A ‘make-do’ Budget that adjusts to the slowdown

Columnist  | Parsa Venkateshwar Rao Jr

Opinion, Columnists

The Economic Survey of 2019-20, placed on the table of the LS on Jan 31, was arguing that there should be minimal state intervention in the economy.

Finance Minister Nirmala Sitharaman. (Photo: ANI)

In the Winter Session of Parliament in December 2019, replying to a discussion on the economic situation in the Rajya Sabha, finance minister Nirmala Sitharaman admitted that the economy has slowed down and said that there was yet no recession. The expectation was that in her Union Budget for 2020-21, she would address the issue of the economic slowdown and announce measures to reverse it, that is provide a stimulus. But her Budget speech lasting two hours and 40 minutes — the longest ever in the country yet — left her exhausted and left many disappointed that she did not respond to the challenge of the economic slowdown.

But if we put aside our expectations and pay attention to what she said that the government would do in the year, we will see that Ms Sitharaman presented a Budget for a slowed-down economy. In many ways, she tried to make do with what was at hand, which a good housewife — this term needs be understood not in pejorative terms but in the positive sense of being frugal, judicious and economical — would do. It is a housewife’s budget when things are down. The complaint that she did not do what was expected of her or that she did not show a way out is quite unfair. The strategy of the government is to sit out the economic lull, and do the small things that can be done for the moment and wait for the weather to improve. This is a kind of Plan B. The grandiose economic vision of Prime Minister Narendra Modi in his first term in office to turn Indian into an economic powerhouse has been put on the backburner.

There are vital clues for this strategy in the Budget speech. The first is the quotation from the ancient Tamil poetess of the Sangam era, Avauyar: “First tend to till one’s land and then eat.” This is a thought fit for hard times. There is no plenty around. You must work, build, prepare before you can eat. Though the finance minister used this line of poetry to outline the measures she announced for improving cold storage facilities in the agricultural sector, including allowing women self-help groups (SHGs) to provide cold storage, its implication is to be found in what she offered in the other sectors. There is a recognition that there are not enough doctors, either general physicians or specialists. She has announced that medical colleges — that is private medical colleges which do not have a hospital attached to them — will be attached to the government hospitals in the districts, and the state governments that agree to do so will get financial backing. Then there is a scheme of the local urban bodies to offer a one-year paid apprenticeship for engineers. Then there is the skill development scheme for teachers, nurses, para-medical workers and caretakers as there is a demand for them abroad, and there is a provision to equip them with required foreign language proficiency as well. The finance minister saw an economic opportunity of attracting foreign students and creating an American-type SAT as an eligibility test for Asian and African students seeking admission to Indian colleges. Farmers are to be encouraged to run their pumpsets using solar energy, and also to generate solar power and contribute to the power-grid, as well as use fallow and wasteland to set up solar power generators which will connect to the power grid and this will enable farmers to earn money. Desperate measures? Yes. One is reminded of Mao Zedong’s idea of running backyard steel plants where households could produce steel from micro units. At a time when solar power generation is not commercially feasible, to suggest farm-based solar power generators is an eccentric measure.

Will these small measures have a cumulative impact in the near future, and will things will turn sunny sooner rather than later? It is the kind of desperate wish that people caught in a bad situation entertain. The Narendra Modi government is not different. But the real lacuna in the Modi government’s approach to the economy is that it does not know how to define its position. Prime Minister Modi is the man who is supposed to provide the big idea or ideas, and the others in Team Modi can only do the implementation work. Mr Modi does not know whether he should allow the economy to function according to market principles, with its natural fluctuations, its ups and downs, its boom-and-bust cycles, because this would mean that he has to allow economic players — companies as well as individuals — the freedom to do what they want to, and reap the profits and losses accordingly, or he should guide their activities so that the nation achieves glory. The Economic Survey of 2019-20, placed on the table of the Lok Sabha on January 31, was arguing that there should be minimal state intervention in the economy. The Prime Minister and his party, however, do not favour the free market economy because of their so-called nationalist ideology. That is why Mr Modi wants the State to play an active interventionist role in the economy to help improve the lives of the people, but essentially for the greater glory of the nation. It is this ideological bent of mind that places Mr Modi and the BJP in a tight spot, and leaves no wiggle room when the economy is in a bad shape.

What Mr Modi wants to do is to wait for fair economic weather and take advantage of it to claim success and glory for his government, and for the nation under his governance. Ms Sitharaman’s “make do” budget this year reflects the Prime Minister’s approach. But economic growth and State control are incompatible. But the Modi government is unwilling to let go of its control over the economy. Hence the large number of government-directed small measures just to keep things going.