Other than that twist in the plot, the rest of the interim budget speech from an interim minister that was, mercifully, not interminable, was wholly unsurprising. After all, who can blame the government? There is an election ahead and this fact was hard to miss. The urban middle class? Check. Farmers? Check. Workers, most of whom are in the unorganised sector? Check. You get the picture.
Now, it remains to be seen if some of the goodies here — for example, a tax exemption for income up to Rs 5 lakh to appease the middle class or a Rs 6,000 annual cash handout to poor farmers in a scheme that will cost Rs 75,000 crore annually added to a scheme to provide a monthly pension for workers in the unorganised sector after they turn 60 years old — will exacerbate the fiscal deficit significantly enough and whether that ought to be a cause for worry in the future. That said, I am glad that the farmers at the proverbial bottom of the agricultural pyramid and the workers in the unorganised sector — which pretty much covers most of the worker pyramid — were offered some form of an economic cushion, even if a rather thin one.
Call me overly pessimistic but I don’t see the deep structural problems that afflict the agricultural sector and the low wage trap that the Indian workforce finds itself in being addressed by either political party in the near term, regardless of the election outcome. Yes, these are stopgap measures and may even create a disincentive to take any of the larger steps needed for meaningful structural reforms. But it is better than nothing.
What else can one say about this rather ho-hum budget? Where one should be worried is that budgets are inherently about data and projections based on intelligent calculations based on economic assumptions and models. What I find worrying is the spate of statistical skullduggery that is coming to light in advance of elections. It makes me quite uneasy about completely buying all the statistics and projections in the budget. To get a sense of my discomfort, consider, first, the magical revision of national income statistics that set GDP growth rocketing up to 7.2 per cent in 2017-18 from a more modest 6.7 per cent. Even the post-demonetisation period got a nice bonus: A bump from 7.1 per cent to 8.2 per cent for 2016-17. These numerical bounties arrived on the heels of an earlier revision. In November, when the government made sharp downward revisions in GDP numbers for 2009-10 and 2010-11, bringing down the average GDP growth rate during the 2008-09 to 2012-13 period making the Manmohan Singh — y’know that “accidental Prime Minister” — era look a lot less rosy than the present one and India’s only record of double-digit annual GDP growth seem like an accident. The overall message from all this revisionist statistics seems to be: As long as you don’t get too caught up in the petty methodological details, there is more GDP in every pot now than ever before.
Even if one were to take the methodological revisions as part of the natural process of improving national accounts and statistics, it is deeply troubling to learn that the National Sample Survey Office, which had pegged the 2017-18 unemployment level at 6.1 per cent, a 45-year high and triple the rate five years earlier, had been compelled to suppress its findings. The report was due for release in December and now two commissioners responsible for reviewing data in the report have resigned in protest of the suppression of the findings ahead of the elections. Prior to this, the Labour Ministry had, since 2016, discontinued its routine practice of publishing employment statistics.
This string of revisions and suppressions are enough to make my eyes glaze over as I read all the statistics in the budget announcement. The acting finance minister says that this budget has been prepared with a moderate impact on the fiscal deficit. He assures us that the fiscal deficit for 2019-20 is no more than 3.4 per cent of GDP and the government has “taken further steps” to consolidate the fiscal deficit in years to come, with a target of 3 per cent in 2020-21 as well as in 2021-22. He adds that many good things are expected to happen in the interim and cites even more statistics. Gross tax revenue is expected to go up, according to this plan, to 12.1 per cent of GDP in 2019-20 and 2020-21, climbing up after that to 12.2 per cent. We have few assurances that more statistical jujutsu will not happen down the road.
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This makes the budget seem like a house of cards. So, what should we bank on, then, given that a budget is, after all, about statistics and, one hopes, methodologically honest estimations of the impact on the future? My bottomline is that I would take all these figures with a healthy helping of salt. In an ideal budget, I would be looking for meaningful policy measures that were not just stop-gaps or giveaways to appease vote banks. I would have been looking for a budget that struck at the core of what ails the Indian economy: Dismal productivity, not just in the agricultural sector, but across all the workers. India ranked 158th among 196 countries in terms of “expected human capital,” according to a recent study published in the journal, Lancet. Expected human capital is the number of years an individual can work at peak productivity between the ages of 20 and 64, based on the life expectancy adjusted for health, and the years of schooling adjusted for the quality of learning.
I looked in vain for some genuine measures to boost productivity in the minister’s speech. And the only true productivity related policy proposal was related to the surprise element in this year’s budget: The cow. Thank goodness for the Rashtriya Kamdhenu Aayog which is designed to “upscale sustainable genetic upgradation of cow resources” to enhance the productivity of cows. Well, I guess, it’s a start.
The writer is Dean of Global Business at The Fletcher School at Tufts University, founding executive director of Fletcher’s Institute for Business in the Global Context and a non-resident Senior Fellow of Brookings India.
He is author of The Slow Pace of Fast Change