As India celebrated its 73rd Republic Day and gets ready for the annual drama of the Union Budget, we face a tough economic situation. I would venture to say that the nation is not in a mood for excruciatingly long speeches high on vision we would be happy with a few measures to really make life easier for us.
Finance Minister (FM) Nirmala Sitharaman will present her fourth Budget against the backdrop of a rather damning report from the global NGO, Oxfam, titled “Inequality Kills” released on 17th January. While economic inequality has widened all over the world, especially after the pandemic, India has fared worse than other countries, with 84% of Indian households suffering a drop in income while the collective wealth of India’s 100 richest people hit a record high of Rs57.3 lakh crore in 2021.
Until a few weeks ago, the Oxfam report would have been dismissed as negative and one-sided, by countering it with increased goods and services tax (GST) collections, soaring stock indices and the proliferation of ‘unicorns’, never mind that these are mostly cash-guzzlers and yet to show profits.
But that narrative hit a big road bump as the stock market, held up as the barometer of all that’s great and good today, has turned rocky. The benchmark BSE sensitive index (Sensex) which had dropped sharply and continuously from October to December 2021, had recovered in early January 2022, but has again fallen sharply from a high of 61,385 on 17th January to 56,409 on 25th January (at the time of writing this column). Is this another correction in the long bull run or has the tide turned, with inflation rising and interest rate hikes coming soon? A relentless rise in stock indices riding on soaring corporate profits had been the government’s counter to the grim reality of a badly botched lock-down, the long march or millions of migrant workers, images of burning pyres and corpses floating in the Ganges during the first and second waves of the dreaded virus.
The rising indices attracted millions of newly-minted investors, mostly well-paid corporate employees or tech-savvy Indians who were able to augment their wealth significantly through trading. Concerns about rising inflation, high prices of fuel and vegetables, distress caused by business disruption, anxiety faced by entrepreneurs and traders in dealing with a relentlessly punitive State frequently changing rules and compliance requirements, were all relegated to the background.
But a sharp fall in markets has a way of changing public sentiment quickly and the pessimism is reflected in many expert articles. Self-styled experts have been exposed for their bad calls which inflicted losses on those who followed them blindly.
In this context, the Oxfam report, as well as the Global Risks Report 2022 released by the World Economic Forum (WEF), has offered a timely signal to the government, if it is in a mood to listen. The latter has identified widespread youth disillusionment, failure of technology governance and digital inequality among the top-5 risks for India.
The Oxfam report is far more damning. In contrast to the wealth of billionaires reaching a record high, the bottom 50% of Indians held only 6% of national wealth. This growing inequality is a global trend, but India fares worse than the rest of the world.
More than 46mn (million) Indians, meanwhile, are estimated to have fallen into extreme poverty in 2020, which is nearly half of the global new poor, according to the United Nations (UN). “The stark wealth inequality in India results from an economic system rigged in favour of the super-rich over the poor and marginalised,” says the Oxfam briefing published ahead of the World Economic Forum’s Davos meet this month.
Meanwhile, employment remains a major concern for people who had still to recover from the loss of livelihoods after demonetisation. The badly executed rollout of GST led to a second round of disruption, affecting traders and small businesses. Professionals are struggling with badly designed tax and corporate reporting portals and steep, frequent changes in regulations and automated penalties which are causing stress, while increasing compliance costs. The COVID lock-down was in addition to this extreme hardship.
The Centre for Monitoring Indian Economy (CMIE) has repeatedly shown that employment numbers in India have been sliding since 2016. Unemployment among graduates in the 20-24 year age group was as high as 63.4% in 2019. Then came the blow of the lock-down. “Nearly one year after the lockdown, in February 2021, employment was down by seven million of what it was in February 2020. Employment in February 2020 was 406 million. This was down to 399 million in February 2021,” said Mahesh Vyas of CMIE in March 2021.
As FM Nirmala Sitharaman stands up to present her Budget on 1st February, people are bound to remember that all the slogans of the past (Make In India, Stand Up India, Digital India and Minimum Government, Maximum Governance) have proved empty and hollow. The government remains a vast, punitive, litigious beast while Ease of Doing Business is a pipe dream. There is bound to be less patience about grand spending ideas and development plans with little to show by way of implementation except a few pet projects. Will the FM address the cost of two years of dealing with fear, death, unemployment and the incalculable damage to students, even as the cost of education and healthcare have soared?
What we need is a short, crisp Budget that simplifies taxes and compliance, does not tinker needlessly with indirect tax rates (except to reduce them), makes a serious attempt to reduce compliance and make the State less punitive and focuses on employment generation by industry.
Rising inflation, higher education and health costs and job losses have badly affected the middle class. Senior citizens, who do not have inflation-adjusted pensions, have seen interest on their term deposits shrink. Theirs is a constant struggle being forced to deal with technology and online payments and to avoid mis-selling of financial products by their own bank’s relationship managers. The Budget needs to address their concerns too.
The Oxfam report has suggested imposition of a wealth tax on super-rich Indians, which can be used to mitigate the hardship of the underprivileged. “A 1% tax on the wealth of the top 98 Indian billionaires can fund the total annual expenditure of the Department of School Education and Literacy under the Ministry of Education,” it says. This makes sense when you consider collective wealth of India’s 100 wealthiest people hit a record high of Rs57.3 lakh crore or about $775 billion in 2021. Moreover, it points out that indirect taxation that affects every Indian (even the very poor) contributed to 63.69% of tax revenue in 2020. Since then, additional tax imposed on fuel alone rose 33% in the first six months of 2020-21 compared to last year and is 79% more than pre-COVID levels, says Oxfam. In contrast, corporate tax was reduced to 22% in September 2019.
However, in the Indian context, the mere imposition of a tax, cess or surcharge does not mean that funds collected will be used to mitigate the hardship of the poor, provide social security or ensure better allocations for health or education. In fact, people in the higher income bracket already pay a health and education cess. Even attempts to counter corruption and harassment by tax officials through faceless assessment have been marred by myriad technical glitches such as imposition of wrong penalties and adjustment of refunds against wrong claims. All this leads to increased work for professionals and higher costs for the assessee, as described by CA Ameet Patel in his article titled “Tax Torture Season 2”.
Elsewhere, corruption remains as high as ever, with regular media reports about ‘lucrative’ posts in the police, customs and Central investigation agencies being brazenly auctioned. Nirmala Sitharaman’s previous Budgets and roll-backs did not go down well with people, but the pandemic and the booming stock market provided a cover of sorts. This time around, she needs to deliver.
Curious why all articles should have the "sides" that Bhakts want to see. Why not go to watch all the "positives" of every Modi action in EVERY television channel? People come to Moneylife for the unvarnished truth, not to read "on the one hand... and on the other hand" type of pieces.
Well intentioned and to an extent successful, Modi Govt schemes may have been, but a botched up demonetisation, Direct Tax Tech Fiasco, Inflation, GST bottlenecks, dropping employment all were accentuated by Pandemic. Modi is lucky that a lot of self created economic woes have been camouflaged by Virus, and gets due credit for prudent handling of Health Care with respective State Governments taking their job seriously and the Centre driving vaccine..
Creating Systems of any kind is never easy and to that extent Modi needs to be lauded.
But in absence of a strong opposition, a critical view from a Seasoned Journalist like Sucheta Dalal does give Opposition some spine!!
Totally agree that a good opposition is most critical. However for any criticism to be effective the good parts too need to be lauded like you have expressed here. A one way diatribe seeing everything as black probably holds no impact or value! Even a child cannot be corrected in this one way manner!
Offcourse all this presumes that the objective of criticism is for repair and renovation but guess a one way diatribe is perfectly in order when the intent is only to troll and call names!
A very myopic view of Modi govt focussing on the negatives and keeping mum on the positives -
- Swatch bharat
- Lpg connections to the poorest
- Drinking water project
- PLI scheme
- Supporting the poor through free rations for nearly 2 years now
- Tackling Covid in such a manner that even 3 lakh infections daily are no threat as allround infra (masks, oxygen, hospital beds, vaccines etc ) have been rolled out in no time
- one could go on but guess it will be a wasted effort on predetermined minds!
As regards the much touted Oxfam report is concerned a much clearer and even perspective can be had from Jaithirth Rao in his article on the Print :
https://theprint.in/opinion/dear-oxfam-stop-looking-for-inequality-in-india-go-back-to-distributing-blankets/812844/?__sta=vhg.uosvpxYBIB.mjsjs%7CQTUI&__stm_medium=email&__stm_source=smartech&utm_source=ThePrint&utm_medium=Email&utm_campaign=IMO&utm_content=29Jan22
Expected a veteran journalist like you to be fact based and present both sides of any argument but now have realised that a Liberal leftist wokish viewpoint cannot tolerate a Modi at any cost!
Regret my decisions to subscribe and respond to your donation calls but guess all seemingly good things at first sight get exposed over time!
I agree with Anant. Ms. SD could have done a SWOT Analysis based on actual figures rather than writing general observations on the performance of the government, which appears to be to give an ammunition to the "botched up opposition" as she calls the bunch of hooligans who predominantly does not understand economics, but create bottlenecks and never supported the government especially on the pandemic management and tried to create suspicion in the minds of gullible masses about the efficacy of the vaccines and what not! I request her to present a table of good and Bads of the present government based on real statistics, so that a meaningful assessment takes place on the total economic front rather than writing an article for the Left and The friends!
The elites in India (probably whole World) had never had it so good. With access to Capital and Technology they have grown their wealth tremendously since Mar 20. Now fleet of unemployed youths are at their service as Courier Boys, House Maids and Massagers. Life can't be more heavenly.
Oxfam report needs to consigned to dust bin of Patna.. pseudo socialist have not allowed wealth to be created and have driven wealth creators to leave Indian shores to UK, USA etc..
Shops and small office spaces are available on lease/rent on Linking and Turner Roads in Bandra West, on Sion-Trombay Road in Chembur and in Bangalore based on my limited but first-hand knowledge. Most likely, this is a pan India phenomenon. This was unheard of just two years ago. Some may point out that with the entry of Amazon and its kin this was bound to happen. That would be missing the woods for the trees. Small businesses have been crushed by the pandemic and countless livelihoods have been lost. No wonder 84% of Indian households have suffered a drop in income. The road ahead, if it at all can be called a road, is very difficult to traverse.
The government makes it so difficult to do any kind of business that most people are dependent on jobs and thereby creating more inquality and slow growth. The government instead of being a facilitator is a bottleneck.
Modi's fiscal and monetary policies beginning with Jaitley (2014) and followed through by Sitaraman have been to build on the policies of the previous Governments by concentrating even more financial and economic control and ownership in the hands of Government, its minions and cronies by plying the instruments of the Command Economy and the Corruption (Extortion and Percentage) and Quota (Reservations and License) Raj.with technology assisted bureaucratic vigour. Modi has been a Nehru and and and Indira Gandhi leading to "More Government, Less Governance, make governing a pleasure". The enormous burden of carrying the the unproductive Government and its assets (public sector) etc has grown a hundredfold to crush the productive even further. Modi will blame this on previous Governments but he has carried out their policies more faithfully than they. He will blame the Wuhan Virus but employment had collapsed and the economy had already been crushed before he implemented Xi's unscientific Police State in India in response to the US funded Chinese Bio Weapon. His perverse interest rates and profligacy have garnered all purchasing power into the hands of Government, its minions and the super rich. If the truth be told, Modi cannot see beyond the glitter of the wealthy and powerful whom he seeks to imitate and excel.
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Creating Systems of any kind is never easy and to that extent Modi needs to be lauded.
But in absence of a strong opposition, a critical view from a Seasoned Journalist like Sucheta Dalal does give Opposition some spine!!
Offcourse all this presumes that the objective of criticism is for repair and renovation but guess a one way diatribe is perfectly in order when the intent is only to troll and call names!
- Swatch bharat
- Lpg connections to the poorest
- Drinking water project
- PLI scheme
- Supporting the poor through free rations for nearly 2 years now
- Tackling Covid in such a manner that even 3 lakh infections daily are no threat as allround infra (masks, oxygen, hospital beds, vaccines etc ) have been rolled out in no time
- one could go on but guess it will be a wasted effort on predetermined minds!
As regards the much touted Oxfam report is concerned a much clearer and even perspective can be had from Jaithirth Rao in his article on the Print :
https://theprint.in/opinion/dear-oxfam-stop-looking-for-inequality-in-india-go-back-to-distributing-blankets/812844/?__sta=vhg.uosvpxYBIB.mjsjs%7CQTUI&__stm_medium=email&__stm_source=smartech&utm_source=ThePrint&utm_medium=Email&utm_campaign=IMO&utm_content=29Jan22
Expected a veteran journalist like you to be fact based and present both sides of any argument but now have realised that a Liberal leftist wokish viewpoint cannot tolerate a Modi at any cost!
Regret my decisions to subscribe and respond to your donation calls but guess all seemingly good things at first sight get exposed over time!