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Jul 15, 2014

A people’s budget has to go beyond...

Avinash kumar


came around the rhetoric ‘against populism’ (meaning social sector expenditure for the poor) and ended up pandering to populism for the middle classes.

So, while the social sector expenditure in key areas like MGNREGA, Food Security, health and education saw minor increases (going minus realistically in face of rampant inflation), the tax exemption to middle classes on income tax, housing etc were driven by the desire to see middle class friendly media showering praises on it. The latest Economic Survey had outlined the need to streamline a plethora of social sector schemes into a few, focus on service delivery reforms etc. None of this was evident in the budget. Instead, what we saw is so many more schemes announced with paltry sums of 100 crore rupees scattered around.

It’s a strange thing however that so much noise is created around ‘wasteful expenditure in the name of the poor’ while India’s record on health and education combined spend of 4.7% of GDP is lower than even sub-Saharan Africa (7%) and the Least Developed Countries (6.4%) as pointed out by Jean Dreze in a recent article. On the other hand, ‘incentive’ being given to the Corporate sector is to the tune of 5.73 lakh crore rupees equivalent to 5% of GDP as revenue forgone. Very little evidence is available in terms of the benefits they raise for the general populace. It’s a very well known secret that the jobs are in the informal sector and not the organised corporate sector which provides just about 7% of the total employment. More importantly, India’s extremely low tax: GDP ratio hovering around 17% is among the lowest across countries. The need of the hour was to go beyond the usual platitudes around rolling out Goods & Services Tax to re-introducing direct taxes like inheritance and wealth tax, better regulatory framework the plug the loss of huge amount of revenues through skewed tax policies which allow 40% of the total invested money in the stock market in India routed through Mauritius. Also important is the crucial step to outline policies which widen the tax net which covers just about 3% of the total population currently.

A range of social sector initiatives are dying because of lack of funding. Principal among them are recent Right to Education Act, recently revised National Health Mission, Domestic Violence Act. These are critical not just in themselves but as better economics to build a healthy, educated, violence free skilled work force. Unfortunately, there’s more rhetoric on these than substantial steps. Symbolic moneys on outcome related reforms e.g. 30 crores for school assessment, 500 crores for teacher trainings in education, a few new medical colleges will just gain us the epithet of tokenism, neither here, nor there. In education we need a progressive realisation of the target of 6% of GDP, in health a similar process for the target of 3% of GDP including universal access to essential generic drugs (something promised in the 12thPlan document but far from realisation). The budget should definitely pay more attention to investing in internal reforms processes for better service delivery through a better regulated and accountable public delivery system rather than a fanciful flight towards public private partnerships where you throw the baby out of bathwater. A people’s budget has to go beyond the rhetoric of FDIs, GDP growth and divestments to make it real for those who matter!

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