Budget 2018 Opinion

What Budget 2018 Says About Elections 2019

This government has broken most of its promises from past budgets. This budget is a tool of political expediency. 2019 is coming. What matters now is rhetoric, not governance.

It is almost a truism that governments over-promise and under-deliver. Political expediency demands they do so. After all, voters, the stock markets and rating agencies are all swayed by ‘sentiments’ and ‘perceptions’. They often discount performance at the altar of rhetoric.

For instance, the Union Budget 2017 proposed that they would complete one crore houses under the Pradhan Mantri Awas Yojana (PMAY) by March 2019, 51 lakh of which would be completed by March 2018. Against that, it reports that so far, 12.6 lakh houses have been completed. The 2017 budget also promised to provide mason training to five lakh persons in rural areas by 2022 – an ostensible target of one lakh persons per year. Against that, just over 6000 persons had undergone training until late December 2017. Skills development is obviously an uncomfortable subject for the BJP government, as evident from the fact that the grand promises of Skill India have been given a quiet burial this time around. In a similar vein, ‘smart cities’ and ‘start-ups’ have lost their lustre, and did not find a mention in the Finance Minister’s budget speech.

Meanwhile, growth in the agriculture sector fell from 4.9% in 2016-17 to 2.1% in 2017-18. Rural distress is real, and farmers are up in arms. Against this backdrop, in 2017-18, the allocations under food subsidy under the National Food Security Act fell by Rs. 5057 crores. In a nutshell, Budget 2018 admits that government policies have largely failed to improve “ease of living”, and that the government needs to make amends.

Self-inflicted pain

Delivery of social-sector schemes on the ground is a challenge even for the best of governments. But very few governments hazard to sacrifice long-term economic interests of the nation for short-term political gains. Demonetisation was one such gamble – it may have won Narendra Modi the Uttar Pradesh election, but the economy is still struggling to recover from this self-inflicted pain.

Last year, the excitement around the idea of a Universal Basic Income (UBI), or any broad-coverage cash transfer from the government, was prompted by the expectation of a post-demonetisation windfall. However, tax revenues last year did not match the hype. With this year’s budget, any lingering doubts have been laid to rest. While the myths around an expanded tax base and its impact on tax collections have been busted repeatedly, the government continues to spin a narrative that the economy will return back to GDP growth rates of over 8 % per annum. Gross Tax receipts have continued to grow at a stable rate. In fact, the dividends from the Reserve Bank of India came in over 30% lower than what was budgeted – at Rs. 51,623 (RE 2017-18) as opposed to last year’s budget estimate of Rs. 74,901.

If demonetisation was a malicious scheme unleashed upon an unsuspecting populace, the much-awaited Goods and Services Tax (GST) was a case study in incompetence. The GoI has had to transfer to states and union territories just over Rs. 63,000 crores to compensate for revenue losses caused by the GST, which has thrown the GoI’s financial calculations out of gear. This would have also contributed to the multiplicity of cesses and surcharges in the current revenue projections, all of which add back layers of complexity that an ideal GST should eliminate. The government’s revenue projections for 2018-19 depend on a 67% increase in GST receipts. I wish them well. This, and the claim that things will get “smoother” are hardly a consolation. Policy reforms come at a cost, but when costs are amplified due to recklessness of governments, we must not forgive easily.

A pro-poor budget?

What makes a budget “pro-poor”? Industry bigwigs and the media declare a budget automatically as “populist” and “pro-Bharat” when it imposes a tax burden on the urban, corporate, rich and the middle classes. This does not have to be matched by a corresponding ‘real’ increase in the social sector budget. Mere announcements will do. And as we have all seen, constructing toilets equals safe sanitation; repackaged loans mean ‘jobs’; and now, a poorly designed health insurance scheme is being sold as ‘universal healthcare’.

Never mind the small minority of voices who will point out that in real terms, budget allocations to the social sector have not even kept up with inflation, and there are serious systemic issues in the delivery of public services that need to be addressed far more urgently than making new grandiose announcements. The budget and reactions to it is further proof that our consciences are easily satisfied when it comes to policies that affect the poor.

On all of the big promises made in this year’s budget – on health insurance, sanitation, housing, cooking gas, and rural infrastructure – it is clear that the government will struggle to find resources to translate their stated ambitions into concrete action on the ground. The goal of ‘cooperative federalism’ too seems to have been abandoned, as states now are now divided into two camps – those openly hostile to the Centre, and those micro-managed by the Prime Minister’s Office. This factor, more than any other, will sound the death-knell for implementation of government schemes.

The road to 2019

How then will this budget help the BJP in the 2019 Lok Sabha elections? As much as an admission of failure this budget may have been, the government has signalled quite clearly that it is caught up in its own rheotric. That is exactly why the president of the ruling party seeks to underline in Parliament that selling pakodas is a legitimate employment. One must ask whether these are the kinds of aspirations that Narendra Modi was supposed to bring to fruition.

Faced with this hubris from the ruling party, questions seem futile. What is incredibly clear is that 2019 will have to be fought on jumlas and nationalism. Because vikas and achhe din have gone missing.

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About the author

Suvojit Chattopadhyay

Suvojit Chattopadhyay works on public policy and development, and is currently based in Nairobi, Kenya. Suvojit blogs here on development and politics; and tweets from @suvojitc.