P Chidambaram writes: The gravest economic challenge facing India — a young nation where the median age is 28.43 years — is unemployment. Mr Narendra Modi understood this when he bid for power but, over the years, his philosophy seems to have changed.
Since I came out of the Utopian dream of socialism, I have believed in three driving forces to build a progressive, prosperous and plural nation: Work, Welfare and Wealth. None of the three is less or more important than the other two.
The context will, of course, vary. In the last 30 years, we have seen dramatically different economic contexts in 1991 (near default), 1997 (globalization), 2002-03 (drought), 2005-08 (global upswing), 2008 (international financial crisis), 2012-13 (taper tantrum), 2016-17 (demonetization, drought) and 2020-22 (pandemic, recession). Each context will require a different and nuanced response, especially while presenting the Budget, but the basic philosophy of promoting work, welfare and wealth ought not to change.
Why Work?
The Homo sapiens are no longer only hunters and gatherers of food. As his/her desires and needs increased, he/she embraced the culture of work. In the modern era, work is an integral part of life. In a developing economy, an important indicator is the number of persons aged 15 years and above who constitute the workforce. In the workforce, the LFPR (Labour Force Participation Rate) is the proportion of the population that is presently employed or seeking employment. In India the current numbers are workforce: 94 crore, LFPR: 37.5 per cent, equal to 52 crore (source: Economic Survey, Appendix).
The gravest economic challenge facing India — a young nation where the median age is 28.43 years — is unemployment. Mr Narendra Modi understood this when he bid for power but, over the years, his philosophy seems to have changed. His promise to create 2 crore jobs a year had electrified the youth. Later, he said that selling pakoras was also a job! In the last seven years, unemployment has increased. The pandemic and the lockdown brought in their wake more unemployment. 60 lakh MSMEs were closed down. Millions lost their jobs, that included salaried jobs and non-regular jobs. The self-employed (e.g. tailor, electrician, plumber) lost work. Many of those jobs have not come back. The current unemployment rates are Urban: 8 per cent, Rural: 6 per cent.
Besides, those who returned to work faced wage cuts. In the last two years, 84 per cent of households have suffered a loss of income. In this background, the Budget has promised that 60 lakh jobs will be created in the next five years. As against the 12 lakh new jobs a year, the number of persons who enter the workforce every year is 47.5 lakh (source: Labour Bureau). My conclusion: unemployment will rise, especially among the less educated.
Why Welfare?
Welfare is a wide concept that includes many aspects such as livelihood, job, food, healthcare, education, social security, rest & recreation, etc. Welfare measures are intended to address these challenges. For example, MGNREGA is intended to address the challenge of livelihood, National Food Security Act to address the challenge of food, free public health facilities and health insurance to address the challenge of healthcare, Right to Education Act to address the challenge of education and so on. What has the Budget done? Look at the allocations:
The total subsidy bill has been cut by a humongous 27 per cent!
The Budget’s messages are no cash transfers or free rations to the very poor; no increase in social security pensions; no interventions to combat malnutrition, stunting and wasting; no intervention to overcome the huge ‘learning loss’ among school children in the last two years; no tax relief to the middle class; and no GST relief to consumers. My conclusion: welfare has been thrown to the wind.
Why Wealth?
I support the creation of wealth. Wealth is the source of new capital and, consequently, new investment. Rising incomes, after taxes, will result in accumulation of wealth. Both income and wealth are triggers for investment, risk-taking, innovation, R&D, charity and other uses. My opposition is not to the creation of wealth but to the accumulation of wealth that widens inequalities in society. India, according to some studies, is one of the most unequal countries in the world. A Budget that is constructed on capital-intensive investment, advanced science and technology, digitization and sophisticated ecosystems to the exclusion of capital, technology and labour that are required to sustain the lives and livelihoods of millions of poor people is a mockery of the poor. If more resources are needed to help the poor, the correct approach will be to tap the wealth of the rich — the very, very, rich in India are 142 persons whose wealth is Rs 53,00,000 crore — and use the resources for programmes and interventions to help the poor. My conclusion: this Budget is a capitalist budget that has ignored the poor.
The on-going debate in the media and in Parliament has exposed the deep divide between the privileged sections and the deprived sections. The capital market may salute this Budget but the poor and middle classes will not forgive the makers of this Budget.