JOIN USBudget assumes economic distress of Covid is behind us
The first step towards solving a problem is recognising that it exists. Many Indians are currently going through severe economic distress. Incomes of the poorest 20 per cent of Indian households fell by more than a half in 2020-21 from where they were in 2015-16. This emerged from the latest round of the ICE360 Survey 2021, conducted by People’s Research on India’s Consumer Economy (PRICE). Further, as per a recent Oxfam report, the incomes of 84 per cent of Indian households fell in 2021.
There is other data that points towards widespread economic distress in large parts of the economy. Domestic sales of motorcycles, scooters and mopeds in 2021-22 has been the lowest in a decade. The work demanded under the Mahatma Gandhi Rural Employment Guarantee Scheme (MGNREGS) during this financial year has been just 8 per cent lower in comparison to the last financial year.
The number of people dependent on agriculture for their incomes has gone up, which is something that is not known to happen in a growing economy. Private consumption expenditure in 2021-22, adjusted for inflation, is still lower than where it was in 2019-20.
In this economic scenario, the central government’s budget was expected to do something and help people by putting more money in their hands. But that has not happened.
Take the case of the Mahatma Gandhi Employment Guarantee Scheme (MGNREGS), after spending Rs 98,000 crore under the scheme this year, the government plans to cut the spending to Rs 73,000 crore next year. Of course, the allocation can always be increased during the course of next year. But the fact that the government has allocated a substantially lower amount tells us that it still isn’t taking the problem of the average Indian being under economic distress seriously.
Also, given the very high rate of unemployment among youth, some sort of an urban MGNREGS could have been introduced, at least at an experimental level. The government could also have looked at cutting the very high excise duty on petrol and diesel, further, and putting more money in the hands of people. A direct transfer of a small amount of money into Jan Dhan Accounts, as was done in 2020, could also have been looked at.
Instead, the government has chosen to carry out higher capital expenditure. The capital expenditure in 2022-23 is expected to go up by a fourth to Rs 7.5 lakh crore. The idea is to build physical and other assets that help in the years to come. While this makes sense, its benefits will only emerge in the years to come. The distress of the people is immediate. They need more money in their hands and they need it right now.
In fact, the economy, on the whole, is doing decently well and there has been a huge surge in tax collections. So, money is really not a problem. But by presenting the budget that it has, the government seems to have assumed that the severe economic distress of covid is behind us. And that’s in line with the narrative that has been projected.
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