Union Budget 2021: Art of hiding the truth

Many of us have grown hearing the story of how Dronacharya is slain in the Mahabharata by a half-truth. On Krishna’s advice, Bhima kills an elephant that bears the same name as Ashwattama, Drona’s son, and Yudhishtira announces that Ashwattama, the elephant, is dead, as Krishna blows the conch loudly to drown out the words “the elephant.” Filled with grief, Drona lays down his weapons. Seizing the opportunity, Dhrishtadyumna beheads Drona.

Whether it was an ethically and morally justifiable act to deceive Drona thus continues to be debated even today, but it is accepted that it was a brilliant way of hiding the truth. The Budget presented by Finance Minister Nirmala Sitharaman seems to have taken this lesson well.

Let us start with the health budget. It is claimed that the allocation has been hiked by a whopping 137% from last year to over Rs 2.2 lakh crore. What the government didn’t say is that the rise in the allocation is largely due to the merger of the allocation for water and sanitation with the allocation for health, adding on to it the one-time expenditure on Covid-19 vaccination (Rs 35,000 crore) and showing the entire six-year initiative of a new health scheme (Rs 64,180 crore) as a part of an annual increase. Truth is, the health allocation has actually increased by only about 10% to over Rs 71,000 crore.

Next, move to food security, where more than a tripling of the allocation is due to payment of debt to the Food Corporation of India. Similarly, the allocation for agriculture has also declined, though references of this sector being a priority were amply present in the Budget speech.

A country that witnessed unprecedented home-bound reverse-migration of millions of people in the post-lockdown phase and reports of jobs and income losses, hunger, a mass change towards consuming less-nutritious food, a massive drop in immunisation coverage and very limited reach of technology-based education, and higher incidence of child labour and child marriage, cannot afford to choose an economic path that is indifferent to these realities.

The Budget, while rightfully placing its trust in choosing the infrastructure sector as a vehicle of economic recovery, has completely missed the opportunity to pay attention to other pathways that could have complemented it by helping rebuild the losses caused to education, livelihoods, food and nutrition among the low-income households that make up at least a third of the country’s population.

The focus on infrastructure is a welcome step and it has potential to generate growth and jobs, but that alone is unlikely to be enough. The opening up of the insurance sector to higher FDI is also expected to generate higher off-Budget resources. However, health insurance utilisations are highest in the big cities and district headquarters, where the private hospitals are more in number. This trend will be strongly influenced by the higher FDI in insurance, and assuming that this will bring in higher investment in healthcare it may potentially result in higher density of hospitals in a few cities while the poor will be deprived of healthcare due to accessibility issues – not only in terms of transport but also because of information gaps and the absence of ability to deal with procedural requirements.

No new taxes have been levied, not even a widely talked-about Covid-19 surcharge on corporate taxes or one on the super-rich, hoping that not doing so would lead to flow of higher capital investment in the economy. However, so far, the corporate sector has been cautious, and investments have not gone up despite low interest rates. Also, a focus on protectionism and hike in custom duties for a number of intermediate products to give to push to ‘Atmanirbhar Bharat’ does not align with this otherwise open-door policy.

While there is no expansion of the tax base that could contribute to the pool that is shared with states, two new cesses, which do not go to the divisible pool, have been introduced. The agri-infrastructure cess imposition by way of reducing excise duties results in lower tax share for the states and can increase their borrowing and interest payment burden. The cess imposed on petrol (Rs 2.5 per litre) and diesel (Rs 4 per litre) are high, and with high inflationary potential, this may adversely affect demand for goods at a time when what is needed most is an increase in demand.

The Budget offers almost nothing for reviving MSMEs despite the fact that they have been the worst-hit even during the pre-pandemic days because of demonetisation. No measure exists even for reviving the pandemic-hit hospitality sector; a few incentives with linkages to jobs could have served two purposes together. The expenditure on employment guarantee scheme in rural areas, MGNREGA, soared during the pandemic, acting as a shock absorber for thousands of families. The allocation for this has been reduced by about 45% as compared to this year’s expenditure, of course, with the rationale that the economy is reviving and therefore this measure would not be needed. This seems a bit too optimistic an assumption given the trends so far. Also important to note is that these are not only social security measures, but the income is entirely spent, with no savings component, and therefore would play a major role in pushing up aggregate demand in the economy and thus its revival.

The share of the ‘Child Budget’ has declined: the allocation for the Department of School Education and Literacy has declined as compared to last year’s allocations by nearly 10%, not reflecting the need for new measures to revive the public school sector to face the challenge of millions of children migrating from private schools due to affordability and reverse migration. The allocation for Women and Child Development has also declined by nearly 20% as compared to last year’s allocation despite widespread reports of adverse and gendered impact of the pandemic on women’s education, health and work.

Budget presentation is indeed an art of hiding the truth.

(The writer is Director, Centre for Budget and Policy Studies, Bengaluru)