Budget 2019: Has ‘Brand China’ Made Its Imprint On Indian Economy?

Modi 2.0’s economic vision is increasingly resembling that of China, Singapore, S Korea. What does this mean for us?

Updated
Opinion
4 min read
Image of the Chinese currency, Yen, and the Indian flag on a piggy bank, used for representational purposes.
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There was something significantly symbolic in Nirmala Sitharaman’s decision to jettison the briefcase, that finance ministers have traditionally used to ferry Budget papers for decades, in favour of a red silk bahi-khata.

It prompted Chief Economic Advisor, Krishnamurthy Subramanian, to call it a departure from the ‘slavery of Western thought’. Subramanian’s Eco Survey, the previous day, had already given glimpses of ‘Indian tradition’ by invoking religious tracts to nudge changes in the Indian tax-payer’s behaviour.

Perhaps, it is this urge to go ‘back to basics’ that made the finance minister talk about neo-traditional farming techniques like Zero Budget Farming, as a means to double farm incomes by 2022.

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It is a method inspired by the Japanese philosopher-farmer Masanobu Fukuoka, who farmed his paddy fields without chemicals and artificial fertilisers, but still achieved yields that rivalled Japan’s most productive farms.

In India, the controversial technique has been implemented by farmers in Karnataka, Andhra Pradesh, and Maharashtra with varying degrees of success.

What Are The Rural Poor Going To Get?

The important policy implication here is that it more or less absolves the government of spending much on building agricultural infrastructure, such as irrigation. Zero Budget also means Zero Credit. So, nothing needs to be down about farmer indebtedness either. Mind you, the government doesn’t really believe that farmers will actually change their farming behaviour. Otherwise, budgetary allocation for urea subsidy wouldn’t have gone up by 19 percent.

But, that is nothing compared to the subsidy on LPG. The government spent a little less than Rs 25,000 crore on subsidised gas cylinders. It plans to spend nearly Rs 33,000 crore this fiscal.

That’s a jump of 63 percent. Much of it will probably go to poor rural households under the Ujjwala scheme, which has given great electoral returns to PM Modi.

The plan is to provide each rural household an LPG cylinder, electricity connection, and piped water. The Har Ghar Jal scheme hopes to provide piped water to each home by 2024. This year, the allocation for the National Rural Drinking Water Programme has gone up by 70 percent, from about Rs 5,400 crore to Rs 9,150 crore. Along with this, Modi 2.0 has also launched the second phase of PM Awas Yojana, promising to build another 1.95 crore rural homes.

Handouts Marketed As ‘Gifts’ From PM, Yield More Votes

Add to this, the Rs 6,000 that each farming family will get as part of PM Kisan scheme, and you have the broad contours of the Modi government’s economic plans for the rural poor. While the UPA’s strategy was to set up a system of rights, the Modi version of NDA has been setting up a system of ‘contingent handouts’.

After all, the 2019 Lok Sabha results have already shown that handouts that are marketed as ‘gifts’ from the prime minister yield more votes than impersonal employment-generating projects.

In fact, the total allocation for MGNREGA is down from Rs 61,000 crore last year to Rs 60,000 crore in this budget. The outlay for investment in NHAI is down from Rs 37,300 crore to less than Rs 37,000 crore. Adjust these numbers for inflation, and the drop is even sharper.

These are schemes that directly generate jobs, especially for the rural poor. The Modi government doesn’t think they are worth spending on.

Even the key source of income for farmers, crop prices, finds no mention in the Budget. Perhaps, that’s because the latest round of MSP hikes took place just a couple of days back – the MSP for paddy was raised by a paltry 3.7 percent, not enough to keep pace with inflation.

Modi 2.0 Economic Vision: Mirroring China, Singapore, South Korea?

But, the Budget points to something bigger as well. Along with the Economic Survey, it points to a paradigm shift in the economic administration of India. Finance Minister, Nirmala Sitharaman, spoke about it, when she said it is time to talk not just of rights, but of duties. It signals a partial reversal of the ‘doctrine of choice’ introduced in the 1990s along with liberalisation.

The economic vision of Modi 2.0 is increasingly beginning to resemble that of China, Singapore and South Korea, where compliant citizens conform to a grander economic idea that is larger than them.

There are a few key pointers here. First, the move towards an all-knowing centralised tax administration, where all your economic activities are already documented and recorded even before you report them. Second, the imposition of super-high taxes on the super-rich. Those with a taxable income of more than Rs 2 crore will pay 38 percent in taxes, while those earning more than Rs 5 crore, will pay at an effective tax rate of 42 percent. It is a move aimed at curbing the massive income inequalities in India.

Modi 2.0 Budget: Looking At The Economy Through A New Lens?

There is a third indicator that was mentioned in passing by Nirmala Sitharaman. It is a scheme to get large MNCs to manufacture in India, by setting up ‘mega-manufacturing plants’ to produce advanced technology products, from semi-conductors to laptops. And, to attract them, the government will give them ‘investment-linked income tax exemptions’, and other ‘indirect tax benefits’.

This conjures up images of Chinese mega factories, which employ thousands of workers over multiple shifts that go on 24x7.

The workers not only work, but also live in dormitories in these giant industrial complexes. That is, perhaps, the key reason why one of the first things the the Modi government announced was labour law reforms, to weaken unions and ease ‘hire and fire’ norms. It could also be a partial ‘solution’ to the jobs crisis that India faces today.

At first glance, the first Budget of Modi 2.0 appears to be lacklustre, devoid of direction. But, it might have laid the foundations for a new way of looking at the economy, where the government regains the commanding heights, not for socialist planning, but to foster arrested capitalist development.

(Aunindyo Chakravarty was Senior Managing Editor of NDTV's Hindi and Business news channels. He now anchors Simple Samachar on NDTV India. He tweets @AunindyoC. This is an opinion piece. The views expressed above are the author’s own. The Quint neither endorses nor is responsible for them.)

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