by shivaji sarkar
The Union Budget is to be presented after ten days and Indians eagerly await a miracle. They have been hoping for one, but it hasn’t happened since long. Finance Minister Nirmala Sitharaman’s faith in Manmohanomics is leading to free-flow exploitation through tax on taxes and inflation choking the growth.
India must learn from the economic vision of the first decade after Independence, bubbling with many aspirations. Some were fulfilled with the Five-Year-Plans, power projects, new roads, new industries, Indian Institutes of Technology, Bhabha Atomic Research Centre, hosts of agriculture and other institutes and giant public sector units (PSU). It was a vision of the galaxy of leaders led by India’s first Prime Minister Jawaharlal Nehru.
Along with the vision came a host of rights-based labour law reforms for large number of sectors. The PSUs and the government sectors emerged as. But these have unfortunately been nullified mostly in the past few years. The founders’ visionary approach led the country to a rise of 18 percent growth in income, says the International Monetary Fund, against an envisaged growth of 11-12 percent.
During the First Plan period, national income was expected to rise by 11–12 per cent; the actual increase was over 18 per cent, despite a shortfall in Plan outlays. The success of the First Plan, under conditions of economic and financial stability, prompted more ambitious goals and a bolder approach in formulating the Second Plan, the IMF adds.
This raises a fundamental issue why since 1991’s so-called liberalisation and end of licence-permit raj, India’s progress has been sluggish or at best tilted towards the corporate, ignoring the welfare of the masses. With loss of “concessions and incentivisation”, investments in real terms had been peanuts or largely a government responsibility. The common man was only a peg, if not a pawn.
Industries did not invest much from their profits. They emptied bank coffers and took the robust system into an abyss of unprecedented non-performing assets (NPA). It meant they did not repay the loans. Many fled the country and others preferred write-offs.The budget expressed concern but never penalised them. People suffered with job losses, which the corporate did not create or inflicted on them with closures of the PSUs helping create monopolies without responsibility.
Of late a new phenomenon has developed. Many large corporate, having stacks of funds, shy away from investment. Their apprehension is not unfounded. In private, the owners confide that they fear if they invest and grow, some predators among them would force merger or takeover their thriving units. The budget,which is now the only instrument to check, lacks the capability to deal with the disastrous situation. It’s disastrous because it thaws investment and progress of a country that is being subsidised with government doles in all sectors where the corporate failed – jobs to welfare – MGNREGA to free food dole, continuous subsidies for preferred DAP-type fertilisers, while farmers wait for remunerative prices and market system.
Even foreign funding is plummeting, and foreign portfolio investments are witnessing faster flight. After a robust 2023, foreign investors significantly scaled back their investments in Indian equities in 2024, with net inflows amounting to over Rs 5,000 crore. Foreign portfolio investment (FPI) inflows decline 99 per cent in 2024 to ₹2026 cr from ₹1.71 lakh crore in 2023.31. In October alone FPIs withdrew Rs 22,194 crore from Indian equities, driven by expectations of a weak earnings season.
No wonder that India’s growth plummets to two-year-low to 5.4 percent and the annual 2024-25 growth being continuously revised from over 7 percent to 6.6, 6.5 and now the industry body FICCI estimates 6.4 percent. It speaks volumes for those who had been critical of the remarkable Plan process and India’s early growth statistics.
Deficit financing has become a bane. Largest doses of taxes, tolls, fees, and other charges keeps the rot under continuous pressure of penury and lack of purchasing power. The government’s new National Education Policy (NEP), implemented without social discussion, calls for a deep review.The share of allocations to the National Health Mission (NHM) decreased from 1.2 percent in 2019-20 to 0.74 percent in the current budget denying 40 percent women of medicines.
While government funding in education has not been increasing, it has dumped on the people a system that keeps children bound to the educational system to cover up the inability of providing jobs or delay the arrivals of unemployed into the job market. The 4-year-BA/BSc is a mess as even after four years proper syllabus could not be tailored. There is an unheard of 3-year-preparatory nursery. It dumps each parent with additional expenses of Rs 3 lakh per child in higher and nursery classes – higher education has now 4.33 crore students and nursery one crore.
Similar is the additional expenses of the state per year for delaying their arrival in job markets. While the need was to cut education term to at best 14 years till post-graduation, it is now extended literally over 17 years, officially 16 years. The nation is wasting a huge sum for no gain, and it does not look concerned.
The BJP used to have a vision, including concern for the antyodaya, the last man. It needs to revive that as well as its liberalised views of the economy that have got stuck in selected corporate welfare and not its commitment to a wider swadeshi, Make in India,which is not “Made in India” that was pride for India till early 1980s. That alone would be a job giver as even the IT sector is thawing.
But the average Indian does not need those estimates to spell out the slowdown: a rise in retail-loan defaults, even as personal loan growth has almost halved from a year ago; continued gloomy news on how consumer spending is sputtering; a wash-out year for entry-level cars; and the steady and intense pinch of household inflation. The writing is on the wall, for those who choose to read it.
The country needs to strengthen its reviewing and planning process. The growth is not a responsibility of the finance ministry, which at best is the finance, not economic, manager. There is concern for discussing this situation. India needs to redo its economics junking Manmohanomics, which has only led to this disastrous situation.
It’s not an easy path but not that difficult either. All heads need to come together to lead the country to prosperity starting with the new financial year but continuing till it becomes a global leader as it was during the Mughal era and before. Still sparks are there and with course correction, none can prevent India emerging as the world’s most vibrant economy.—INFA
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