India’s Vote-Buying Budget

NEW DELHI – One sign that an Indian general election is imminent, and that the ruling Bharatiya Janata Party (BJP) is readying its campaign pitch, is the government’s final pre-election budget. By tradition, it is an “interim budget” – a modest rollover of expenditures to see the government through for a few months until a new government is elected and presents its own budget. But, in issuing its last budget at the beginning of February, Prime Minister Narendra Modi’s government went much further than its predecessors, by including far-reaching proposals for tax concessions and giveaways.

The budget reveals three things. First, the BJP has not lost its talent for making promises it can’t possibly fulfil. Second, the government will attempt a last-minute appeal to every constituency it has failed to address in its five years in power. And, third, Modi’s team still does not grasp the most important challenge facing the country.

The most important of interim Finance Minister Piyush Goyal’s announcements was a Basic Income Support scheme for farmers, predicted by pretty much every analyst. But it turned out to offer a grand total of 6,000 rupees (roughly $84) per year – just 500 rupees a month – to a segment of society whose members have been committing suicide in record numbers. Would a farmer in the throes of existential despair find relief in a 500-rupee note? Would salvation come to him in the form of 16.5 rupees ($.23) a day?

India’s government missed an opportunity to rise to the challenge posed by Congress Party President Rahul Gandhi to devise a serious minimum income guarantee that would actually provide a living wage to the poorest of India’s poor, including by subsuming some of the existing subsidies. Worse still, its subvention would only go to landholding farmers with two hectares of fields or less, not to the landless peasantry or farm laborers, and not at all to the urban poor.

Although the scheme would make absolutely no difference to recipients’ lives, it would be provided in three equal installments starting immediately. In other words, it would allow the government to transfer 2,000 rupees of taxpayers’ money into each farmer’s bank account just in time to reach them before the Lok Sabha elections. One may as well name the program the Prime Minister’s Re-Election Subsidy.

The other major announcement was a doubling of the tax exemption for lower-middle-class taxpayers to 500,000 rupees ($7,000) of annual income. This overdue gesture is indeed welcome – all the more so from a government that has been regularly dipping its hands into middle-class pockets with an array of measures, ranging from a 20-rupee per liter excise duty on gasoline to an unreasonably high Goods and Services Tax (GST) on staple consumer items.

But these sops were overshadowed by Goyal’s startling omission: jobs. India’s unemployment crisis is the elephant in the room that the manager of the menagerie refused to see.

The BJP has plunged India into a jobs crisis. Modi’s reckless and ill-considered demonetization (which eliminated 500- and 1,000-rupee banknotes in an effort to curtail the black economy), the GST’s botched and hasty rollout, and five years of macroeconomic ineptitude have robbed India of millions of jobs. Modi promised during his 2014 election campaign to create 20 million jobs per year. Instead, either 11 million jobs were lost last year (according to the Centre for Monitoring Indian Economy), or, more conservatively, 3.5 million in two years (according to the All India Manufacturers’ Organization).

The Modi government tried to suppress official figures revealing a 6.1% unemployment rate, the highest in 45 years. Worse still, youth unemployment among urban males aged 15 to 29 is 18.7% and among females has collapsed to a staggering 27.2%. The unemployment rate for rural males between 15 and 29 soared from 5% in 2011-12 to 17.4% in 2017-18. Rather than dealing effectively with India’s youth-employment problem, as Modi had promised to do in his 2014 campaign, his government has made it worse than ever.

Modi’s foreign admirers, believing that he represented India’s best hope for economic reform, were willing to overlook his government’s disgraceful record of minority-bashing and tolerance of the bizarre phenomenon of “cow vigilantism” (in which mobs routinely savaged innocent civilians in the name of cow protection). Modi talked a good game, pledging to restructure India’s political economy, remove the dead hand of regulation throttling the private sector, and increase productivity. This budget is the last nail in the coffin for those hopes.

“The government has no business to be in business,” Modi once blithely declared, before failing for the next five years to get the government out of any business it was in, from running hotels and airlines to making consumer goods and condoms. With the exception of a handful of crony capitalists who bankroll the BJP, the private sector is frustrated, investment is stagnating, and corruption is rife (symbolized in the shenanigans around India’s biggest defense deal, involving the purchase of 36 French Rafale fighter jets). No one believes official data any more, after two of the government’s top three statisticians resigned in protest at Modi’s attempts to manipulate figures. Modi himself no longer talks of reform.

That is why the sops and giveaways in this budget were necessary. They seek to mask the Modi government’s comprehensive failure to manage the Indian economy by appeasing those sections of society, from farmers to the middle class, most hurt by its misrule. It remains to be seen whether Indian voters will be as easily fooled as Modi’s minions hope.

By Shashi Tharoor

Shashi Tharoor, a former UN under-secretary-general and former Indian Minister of State for External Affairs and Minister of State for Human Resource Development, is currently Chairman of the Parliamentary Standing Committee on External Affairs and an MP for the Indian National Congress. 

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