What India’s Finance Minister Doesn’t Tell You About Budget 2021

Prof MV Rajeev Gowda, former Rajya Sabha member (Congress) and academic, decodes the union budget.

You wouldn’t know from Finance Minister Nirmala Sitharaman’s Budget speech that India was facing off against China at the border. She did not mention the armed forces even once during her address. That enabled her to cover up the measly 0.95 percent increase in the defence budget from Rs 3,43,822 crore to Rs 3,47,088 crore.

This inflation-adjusted real decline in defence expenditure comes despite repeated warnings from the military, notably General Sarath Chand, that 68 percent of our weapons are ‘vintage’ and need urgent replacement. In FY 2018-19 – before the pandemic – there was a gap of Rs 1,12,137 crore between the requirement projected by the services and the funds allotted to them.

Defence spending as a share of GDP has been consistently declining since 2014. The sustained neglect of our national security by self-proclaimed nationalists is shocking.

On Healthcare

You wouldn’t know that the government’s National Family Health Survey-5 shows that across India, children born between 2014 and 2019 are more malnourished than the previous generation. At least one of the three aspects of child undernutrition (stunting, wasting, being underweight) has gone up in 14 out of 17 states.

Yet, the FM simply merged existing central schemes to create “Poshan 2.0,” a staggeringly underfunded scheme whose allocation is barely 0.3 percent higher than its cash-starved predecessors. Overall, allocation for nutrition has fallen by 27 percent year-on-year. Clearly, this government does not value the health of the poor.

You wouldn’t know that India is reeling from a pandemic that has exposed the weaknesses of its public healthcare sector. The budget touts an astronomical 137 percent increase in healthcare outlay. This increase has been accomplished through some statistical skulduggery. Allocations for Water and Sanitation and the Finance Commission grants (Rs 49,214 crores) were added to the Healthcare outlay along with the one-time cost of COVID vaccinations (Rs 35,000 crores).

The measure of healthcare investment is long-term capacity-building rather than short-term jugaad and crafty data manipulation. The Budget, with its mere 9 percent nominal increase in healthcare outlay, has failed this pandemic-stricken nation.

In the annexure to the Budget Speech, the FM excluded mention of Revised Estimates for 2020-21, which would have exposed the decline in allocations to the Ministry of Health and Family Welfare, by nearly 11 percent between RE 2020-21 and BE 2021-22. Can the government justify this when we are coping with COVID?

On Agriculture And Education

You wouldn’t know why India’s farmers have little faith in this government, and why lakhs are protesting at Delhi’s barbed-wired borders. The government that parrots that it will double farmers’ incomes by 2022 has actually cut spending on transfers to farmers by 13 percent, and on market intervention and price support by 22 percent.

These cuts come despite the agricultural sector lagging the rest of the economy for years but saving us during the COVID collapse. Agriculture needs significant investments in infrastructure, research, and climate-change adaptation. These are not to be found in this budget.

The finance minister’s claim that the government is providing a Minimum Support Price of at least 1.5x the cost of production ignoring the reality that most farmers across the country are forced to sell their crops below MSP, and that her definition of MSP is not that recommended by the Swaminathan Committee.

You wouldn’t know that Education urgently requires resources but has faced an overall cut in allocations by 6.13 percent. Despite the National Education Policy’s budgetary target of 6 percent of GDP, the Departments of both School Education and Higher Education had their budgets slashed.

On Trade, Banking and Disinvestment

You wouldn’t know that the banking sector is on the verge of a mega NPA crisis post-COVID lockdown. The RBI has estimated that the Gross NPA of Public Sector Banks could touch as much as 16.2 percent by September 2021. The FM has allotted only Rs 20,000 crore for bank recapitalisation. Banks will be averse to lending unless they have adequate capital infusion from the government. Whither revival?

You wouldn’t know that we are in a post-liberalisation trade regime given the number of new tariffs barriers the government is erecting. The tariff on cotton may possibly help cotton growers in Gujarat but the increased cost of yarn will certainly hurt the garment producers of Tiruppur. Is there a plan to ensure a win-win for both?

You wouldn’t know that FMs usually prepare One Nation One Budget. This FM turned the Budget exercise into an election speech. From the choice of poets to the allocation of funds for mega projects, the state election calendar loomed large.

You wouldn’t know that disinvestment is going to strategically divert valuable public assets into the burgeoning portfolio of the prime minister’s favourite crony capitalists. Until it happens in a few months’ time (or years, given how inept the government is at implementation).

Expect more ports, airports and the Container Corporation to go to one A, BPCL to another A, and possibly defence sector BEML to AA (to add to his Rafale production capabilities).

On ‘Modi Sarkar’

You wouldn’t know that inequality in India has exploded. India’s billionaires, and especially the government’s chosen cronies, increased their wealth by 35 percent during the lockdown, while large numbers lost their jobs and income. The Budget does nothing to address this huge and growing inequality.

You wouldn’t know from the cheers of captains of Indian industry and the spike in the stock market that our economy is being driven to the ground by Modi sarkar. COVID provided an excuse, but the ill-planned lockdown only worsened a steady decline in GDP growth. A $5 trillion economy is now as impossible under this regime as the promise of 2 crore jobs annually or 15 lakhs in every Indian’s account (you do remember these grand jumlas, right?)

You wouldn’t know that the headline-grabbing numbers for various allocations were followed by a sotto voce “over five years.” No one is going to check next year. In any case, there will be some other headline to divert you. And life will go on, with the budget and the government’s rhetoric inhabiting an alternative reality from the rest of us fatalistic Indians.

(Prof MV Rajeev Gowda is Chairman of the Congress party’s Research Department and a former Member of Parliament. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)