Budget 2021: Devil in details

Despite big numbers, budget fails agriculture, healthcare and the poor

Business

February 3, 2021

/ By and / New Delhi

Budget 2021: Devil in details

India is still counting the human, social and economic cost of the lockdown (MIG Photos/Aman Kanojiya)

Union budget for year 2021-22 has won plaudits from a broad section of the media, especially for its big spending plans. However, the critics say that the fine print shows how the government has once again failed the poor in general and farmers in particular.

For weeks, it had been touted as the most crucial budget that an Indian finance minister has had to place before the Parliament in several decades, if not since the independence of the country.

After all, this was the first budget that the government has presented since the full-blown outbreak of the Covid-19 pandemic in the country about a year ago. There were several large expectations that the government would finally do right by the hundreds of millions who have been hit the hardest in India since the outbreak of the pandemic and especially since the nightmarish blunder of a lockdown announced by Prime Minister Narendra Modi on March 24.

Even 10 months after the Himalayan blunder, the nation is still counting the human, social and economic cost of the lockdown, which has clearly claimed hundreds of lives, put at least 120 million people out of work and sent India’s GDP crashing by a record 23.9 pc, not only the worst in Indian history, but also making India the worst performer amongst major economies globally.

To make the matter worse, the much-hyped up relief package announced by the government in July, claiming an injection of INR 20 trillion did not address the urgent needs of the poor and those hit the hardest by the pandemic. Instead, it was focused on pushing supply side of the economy, with several schemes aimed to help businesses, notably the large business. Evidently, North Block mandarins were hoping that corporate India would use the financial resources to not only protect jobs but also create them.

However, that never happened as most companies used the money to pay off their debts, with little or no money going in investments and the job cuts have continued unbridled. Thus, the expectations from the budget were that finally the government would go on a spending binge with the objective of putting the money in people’s pockets, which would then lead to a bottom-up revival of the economy. But critics say the budget has failed to address these survival issues of the poor.

“The Union Budget 2021-22 reflects the central government’s denial of the livelihood crisis that continues to ravage the informal sector. According to a recent survey by Azim Premji University, informal-sector workers are earning about half of what they used to earn before the lockdown. This situation called for bold measures that serve the dual purpose of putting money into people’s pockets and stimulating the economy. Few measures of this sort can be found in the Budget,” noted developmental economist Jean Dreze tells Media India Group.

Critics say that many of the major schemes which are meant for rural India, which are meant for putting cash in the hands of people have been actually cut. “For example, the PM Kisan Scheme which was the cash support scheme, the budget allocation has been reduced by INR 100 billion to 550 billion. Similarly, on Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGA), meant for rural workers, last year the expenditure was INR 1100 billion, this time the budget has been reduced to INR 730 billion. So, in the face of the whole recession brought forth by the lockdown, one would have assumed that the budget would put more money in the hands of the people in the bottom rungs, especially in the rural areas, which would actually increase their purchasing power and boost the economy. Instead, those purchases have been slashed. On the other hand, more money is put in the hands of the corporates and more public sector units are been sold off. So, this was a completely lopsided priority as far as the government is concerned towards the poorer section especially rural India,” points out Vissa.

Despite loud pronouncements by finance minister Nirmala Sitharaman about the government’s focus on the poor, analysts say that the budget has actually cut actual spending on several key schemes, all of which play a crucial role in providing a threadbare social security net to the weakest of the lot. Jean Dreze says the government ought to have paid special attention also needed to vulnerable groups such as children, pregnant women and the elderly. Instead, they have been ignored. “Children represent 40 pc of the population, but they are not mentioned in the Budget Speech, except once or twice in a tangential context such as “hearing impairments”. The budget allocation for the Integrated Child Development Services (ICDS), the most important national programme for children under six, has been reduced. So has the budget allocation for maternity benefits under the Pradhan Mantri Matru Vandana Yojana (PMMVY), and even the budget for school education. The budget for the National Social Assistance Programme (NSAP), a lifeline for the elderly, widows and disabled persons, was copy-pasted from the 2020-21 budget. Overall, with the partial exception of enhanced health expenditure, the Budget has very little to offer to those who are still reeling under the devastating impact of the economic recession precipitated by the Covid-19 crisis and national lockdown,” Dreze says.

The farmers’ protest seems to have passed by the finance minister entirely while preparing the budget (MIG photos/Varsha Singh)

Farmers’ protests ignored

Critics also say that even though the government, notably Modi, has been paying lip service to the cause of farmers for years and has promised to double farmers’ income, neither the government’s policies nor the budget address the issues. “In this budget especially in the midst of the entire farmers’ agitation that is going on, one has the hope, even if not an expectation that there will be some major announcement which address the issue that are being raised by the farmers, but unfortunately that is not the case. In fact, the share of agriculture and allied sectors in the budget fell drastically from 5.1 pc last year to 4.3 pc now. Even in absolute terms, the budget allocation actually reduced from INR 1.54 trillion last year to 1.48 trillion this year. This is a major factor that shows that agriculture has not been prioritised in this budget,” Kiran Kumar Vissa, national group member, All India Kisan Sangharsh Coordination Committee, tells Media India Group.

Vissa says that despite the farmers’ demands to get guaranteed minimum support price (MSP), the budget actually once again slashes the allocations which are meant for MSP. There are only two schemes in the central government which are meant to ensure that the farmers get the minimum support price which is announced. “For both these schemes, PM Asha Scheme, which was announced with much fanfare in 2018, the budget for that if you look at it in the last three years- first it was INR 15 billion, then it was reduced to INR 5 billion and this year it has been reduced again to INR 4 billion. Similarly, the allocation has been cut for market intervention scheme meant to ensure that when the prices fall below the MSP the government intervenes to push up the prices. We find that the allocation has once again fallen in the last three years. From INR 30 billion to 20 billion and now again to INR 15 billion. But even the reduced allocations have not been spent so far,” Vissa says.

“We have done an analysis of how much the farmers are actually losing because of the shortfall between the MSP and their actual market price. And we find that it is INR 500 billion. But the government has not allocated even 20 billion. It shows that despite all the rhetoric that MSP will be kept up and so on, the actual reality of the figure shows that the government doesn’t seem to have any commitment towards ensuring that the MSP is realised by the farmers,” says Vissa.

Wealth over health

One of the biggest most talked about points of the budget is the rise in healthcare allocation. The government claims it has increased healthcare spending by a record 137 pc. However, even a slightly closer examination of the numbers exposes the sleight of hand used by the finance minister as this year, the expense head has been changed from health to health and wellbeing and instead of just being healthcare, now the budget has added drinking water supply as well as the one-time expense of the vaccination against Covid19.

“If you compare apples to apples and oranges to oranges then the budget of health and family only increased from INR 650 billion to 750 billion, even in the middle of this huge pandemic. But by including 350 billion for vaccination, by including the budget for sanitation and supply of drinking water in the budget of health and well-being. So, when you claim that there is a 137 pc jump in the expenditure, you are actually not comparing apples and apples,” points out Vissa.

However, the government allocations do not adequate seem adequate even for healthcare. For instance, the government has promised to vaccinate 300 million people against Covid19. The cost of each vaccine dose is about INR 206, making it INR 412 for each person or INR 123.6 billion excluding taxes just for purchase of vaccines for 300 million people. Add to that taxes as well as cost of storage, distribution and administration, the amount of INR 350 billion earmarked for vaccination starts to look a bit shaky.

Also, public spending on healthcare is amongst the lowest in the world, with barely 1.3 pc of GDP last year. This means that for each rupee spent by the government on healthcare, citizens have to spend at least two more. Numerous studies have shown over the years that unexpected healthcare costs or hospitalisation is the single biggest cause of pushing an entire household below the poverty line. The government ought to have raised real expense on boosting public healthcare infrastructure to a level where it makes a real difference to the people.

However, critics have low expectations of something like that coming from this government, which they accuse of making big announcements and failing to reach even their modest targets. “It’s a matter of smoke and mirror. Actually, when you are in a slowdown the spending from the government has to be more so that it gives a boost, but really the total allocations under this budget in nominal terms have reduced in from INR 34.87 trillion which was last year, it became something like INR 35 trillion. In real terms, the total expenditure in budget has actually reduced whereas it required a bigger boost. Secondly the numbers which are been put out in the budget are actually not being spent. So the actual expenditure in the budget is even much lower than what is being projected. Basic honesty in terms of presenting financial figure is not there in this government and they have played this same kind of game with numbers earlier as well. Of the INR 1 trillion that was meant for spending on agri-infrastructure as part of the pandemic economic package announced eight months ago, latest data from the Economic Survey says that projects worth less than INR 20 billion have been sanctioned and not one rupee has been spent so far,” says Vissa.

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