Union Budget 2018: a policy prescription or an election manifesto?

After majoritarian politics, BJP turns to majoritarian economics

Business & Politics

February 2, 2018

/ By / New Delhi



India’s annual federal budget 2018

With its popularity dwindling among the rural voters the Modi government has offered a new deal in India’s annual federal budget 2018. It looks pro-poor and pro-farmers to uplift rural India towards prosperity. One wonders whether it is too late as the General Election 2019 is not very far.

The ultra-nationalist Bharatiya Janata Party (BJP) had won just two seats in 1984. After practising majoritarian politics for more than three decades, the party in 2014 had won 282 seats under Narendra Modi’s leadership, in the 16th Lok Sabha election, crowning Modi as the Prime Minister of India.

Over the last three years, the party won all the state assembly elections decimating the Congress party that had ruled the country for over six decades.

Now, with eight assembly elections scheduled this year and the General Elections 2019 set to take place within the next one year, the ruling party has now turned to majoritarian economics.

Union finance minister Arun Jaitley packed his budget with several new and innovative schemes to woo the majority of citizens in rural India. About 68 pc of India still lives in its villages despite its fast urbanisation.

One of the major announcements was a new flagship National Health Protection Scheme to cover over 100 million poor and vulnerable families for secondary and tertiary care hospitalisation to the tune of INR 500,000 per family. Another big announcement was the hike in the minimum support price to all agricultural crops.  Other bonanza for rural India included 10 million affordable houses for the poor by 2022.

This is the last budget of Prime Minister Narendra Modi’s government, which will seek a second five-year tenure in May 2019 national elections. The new government will determine the full-year budget for 2019-20 unless the Modi government advances the General Elections early next year.

India Inc. cheers for budget

Budget proposals were cheered by India Inc. “The budget, as expected, has provided a major thrust towards agriculture/rural and social sectors, such as education and health with particular emphasis on women.  The major push for infrastructure as well as focus on MSMEs is welcome.  This would alleviate hardships in rural India and would also provide in due course greater spending power in the hands of these consumers,” observed Harsh Pati Singhania, director, JK Organisation, a leading industrial group and past president Federation of Indian Chambers of Commerce and Industry (FICCI).

Billed as the world’s largest health care programme, the National Health Protection Scheme was also welcomed. “If this flagship National Health Protection Scheme is properly implemented and monitored, we would have taken an important step in creating a Swasth Bharat (healthy India). Effectively, this initiative, which amounts to USD 800 billion tops even the United States of America’s Medicaid programme that amounts to USD 550 billion,” observed Suneeta Reddy, MD, Apollo Hospitals.

But professor Santosh Mehrotra of Jawaharlal Nehru University wondered whether the new health scheme could also be a bonanza for health insurance companies?

Implementation is the key

Even as the Union Budget 2018 has received praise for bringing solutions to some of the serious problems facing the country, such as the farm crisis and health for all, people wonder about the efficacy of these solutions. Says Rakesh Nangia, leading tax consultant with several Fortune 500 companies: “Balanced, rational and optimistic budget, with challenges in raising resources to meet the fiscal target are the key ingredients of the budget. In terms of rural spending on health education and infrastructure, which is key to any state, the expectations have been well met. But the success and effectiveness of the innovative schemes will be seen in the year to come.”

Why is the focus on rural India? There are half a dozen reasons. First, during the last three years, India has witnessed a worsening agrarian crisis. During this period, on an average, agricultural Gross Domestic Product (GDP) has grown at just 2.5 pc. Second, two years of consecutive drought followed by a crash in prices have brought the farmers to the brink. Third, for more than a year now, farmers in different parts of India have been holding protests and agitations over the lack of market as their produce failed to fetch the right price. Even a kilogramme of tomatoes failed to fetch INR 0.5. Many of the BJP-ruled states—Maharashtra, Madhya Pradesh, Rajasthan, and Chhattisgarh—also bore the brunt of the farmers’ protests. Fourth, the ruling BJP faces Jat, Gujjar and Rajput unrest and farmers’ agitation in Rajasthan and Madhya Pradesh while Naxalism in Chattisgarh.

All these three states in north India are likely to go to polls before December. As most of the assembly elections are in the Hindi heartland, Jaitley broke into Hindi to make the populist announcement of budgetary proposals to woo voters.

Similarly, Karnataka in south India, which goes to polls in May this year, got a gift from Jaitley. He announced a suburban network of approximately 160 kilometres at an estimated cost of INR 170 billion. According to Jaitley, it is being planned to cater to the growth of the Bengaluru (city in south India) metropolis.

As Jaitley packed his budget with rural bonanza, the Congress party won three by-elections in the BJP-ruled Rajasthan. It clinched the Ajmer and Alwar parliamentary seats and the Mandalgarh assembly seats.

Remember, Alwar had shot into the limelight last year after the murder of Pehlu Khan, a dairy farmer from the Nuh district of Haryana, by a group of 200 cow vigilantes affiliated with right-wing Hindutva groups.

Commenting on the victory, Punjab chief minister Amarinder Singh on Friday said, “This is the beginning of the return of Congress.” Having been decimated from most of the states, the Congress can only improve its tally. Nevertheless, Congress must not forget that one swallow does not make summer.  Now it is to be seen whether the budgetary proposal can help the BJP regain its lost confidence among rural voters.

Also at a time when the fringe ‘Hindu’ groups have targeted scheduled castes and scheduled tribes, who comprise one-fourth of India’s population, the finance minister has allocated INR  957.54 billion to Scheduled Castes/Scheduled Tribes schemes—a 12 pc hike from last year.

All this will reinvent and reinforce the image of Prime Minister Narendra Modi as the Vikas Purush (man of development) and Gareebon Ka Massiha (messiah of the poor) ahead of the 2019 General Elections and ensure a second term for his government.

No doubt the budget has been crafted nicely with higher allocations to suit the political expediency. But whether it will rekindle the Modi magic has to be seen.

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