue getting resolved in the next three years but requires passion and zeal, on a mission mode, not a lackadaisical approach.
9. A Rs 1 lakh crore corpus with a 50-year interest-free provision for the private sector to scale research and development (R&D) in the sunrise domain, is a declaration tall on words, but short on specifics. There are three flaws in this. Firstly corpus for only one year can be allocated in a budget, otherwise, it remains an announcement, isn’t it?
Secondly, isn’t it impossible to give an interest-free guarantee for 50 years, as no such sovereign guarantee even RBI can give, in a dynamic situation, depending on demand and money supply of money? Thirdly, what is sunrise today may not be tomorrow, due to fast technical obsolescence.
How can you commit Rs 1 lakh crore for an ephemeral sector and how do you deny benefits once you initiate? Are moot questions to be answered first? In my view, it’s not a well-drafted scheme and looks like an election manifesto which should be withdrawn during parliamentary debates to give shape and doable content to it.
10. Talk of huge capex in the last budget was heralded hugely by one and all, but actual expenditure is far less so far, forcing a revision in the revised estimate (RE). The finance secretary has conceded that the majority of expenditure occurs in the last 45 days of the financial year. Why and how? States who account for more than 50 per cent of this allocation, are even more laggard in spending. So while tall announcements on public expenditure enhancement, the private sector looks sheepish. Do more government systems can’t ethically spend the announced amounts timely? Hence this red herring needs to be resolved carefully and courageously, as soon as possible.
Now there are some other disturbing questions which need reflection and not argumentation:
1. From the ramparts of the Red Fort, you can ask for votes and reelection as you are addressing the public. But can you or should the FinMin ask for a third time from the hallowed precincts of the Parliament? The government presents a budget, not a party hence isn’t asking for a thumping majority from the MP's gallery in the ensuing election, blurring completely the difference between party and government?
2. Is Sabka Saath, Vikas and Vishwas anywhere in the picture, if the majority of opposition leaders are hounded by investigation agencies daily and parliamentarians are disqualified on flimsy grounds. The statesmanship of Atalji is missing and so are the tolerance limits of any dissension. Does that behove credibility where the interim budget is, all the time drawing comparisons with 2014?
3. What is the use of Capex of 10 lakh crore last year and an 11 per cent jump this year, if MOSPI formally reports that 431 projects with 150 crore or more investment, are each having Rs 1,000 crore plus cost overruns on an average and the humungous total cost overruns of these 431 projects, exceeds Rs 4.82 lakh crores by December 2023?
Few would endeavour to enter this awesomely uncomfortable territory and hence answers are not expected but the question remains?
4. Several large pronouncements were made in the last budget which I covered last year, including 20 lakh crore for agriculture, national housing bank creation of urban infrastructure, green growth targets, credit guarantee for MSMEs, single window in finance ministry etc. Without an action taken report of the previous budget, to inform the public squarely of the progress, is there any point in doling out a new budget even if interim? How does the public know what was done, what was not and why some got dropped, if it was? How do you inspire confidence in the public that even the interim budget chest-thumping assurances given now, will be executed with fervour in the next four months before election results come?
Should ATR of the last budget not become a must for any new budget, so that the performance of the government comes out on a clean slate?
5. One of the distressing aspects of this budget and the government, is more than doubling of cash in circulation from demonetisation time to now, reaching astronomical figures of Rs 37 lakh crore in 2023, from about Rs 17 lakh crore when note bandi took place and UPI started. UPI has done wonders touching 17-18 lakh crores value in December 2023 transactions. Like Sweden where cash in circulation (CIC ) was reduced by 80 per cent and in Norway by 40 per cent as digital payments became mandatory in India, despite all VIPs seeing the wonder of wonders of UPI, the CIC refuses to correspondingly decrease.
The big question is why? No explicit answers are available anywhere. Doesn’t the electorate want to know if are elections the culprit? If so, will CIC drop after elections in tune with UPI advancement? Questions are big and answers need to be concise and precise.
