The riches belong to all Indians
Budget 2018 is a game-changer because it has shifted goal posts from lip service to poor and disadvantaged, to serious action. India already has the sixth largest number of billionaires in the world today, and at a 7.5 per cent growth rate per annum over the coming years, the future seems glorious
Ten days after the Budget proposals of February 1, it seems to be a blueprint for what the Modi Government proposes to deliver till 2024, and perhaps beyond. It is a game-changer because it has shifted the goal posts from lip service to the poor and disadvantaged, to serious action. Conventional political logic all this time had it that rural poverty, education, and health are bottomless pits of want and thankless effort. It is best staved off at election time with feudal mai-baap style doles and soaring rhetoric of the garibi hatao variety accompanied by a pogrom or two against the rich.
For a Government to take the disadvantaged on squarely is both startling and revolutionary. To do so with a constructive programme of elevated farm prices, incentives and tax benefits to small and medium enterprises, senior citizen benefits, massive outlays for education, health, and a Rs 5 lakh each medical insurance programme for 500 million people, is impressive by any standards, and provides a wealth of talking points on the electoral stump.
Indeed, Narendra Modi’s rally at Bengaluru showed a re-energised Prime Minister blowing hard on the electoral conch. The reach and transformational scale of the planning suggests it has envisaged at least a 15-year run for the BJP-led NDA. It may seem audacious to think like this some 11 months before the next General Elections, given the noise, heat, abuse and derision from a panicked Opposition. But let us remember, 15 years is a modest ambition, in comparison to Jyoti Basu’s 30-plus-year Left Front domination in West Bengal.
Meanwhile, this year, India is already expected to become the fifth biggest economy in the world, just overtaking Britain and France. For those woe-begone over the singular, faux Socialist focus on the disadvantaged, poor, and struggling, apparently ignoring the middle class and fat cats of business and industry, there is a need to rewind just a little bit.
Modi declared at Davos in his keynote address, barely a week before, that he wanted his Government to devise mechanisms so that the Indian economy can double to $5 trillion in the GDP by 2025. This would also make it the third biggest economy in the world in just eight years. Critics think that Modi forgot this as soon as he came off the mountain top ski resort. That he spoke of globalisation being inevitable there, but tightened the screws on all imports, and even foreign car assembly in-country and in the Budget. But the Government does have a resource crunch if it is to nearly hold the line on the fiscal deficit.
But read between the lines, and place in context, and there is reason for optimism. It is not just the softening tone of Chinese hectoring post our 10-state ASEAN showing at Republic Day, flanked additionally by the Japanese Foreign Minister. Not only is trade sure to grow with this block, but military ties are also likely to proceed apace. Given the pressures felt at Karachi and Gwadar ports after the commissioning of Chabahar and the routing of Afghanistan’s trade through it, the Chinese have suddenly offered to discuss PoK in the context of the CPEC with us. There can’t be much in it, of course, because they will surely not decide to throw Pakistan under the bus like the Americans already have. And the daily threats on Doklam have been suspended too, as India begins to put paid to China’s takeover-the- backyard ambitions.
There are a couple of other pertinent domestic questions that appear in sequence. How do you fire up the engines of growth if you fail to catalyse a 50 per cent rural population? And what a state of medieval disgrace it is in, that it is headed towards delivering a single digit contribution to the GDP, and a farming growth rate of between 1-3 per cent despite the Green and White Revolutions and producing surplus food for a population of 1.25 billion people, three times over that at Independence. As for cold chains and food processing, there is hardly anything visible above ground as yet despite talk of 50 food courts and the employment buzz around it.
However, along with the mega push on infrastructure via Bharatmala and other road/port/connectivity development, analysts have been conceding, post-Budget, that more than five million of the annual 10 million jobs needed could well be forthcoming from this. The Statistics Office has to update its matrix to capture this information along with other “informal” sector jobs.
Women are a major growth opportunity recognised by this Government. The Mudra Yojana has handed out Rs 400,000 crore in micro loans without collateral to grassroots entrepreneurs, allocating 75 per cent of it to women. This is on the pattern of the pioneering and wildly successful Grameen Bank of Bangladesh.
The leitmotif of the coming General Elections could well be the anonymous pakoda seller (Mudra-financed) as aspirational mini entrepreneur. But to three-time Congress Finance Minister P Chidambaram, they are no more entrepreneurial than beggars.
Muslim women, too, are being liberated by this Government. Those opposed to the Triple Talaq Bill are being overtaken by the community itself, signaling its willingness to make changes rather than have it rammed into law by the present Government.
The Opposition thinks the talk of doubling farming income by 2022 and affordable housing for all by then, hundreds of smart cities, toilet-building in millions for the safety and dignity of rural women, not to mention major pushes given to the bottom of the pyramid in the Budget are all so many “jumlas”. That some work has already been completed on these missions has only served to infuriate them. They point out that it could be inflationary, and ask where is the money going to come from? Caught out for patronising the poor with handouts and not doing any empowering work for decades, the Opposition characterises almost everything the Modi Government says and does as fraudulent.
During his Budget speech — the first since the implementation of the GST — the Finance Minister did not have to spend long talking about indirect taxes. Instead, he spent an hour on rural India. The GST, languishing for decades in the making, has been pushed through by this Government. Even as it is experiencing wobbles in the implementation presently, it has great long-term potential to deliver increasing amounts of revenue to the exchequer in a smooth and seamless manner. It will certainly become double that of the direct tax yields in due course, and make room for cuts in corporate and individual taxes, perhaps to align with the best ASEAN practices. This is acknowledged, even by a sly Government baiter, the erstwhile RBI Governor Raghuram Rajan, who was also at Davos.
But who can build Bharatmala, the renewed railways, the new ports, the bullet trains, new military hardware, naval ships and submarines, helicopters, planes, fighter aircraft, provide universal electricity, water, solar power, telecommunications, information technology solutions, cyber security, education and healthcare and so on, if not the other half of the population and its collaborators?
This applies to the ISRO, space exploration, DRDO, Mazagon Docks, expeditions to Antarctica, UN peace-keeping, and the like too. None of these things can be neglected or put on hold. So the urban masses and classes will need to participate in this work. They may not be at the bottom of the pyramid, but they have the knowledge, the education, the know-how and the drive to meld it all together.
The big problem, ever since this Government came to power in 2014, has been an inheritance of huge non-performing loans (NPAs) in the banking sector. These were partially due to collusion, lack of due diligence and political influence, but also because of a reckless borrowing programme and over-leveraging of businesses. When the economy began to slow in 2012 and 2013, despite a lot of liquidity from the years after the global financial crisis of 2008 that pushed up the fiscal deficit figures, there was nowhere to run to. Particularly, as Finance Minster Chidambaram, back as FM in 2012, raised interest rates to curb the deficit and severely cramped growth in the process.
The private sector is beginning to borrow again now; there is a 10 per cent uptick. And the NPAs have been tackled to an extent via the tough bankruptcy law and Government recapitalisation of banks. But can the bruised private sector drive a fresh growth surge? Not yet. And certainly not without Government help.
This Budget, like many before it, should also begin to be viewed as an annual accounting exercise inherited from British times. Its delivery dates have been changed for swifter disbursements, and may be aligned with a calendar financial year in the future. The Railway Budget has been merged with it. It is slowly, steadily, and inevitably, giving way to diminishing returns. It is not a State of the Union address as in the US. Nor is it comprehensive and sacrosanct as a set of proposals and a financial Bill.
The middle class needs to remember that they have already received a 5 per cent income tax rate applicable to 80 per cent of all tax payers last year. Of course, it is annoying to see that the Parliamentarians have created a glide path to pay increases for themselves, alright! And the 10 per cent capital gains tax on equity may give way to indexing yet.
Worrying about a measly 7 per cent rise in allocations to defence is also not warranted. It is not the whole story, given the well-known twin threats from Pakistan and China. The Government will step up to the plate with any monies required, even via foreign soft loans, and internal borrowing as necessary, but it will be off-Budget.
India’s fiscal prudence is well regarded amongst emerging economies and receives regular praise from the ADB, IMF, the World Bank, the BRICS Bank, and the international rating agencies. It is able to secure loans as a responsible borrower from all the agencies it once took grants and aid from. It has a robust FDI input of over $60 billion and nearly $500 billion in foreign exchange reserves — both at the highest-ever levels. India is also a shareholder in some of these multilateral development lending agencies now.
The move to strengthen the bond market by asking top corporate to invest in ‘A’ rated bonds in addition to the ‘AA’ and ‘AAA’ is a dynamic parallel move. This is along with the intent to require 25 per cent of all corporate borrowing to come from the debt market rather than exclusively from the banks/domestic/foreign lending agencies.
That the Government has exceeded its divestment target set last year is also a first, and it seems determined to sell Air India to the private sector along with a 49 per cent foreign component.
With the increasing moves to involve the private sector into areas that were once the sole preserve of the Government, such as defence manufacturing, things can only get bigger and better for them. It was once subordinated to the “commanding heights” of the PSU world, but now, we need to look at not one, but four American companies, all in the IT space — Google, Apple, Facebook, and Amazon — all nearing $1 trillion in valuation terms. They are worthy examples of what the private sector can do, even when our entire GDP is at $2.5 trillion presently.
India already has the sixth largest number of billionaires in the world today, and inexorably, at a 7.5 per cent or more growth rate per annum over the coming years, the future is glorious. We cannot, therefore, tolerate poverty in our midst because there is no excuse that can justify it.
It is the responsibility of our leadership to take this to heart and a Prime Minister who has come from humble beginnings has done so. Let the critics carp, and take a disjointed view of Budget 2018. The poor, the middle classes, and the rich, indeed the whole country, have a friend on Raisina Hill.
The writer is an entrepreneur and former corporate executive
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