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Union Budget 2018 A Dreamy Budget!

The Union Budget 2018 has been preceded by an Economic Survey which has been more aspirational than realistic as it anticipates the revival of economic growth despite shockers such as rise in oil prices, fall in public investments to name a few.  The biggest challenge for the government is to fulfil if not legitimise its poll promise of huge employment growth.  Growth story till now has shown that it need not necessarily result in employment growth though dispensable.  Employment growth even if its numbers among others must rely on more money in the pockets of people and investment sops.  The Union Budget has not come up with much credible measures on jobs front.  The government has now extended its sector specific policy of short term pay-roll tax sops to all sectors now and extending fixed term employment category to all sectors.  It is clear that the government is more interested in numbers and not on quality of jobs as its sops and employment policy is short termist.  Further by targeting provident fund constantly the government is clearly sending wrong signals to the economy at large that short term job cards and temporary pay bulge matters more than long run employment and social securities. Further, the reduction in corporate income tax for more number of MSMEs should be contingent on the fact that the net gains in profits should be reinvested in a manner that would promote jobs and some kind of share in that should be reflected in wage shares of employees. These clearly will show that employment is the core concern of the government.  The toning down of corporate income tax should be complemented by providing relief to the wage and salaried classes which has not taken place.  With the introduction of the Most Ambitious Social Protection Scheme of providing health insurance cover for up to five lakhs to 10 crore families and hence 50 crore beneficiaries (roughly half of Indians) what will happen to RashtriyaSwasthyaBimaYojana (RSBY) program whose performance anyway is not credible – the out of pocket expenses of the covered have not been eased and there are other delivery problems with it.  Further, with the tailoring of a meagre 3.1 percent fiscal deficit, this ambitious program is more likely to be left to the private players as the government has no fiscal space to devote extraordinary sums for this.  Budget is more about numbers and not aspirations and in this sense 2018 Budget is a dreamer. The hike in customs duty on mobiles etc. will make it costlier on the one hand and may not jack up production in India as innovation is not India’s strength.  This move which is expected to strengthen Make in India may not happen but will affect Digital India as mobiles will be costly thanks to high customs duty.  The assured rise in MSP over cost of production could be tricky though a welcome move.  However, continuance of the Dream of doubling farmer income even in the medium term continues.  In short, this is a Dreamy Budget talking high numbers while missing on empirical realities. There has not been any talk on MGNREGA in this budget though it has stood the test of time despite problems.  Further, disinvestment target has been hiked to INR 80000 crores which again has negative implications for employment creation.  In passing the pro-reformers will ask: is the credit note of disinvestment realisations for 2017-18 being higher than the target of 72000 crores of rupees worthy of jubilation? It is ONGC bailing out the government.  Again, nothing has changed in terms of strategic management of disinvested enterprises.  Hence neither the pro-reformers nor the unions are happy about this progress cheat.  FDI in aviation and defence sector should bail us out in terms of jobs and research shows that FDI is not job-intensive.  So where are the jobs? Job growth failure will haunt India yet again!

 

Prof. K.R. Shyam Sundar

XLRI

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