As India is facing its worst economic slowdown in decades, the situation has thrown up a mix of challenges and opportunities for this government as it prepares for the Union Budget. However, before writing what the government should do or should not do in the coming Budget, the least that is expected of Union Finance Minister Nirmala Sitharaman is to acknowledge that there is a crisis. She must share the real state of the economy with the nation. We say this because facts and honesty have always ranked way low for this government vis-à-vis bravado and expediency.
Most of the ills of the Indian economy today are a fall-out of the government’s obsessive propensity to obfuscate facts. As Modi-2 went about its innings in May 2019, we expected that the government would make good some, if not all, of its self-goals it had scored in its previous stint. But it was not to be. Instead, it went about doing more damage to the economy. No sooner it had assumed power with a stronger majority, than it started steamrolling politically divisive policies. It behaved as if economy is in fine fettle and hence needs no care or attention. In fact, the last Budget in July, 2019 was an opportune time for this government to reboot economy. However, the newly-elected government whitewashed the problems and started forecasting outlandish pictures. It started painting rosy pictures in terms of a robust collection of taxes. But it did not take long for the facts to unravel.
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Growth has collapsed. The least we expect of the Finance Minister now is to acknowledge that there is a crisis in hand. That fiscal deficit is around 4.5 per cent to 5 per cent of GDP and nowhere is this close to the 3.3 per cent target for the financial year ending March 31, 2020. But there is little chance of that happening. We have zero expectation from this government. Sitharaman should acknowledge the fact that 2017 Goods and Services Tax has flopped and hence needs an overhaul.
We are aware that the government does not have enough resources to enable it to loosen the purse strings, however much it may be wishing this. Its revenues have plummeted with the direct tax collection hitting a negative growth this year — a lowest in a decade. Both exports and imports have shrunk. Private investments are not forthcoming. Despite a substantial cut in corporate tax and repeated cuts in interest rates by the RBI over last one year, there is no sight of private investment happening . Companies are not in a mood to increase capacity as consumer demand across sectors has dried up. As is its wont, the government again chose to project a wrong picture. It cut corporate tax in the hope that companies will be left with more money and make fresh investments. The measure may have cheered the stock markets for some time but in long term it worsened the revenue shortfall. Virtually every industry from banking and auto to real estate, power and telecom is in disarray. The fiscal space available to fight the slump is very limited now.
The overtly political nationalism being pursued by Modi-2 has made the task of economic recovery all the more difficult. Society has been sharply polarised along religious lines by the triumvirate of the Citizenship Amendment Act, National Population Register and National Register of Citizenship. India’s 200 million Muslims fear that the Hindu majority nation is weakening the protections of its secular constitution. Mass protests against CAA have erupted across the country and beyond. The new Act might require 1.3 billion people to furnish documents to prove their citizenship. Country’s poor and the minority are the most vulnerable of the lot. The coming Budget will present the government with another chance to reclaim the economic goals that have been heavily obscured by the weight of its political agenda. But will Sitharaman do the truth-telling February 1?
