Modi Bluster Missing From Budget

With the reality of coalition politics staring the BJP in its face, this was inevitable, points out Ramesh Menon.

Prime Minister Narendra Modi's first Budget in his third term was certainly not what he would have imagined before the election, which denied him a majority government. It was sculpted to ensure that his government clings to power with the help of his two main coalition partners, the Janata Dal-United and the Telugu Desam Party.

Together, both parties have just 28 MPs, but on display was the power they wield today when they wrung huge allocations to projects in Bihar and Andhra Pradesh.

Welcome to the dharma of coalition politics in the next five years.

Finance Minister Nirmala Sitharaman promised that more grants would follow in the coming years. (Read that as the next four years.)

When she presented the interim Budget in February, there were no populist freebies, though it was election season. It showed Modi's confidence in riding back to power with a majority.

That bluster was missing this time.

In fact, for almost half an hour, Sitharaman kept harping on Bihar and Andhra Pradesh as if they were the only states in India.

Modi wants to avoid taking chances as state elections are due in Bihar next year.

Chief Minister Nitish Kumar, who lost credibility as he keeps switching loyalties, is on weak ground as his adversary, Tejaswini Yadav, of the Rashtriya Janata Dal, is gaining in popularity, drawing crowds and is much younger and is seen as a future dynamic leader.

Remember that the JD-U and the RJD were in a coalition government until January this year

Ironically, when he switched sides, Nitish was a member of the INDIA bloc of Opposition parties to take on the BJP in the elections, probably because he was not declared the prime ministerial candidate. No one was surprised.

With the reality of coalition politics staring the BJP in its face, this was inevitable. If both these partners or even one of them pull out, the Modi government is in trouble.

Both chief ministers, Chandrababu Naidu of Andhra Pradesh and Nitish Kumar of Bihar, demanded that their states be given special status to get more central funds and assistance. That was not granted.

Instead, they have got a sizeable chunk of the Budget spend and can be the envy of other states.

Andhra Pradesh has been allocated Rs 15,000 crore to create Amravati into a capital with the promise of more to follow.

The state will be helped to build industrial corridors between Vizag and Chennai, and Hyderabad and Bengaluru.

Three backward regions, like Rayalseema, Prakasam, and north coastal Andhra, would get funds for development.

The Polavaram irrigation project on the Godavari river, which started in 2005, would now get central funding until completion. The state estimates that nearly 17,144 crores would be required for it.

Hours before the Budget was presented, Union Civil Aviation Minister K Ram Mohan Naidu, with Minister of State for Steel Bhupathi Raju Srinivasa Varma and Andhra Pradesh Irrigation Minister N Ramanaidu -- all TDP members -- had called on Union Minister for Jal Shakti, C R Paatil, highlighting the importance of the irrigation project demanding support for the project. They got it.

Bihar has 12 JD-U MPs and got a lion's share of the Centre's largesse.

As much as Rs 58,900 crore has been promised ahead of the state elections next year. Of this, Rs 26,000 crore is for the construction of highways, a two-lane bridge over the Ganga, Rs 21,400 crore is for power projects, and another Rs 11,500 crore is for flood management.

Apart from this, there would also be an infrastructure push to develop the Vishnupad temple at Gaya, the Mahabodhi temple at Bodh Gaya, and Rajgir and Nalanda as tourist hubs.

Neglected Opposition-ruled states like Kerala, Telangana, Jharkhand, West Bengal, and Delhi have not taken kindly to the Budget.

No wonder they labelled it the 'Sarkar Bachao Budget'.

Economic reforms that Modi kept harping on since 2014 were missing from the Budget. There was no mention of divestment or privatisation. Modi had repeatedly claimed that the government would get out of handling businesses.

The National Sample Survey Office survey showed that informal manufacturing establishments were the worst affected due to demonetisation, GST rollout, and the COVID-19 pandemic.

Over the last seven years, 16.45 lakh jobs were lost in the non-farm informal economy.

Since the last 12 years, the actual earnings of regular workers have been declining, according to surveys of the Periodic Labour Force.

As unemployment was one of the burning issues that the elections threw up, the Budget focused on creating jobs as it would otherwise further dent the BJP vote base in upcoming state elections in Haryana, Maharashtra, Jharkhand, Bihar.

Sitharaman urged business enterprises to hire youngsters and even offered an internship programme that the government would subsidise. It remains to be seen how it is going to play out.

Those who enter the workforce for the first time will get a month's salary with a cap of Rs. 15,000 from the government. A bouquet of five schemes announced has an outlay of about Rs 2 lakh crore to incentivise industry to create jobs in the next five years.

However, businesses hire only when they need hands and certainly not to tackle unemployment. They will hire only when there is a robust economy throbbing with promise.

They would hire when foreign investors pump in money to help businesses expand and book profits.

If the country is not peaceful, no investor will come in. Attacking mosques and Christian institutions, lynching people of another community, making provocative speeches at election rallies, and much more do not make any investor comfortable.

When society is torn with strife, no businessman worth his salt wants to risk his money. That is what this government needs to realise.

It needs to put a stop to whipping minorities into a corner, taking away their rights and dignity.

If you have a system where entrepreneurs are asked to put up nameplates to indicate which community they belong to, no business will thrive.

Communities help each other grow and not the other way around.

The government must stop dog whistles with a firm hand and punish those creating divides for political gains.

The collateral damage of polarising society will be enormous, and no economic reform or a revolutionary Budget will change that. This kind of poison runs deep.

Experts have suggested that the common man be rewarded with some tax relief to boost consumption and take steps to check inflation and accelerate economic growth, as the last two Budgets did not signal any significant changes in taxation policies.

The standard deduction for salaried employees would now go up from Rs 50,000 to Rs 75,000. Income tax rates for those filing in the new regime would gain a savings of Rs 17,500. It is estimated that 40 million will benefit from it. But they would be from the higher salary bracket.

The Goods and Services Tax (GST) was brought in to streamline the tax regime in India and avoid leaks. The government was expected to make amendments to the law as recommended by the GST Council, which included trade facilitation, such as an amnesty scheme for the settlement of disputes. Sitharaman promised that it would be simplified soon.

With low returns from bank deposits, investors turned to stocks. Sitharaman doused their enthusiasm by increasing the securities and transaction tax. Short-term capital gains tax was increased to 20 per cent from the prevailing 15 per cent. Investors were not happy as they got a raw deal. In the last few years, direct taxes through personal income tax have risen as people invested in stocks.

Another good move was to reduce income tax from 40 per cent to 35 per cent for foreign companies to attract foreign capital. But the environment has to be conducive.

It was also wise to abolish the Angel Tax introduced in 2012 to discourage money laundering by startups. It treats investments from foreign investors as income, taxing them 30 per cent. This has deterred investments affecting startups. This may be a game-changer.

Sitharaman's move to reduce the fiscal deficit to Rs. 16.1 trillion, or 4.9 per cent of the Gross Domestic Product, was a good move. GDP measures the size of the economy. The fiscal deficit in 2023-2024 was at 5.6 per cent.

Another irritating reality that impacted election results for the BJP was farm distress. Sitharaman allocated Rs 1.52 trillion for agriculture and announced plans to launch 109 climate-resistant varieties of 32 crops. But allocations for much-needed organic farming were cut!

The rural economy has been in distress for over ten years.

Data from the Labour Bureau shows a decline in real wages in non-farm occupations, with agricultural wages not growing.

In the last ten years, cultivation incomes have barely increased by one per cent. Agriculture needed more attention in the Budget as India is an agricultural economy.

The Budget offered enhanced support through a credit guarantee scheme, increased loan limit from Rs 10 lakh to Rs 20 lakh and credit support to Medium, Small and Micro Enterprises under stress. That should be good news for them.

The bottom line is that the economy will grow if there is peace and harmony in the country and a feel-good environment. Governance can ensure that, but we need visionary politicians for that.

Ramesh Menon, award-winning journalist, educator, documentary film-maker and corporate trainer, is the author of Modi Demystified: The Making Of A Prime Minister.