Thursday, February 29, 2024
Wednesday, February 28, 2024
On Electoral bonds, black and elections | Arun Kumar
Black economy persists with or without electoral bonds
India’s democratic model needs an overhaul so that elections are not an expensive affair. Only that can create a more just, transparent and efficient system, argues Prof. Arun Kumar.
—
THE electoral bonds scheme has been declared unconstitutional. Various legislative and administrative amendments, implemented to facilitate the scheme, have also been declared unconstitutional. This is a victory for those opposing this scheme.
The government’s argument that the scheme was needed to help reduce the use of black money in elections has not been accepted on grounds of proportionality. The right to privacy of the donors has been held to be less important than the citizens’ right to information about the candidate for whom they were voting.
This is a rare judgment in the last few years that has gone against the establishment’s view. Judgments such as those on Aadhar, demonetisation and Article 370 sided with the establishment’s view even though the court did raise probing questions during the hearings.
Be that as it may, the electoral bonds case was of little consequence for the ruling establishment, even though it has huge significance for transparency and for conducting fair elections.
The government’s argument that the scheme was needed to help reduce the use of black money in elections has not been accepted on grounds of proportionality.
The court has ordered the revelation of names of the recipients and donors— which entity paid and which party received.
Since a vast majority of the bonds were of denomination ₹1 crore and above, these were bought by the rich to donate to their preferred party. The suspicion has been that these payments were bribes in white, to get favours.
There were donations to the opposition parties also but that is an investment in the future, in case a party comes to power. Even if it does not come to power, donations could ensure that the opposition raises inconvenient questions of the government.
The Order to reveal the names is likely to be resisted. An appeal against this could be filed. Attempts will be made to connect donations to the ruling party with favours granted. Donations to the opposition parties that are in power in one state or the other can also be so branded.
But, the ruling party at the Union level is the one that can grant big favours and it has received the vast majority of the bonds. How does all this link up to black money?
Elections and black money
In India, huge sums of money are spent on fighting elections. These are way above the election expenditure limits set by the Election Commission of India (ECI), hence illegal.
If these are declared by the candidates, their election will be annulled. So all expenses above the election expenditure limit have to be funded illegally— by black funds.
Election expenditure limits are now ₹95 lakh and ₹70 lakh for a parliamentary constituency and ₹40 lakh and ₹28 lakh for assembly elections. Actual election expenditures are unofficially reported to be around ₹40 crore for a parliamentary constituency and ₹6 crore for an assembly constituency. The actual numbers for a parliamentary and assembly election are respectively 40 and 15 times the allowed limit.
The court has ordered the revelation of names of the recipients and donors— which entity paid and which party received.
The reason for the high expense by candidates is the need for high-power campaigns to overwhelm the citizens to stand a chance to win. Expenses are on maintaining vote banks, bribing voters in cash and kind, hiring workers and musclemen, paying for crowds for rallies and meetings, spending on cutouts and posters, paying media for coverage, etc., and disrupting the opponents’ campaign. These are all substitutes for a lack of adequate attention to constituencies.
Effectively, the expenditure of large sums in elections reflects the weakness of Indian democracy. The public votes for reasons other than the hard work and honesty of candidates.
Instead, candidates have to entice the voters with bribes of various kinds. Also, India is largely feudal, so the public is guided either by those in authority or by emotional issues and not by individual self-interest.
Finally, issues have become complex and the public’s understanding is minimal, which also prevents questioning of authorities. Many can be heard saying, ‘Voting for a losing candidate is wasting the vote.’
The consideration is not a better representation but who appears to be more likely to win irrespective of what they stand for.
Electoral bonds and black money
Electoral bonds were donated to a political party and not a candidate. So the money went to the party. Since there is no limit on expenditure by a political party, it can get all it needs in white and spend it.
If a part of the donation was given to the candidates then the expenditure would be reduced to come under the ceiling set by the law. So the parties did not need to give the money raised through electoral bonds to the candidates and instead could spend it entirely on a general campaign, organised centrally.
The use of black funds in elections reinforces illegality in society and thereby undermines representation and democracy.
If all the money raised via the bonds was to be given to the candidates, then only ₹95 lakh per candidate could be given for a parliamentary constituency. So, for a parliamentary election, the party would at most need ₹513 crore. But the ruling party has been getting more than a thousand crore rupees per annum since 2019.
Obviously, the money received was used for other purposes, such as setting up offices, running them, logistics and social media cells.
Political parties also engineer defections, topple opposition governments and so on. This cannot be done via legitimate money and requires black money which is donated in cash by the backers of the party.
Also read: Electoral bonds: A landmark judgment in the direction of free and fair elections
This money cannot be shown on the balance sheet of the parties and cannot be caught in an audit of the accounts of the party or the candidates. The ECI cannot catch it.
Businesses in India know how to manipulate incomes and expenditures outside their balance sheets to generate black incomes. Under- and over-invoicing and hawala are used for these purposes.
These methods keep one step ahead of the changes the tax authorities make in the laws and rules with the help of income tax lawyers and chartered accountants. Such methods are also available to political parties and candidates for their financial accounting so that they do not get caught using black funds.
So, apart from the funds made available by the electoral bonds, the parties and the individual candidates continued to use black funds. Thus, the non-availability of funds from electoral bonds will hardly change the funding pattern of the parties and there will be no impact on individual candidates.
In brief, funds received via the electoral bonds were: a) In addition to the money received in black and, b) The amount received was small compared to the total requirement.
What to do?
The use of black funds in elections reinforces illegality in society and thereby undermines representation and democracy. Parties and individual candidates who accept large sums of black money are indebted to the donors and do their bidding when they get into power.
Currently existing parties and candidates are unlikely to change, so new parties are needed that have dedicated workers.
This is the implicit and explicit understanding between the two parties. A nexus forms. Outwardly, parties and candidates make a show of wanting to curb the use of illegal funds but that is not the reality.
Also read: Electoral bonds: No solution to illegal political funding
Democracy gets diminished when people vote for the corrupt who largely appear at the time of elections and make promises that they do not deliver on once in power.
People do not get genuine representation from their representatives who serve the interests of a few powerful entities. But people are helpless since the candidates put up by the parties for elections are all similar— they are beholden to the vested interests and do their bidding once they come to power.
Politics will be cleaned up if the public does not get swayed by emotionalism, sectarianism, etc., and voted on objective factors impacting them.
Currently existing parties and candidates are unlikely to change, so new parties are needed that have dedicated workers. Citizens have to become politically savvy to look after their long-term interests.
Since this would undermine the current ruling parties, they will create impediments to the emergence of new parties and honest candidates. The entire State machinery is available to them to coerce and harass and defeat their opponents.
Conclusion
In brief, it is not that in a robust democracy, elections need to be expensive. It is in the imperfect democracy that prevails in India where accountability is weak that elections become expensive.
In such a situation, an instrumentality such as the electoral bonds adds to non-transparency without impacting the black economy or the use of black funds in elections.
Actually, to survive, the black economy needs to control politics so that dishonest parties and candidates come to power.
Sunday, February 18, 2024
The Solution to Farmers' Problems Lies in the Macro-economic situation | Arun Kumar
The Wire
Poverty and inadequate demand need to be tackled by policy makers by focusing on the welfare of the vast majority and not just of businesses and the well-off.
byArun Kumar
The strife between the government and farm unions has again come to a head with farmers heading towards Delhi more than three years after the 2021 episode. The issues this time are somewhat different from those in 2021-22.
Earlier, the issue was the repeal of stealthily enacted three farm laws. Now the key issue is farmer’s incomes via a legally guaranteed MSP (Minimum Support Price) for all crops.
Linked to this are the demand for debt waiver, pension, additional provision for MGNREGS, etc. The farmers have also widened the ambit of their protest by including rural employment and issues pertaining to indigenous people.
Focus
The key point is inadequate incomes of a vast majority farmers (85%) who have marginal or small holding, plowing less than 2 hectares of land. Even the rest of the farmers supplement their income from agriculture through other work or business, like agri-businesses. Thus, even if the Punjab farmers have taken the lead, they represent the concerns of the farming community.
The talks at the last minute between the government and the farm leaders having failed, the farmers decided to march to Delhi. Trust between the government and the farmers is almost non-existent since the promises made in 2022 when the farmers lifted their siege of the Capital have not been kept. The doubling of farmers’ incomes by 2022 is also nowhere in sight. A Committee, set up to deal with the issue of MSP and reforms in agriculture became suspect since it was packed with pro-government members and therefore boycotted by the farm unions.
Government’s arguments
Why is the government against the farmers’ principal demand – MSP for all crops based on full cost? The farmers feel this is the only way they can turn the currently loss making proposition into a profitable one. Then the other demands, like, debt waiver would lose their urgency.
Some of the arguments advanced against this proposition are:
a) it will be hugely expensive, costing Rs 10 lakh crore. Earlier, the cost was put at Rs. 27 lakh crore;
b) The entire crop would have to be procured;
c) This would not be administratively feasible;
d) Private traders would stop buying and the farmers would lose out;
e) Currently, only wheat and paddy are being procured so how can MSP be implemented in the case of other crops;
f) Only the big farmers get the MSP; and
g) Difficulties will mount in WTO.
The facts?
MSP is applicable to 23 crops and implemented only for wheat and paddy. There is also an assured price for sugarcane to be paid by the sugar mills. So, these three crops assure a profit which other crops do not. Hence cropping pattern has shifted in favour of these three crops. Consequently, crops that suit a agro-climatic zone are not grown there resulting in environmental damage. Like, cultivating sugarcane in water starved areas of Maharashtra and paddy in Punjab. The result is excess production of these three crops, large stocks with the government and much wastage since there is inadequate storage capacity. The Food Corporation of India (FCI) has been heavily subsidized for procuring and holding the stock and releasing it in the Public Distribution System (PDS).
If MSP is implemented for all crops, profitability would be the same across all of them and crops would be grown based on their suitability in a given agro-climatic zone. That would:
a) Eliminate excess stocks of some crops;
b) Reduce need for large storage capacity;
c) Increase production of those crops, which currently are in short supply, like, oilseeds; and
d) Reduce if not end import of these crops resulting in saving of foreign exchange.
The storage space released would become available for other crops. The subsidy to FCI would drastically decline and food wastage would be reduced. As crops suited to the agro-climatic conditions would be grown, environmental damage would decline.
The argument that the entire crop would have to be procured to implement MSP is fallacious. Procurement would be required only when the price drops below MSP – that is at the margin. As excess production declines, the price of the crops would rise above the MSP. If the government were to procure the entire crop and store it there would be mass starvation and sky high prices. Whatever the government procures would get sold in the market, so it would only need working capital which would be a fraction of the Rs.10 lakh crore bandied about.
This would be a win-win situation. So, why is the government reluctant to implement the scheme? It wants food prices to remain low so that workers can be paid a low wage which would lead to higher profit for businesses and benefit the elite which needs cheap labour (servants, drivers, etc.) to maintain its comfortable life style.
Farmers protesting in Rajpura railway station in Punjab. Photo: Special Arrangement
Reform needed
Why do farm produce prices drop below the MSP? Price of agricultural produce is demand and supply determined because there are a huge number of producers and any mismatch between them leads to price changes. For instance, supply floods in during the post-harvest period ad prices drop. Further, NHFS data shows that 30% women and children are malnourished. They are not able to afford proper nutrition in spite of government providing almost free food to them.
The implication is that overall demand is low due to large scale poverty and that is why, farmers don’t get a remunerative price. An OECD study estimates that the loss to Indian farmers in 2022 due to lower price was Rs 14 lakh crore. This is 3.5 times the subsidy to farmers. That is why MSP, procurement and public distribution become crucial. If workers and farmers had a civilised existence, these would not be needed.
The constitution promises a ‘living wage’ to all. If that is ensured, demand for farm produce would rise both from workers and farmers and that would drive prices of agricultural produce above the MSP. So, workers are the natural allies of the farmers and the farmers ought to demand and pay them a ‘living wage’. The farmers would not lose even after paying a higher wage since their MSP would be determined accordingly.
Higher wages and prices would lead to higher inflation which could be tackled by reducing indirect taxes and raising direct taxes. In the alternative scenario presented above, farm subsidies would decline and that would help in WTO negotiations. Subsidies can be shifted to education, health, public distribution system, infrastructure, etc., so that neither the ‘living wage’ nor the MSP need rise unduly. The result of all this would be a virtuous cycle of increase in employment and demand.
Also read: India’s WTO Stance on Farmers Will Be a Test of Its Rhetoric of Championing the Global South
Subsidies are said to be undesirable. That is not the case for education and health which are cases of merit wants or in case of infrastructure, like, communication and transportation. The government gives subsidies to industry and calls them incentives. Take for instance, the PLI scheme which offers heavy subsidies to big corporations who really don’t need them. These are called ‘tax expenditures’ which in 2021 amounted to Rs 4.48 lakh crores. Subsidies are offered on land, water and electricity to businesses. So, why the partiality towards the already well off?
It is argued that farmers should take up employment in non-agriculture. But, employment is hardly available in organised non-agriculture due to mechanisation, automation and now use of AI. The per worker output in the organised sector is 19 times that in the unorganised sector. So, as the former expands due to concessions given to it, overall employment contracts. Workers have to resort to self-employment at low wages or remain disguised unemployed.
The objections raised against the farmers’ demands are only scare crows to frighten the public.
The solution to farmers’ problems of low incomes lies in macro, due to the linkages between output, income distribution, prices, employment and investment. This will provide a rational long term policy. Piecemeal and ad hoc policies attempted till now have resulted in contradictions and persisting poverty. Of late, farmers in Europe have also been blocking roads and highways to rise their demands. Clearly, post the pandemic, the issue of adequate farm incomes has become more acute globally.
Any big policy shift would take a few years to fully get implemented. Poverty and inadequate demand need to be tackled by policy makers by focusing on the welfare of the vast majority and not just of businesses and the well-off. The issue is political, and judges whether the life style of the latter should be maintained at the expense of the former.
(Arun Kumar is retired professor of economics, JNU. He is the author of Indian Economy’s Greatest Crisis: The Impact of Coronavirus and the Road Ahead, 2020)
Saturday, February 17, 2024
Monday, February 5, 2024
K shaped it is. Why deny? | Arun Kumar
The K is Indian GDP’s reality: Why deny?
Supporters of the government deny the K in India’s GDP growth, despite overwhelming evidence. What other forms of inequality— gender, regional, between agriculture and non-agriculture, capital and labour and caste inequality— will the officialdom deny, asks Arun Kumar.
—
THE K-shaped pattern of growth within the Gross Domestic Product (GDP) pointed to by critics has riled officialdom and its supporters because it implies not only growing inequality but an overestimation of GDP and its growth.
The supporters deny any possibility of a dichotomous K-shaped growth pattern on the basis of data on income tax returns, labour force participation, consumption, etc. In doing so, they commit a methodological error.
Types of inequality
There are three different kinds of inequalities in an economy— wealth, income and consumption. The government supporters mix them up. There is a hierarchy between them with wealth inequality greater than income inequality greater than consumption inequality.
The reason for this ranking is that everyone has to consume a basic minimum to survive. The poor consume almost their entire income and hardly save. Often they borrow to consume so that their consumption is larger than their income. People at higher income levels save. The higher the income bracket, the more the savings.
Everyone has to consume a basic minimum to survive. The poor consume almost their entire income and hardly save.
So, as one goes to higher and higher income brackets, consumption becomes a smaller and smaller fraction of the income. So, the ratio of consumption to income falls with income. That is why income disparity is greater than the consumption disparity.
Further, the savings are invested and become part of one’s wealth. The higher the income, the more the savings and the accumulation of wealth. The poor have almost no savings and may be in debt, that is, they have negative wealth.
Thus, the wealth curve rises even more steeply than the income curve. The wealth of the wealthy yields an additional income and that leads to more inequality.
These theoretical aspects need to be kept in mind in the debate on inequality. A bare perusal of the arguments of the supporters of the official line shows a mix-up of these three kinds of inequality. What does the actual available data reveal?
Factors underlying growing inequality
First, the GDP data has huge errors since it does not independently account for the contribution of the non-agriculture unorganised sector. This component of GDP has been declining since demonetisation when it was hit hard and hardly recovered from this blow.
However, this decline is not officially measured since it is proxied by the growing organised sector. This gives an upward bias to the GDP and incomes of the marginalised sections, resulting in the false claim that inequality is declining.
Second, the growth in the organised sector is at the expense of the unorganised sector and that is the K to which critics point. This is visible in various industries.
For instance, e-commerce (in the organised sector) is growing at the expense of the unorganised sector trade. Similar reports are available from other industries such as fast-moving consumer goods (FMCG), leather goods, luggage and pressure cookers.
E-commerce (in the organised sector) is growing at the expense of the unorganised sector trade. Similar reports are available from other industries such as FMCG, leather goods, luggage and pressure cookers.
This applies to most of the industries where an item is produced both in the unorganised and organised sectors. Reserve Bank of India (RBI) data shows rapid growth in the sales of the corporate sector when the economy is mostly stagnant.
That can only imply the growth of this sector at the expense of the other component— the unorganised sector.
Third, taxes are paid mostly by the organised sector and the well-off. The unorganised sector is exempt the Goods and Services Tax (GST). For a turnover of below ₹50 lakh, there is no GST and for turnover up to ₹1.5 crore, tax rate is 1 percent under the composition scheme. Former Union finance minister, late Arun Jaitley, used to say, 5 percent of the units pay 95 percent of the GST.
Corporation tax is mostly paid by the big companies. Income tax is paid mostly by the well-off. Out of around eight crore tax returns filed by individuals, effective tax is paid by only 1.5 crore of a population of 141 crore. That is 1.1 percent population.
So, even if income tax data shows a reduction in disparity, that is only from the return filers, who constitute 5.5 percent of the population. That cannot tell us about inequality in the entire population. For example, 30 crore unorganised sector workers are registered on the e-shram portal. Around 94 percent of them report an income of below ₹10,000 per month, way below the taxable limit.
High tax buoyancy of GST, corporation tax and income tax only reflects the rapid growth of the organised sector. In a stagnant economy, this growth is at the cost of the unorganised sector and that increases disparity.
Further, it is the well-off who generate black money by hiding their incomes. In other words, their incomes are actually higher so inequality is greater.
It is the well-off who generate black money by hiding their incomes. In other words, their incomes are actually higher so inequality is greater.
Fourth, due to inflation, incomes rise but their real value may fall if the rate of inflation is higher. Further, as people earn more they go to a higher tax slab and pay more tax. This is called ‘bracket creep’.
So, increased tax payment does not necessarily mean an increase in people’s real income. That is why the level at which individuals begin to pay tax has been raised from ₹2.5 lakh to ₹5 lakh and now to ₹7.5 lakh.
Fifth, there is an increased production of FMCG in the organised sector but not necessarily of consumption. The market share of the big FMCG companies has increased at the expense of smaller units.
So, organised sector units are producing more and because this is at the expense of unorganised sector units, overall production is not rising. Since the well-off are consuming more, especially premium products, it is people in the lower income brackets who have cut consumption. Thus, FMCG consumption is not an indication of a decline in disparities.
Sixth, Periodic Labout Force Survey (PLFS) data shows an increase in employment in the rural sector. This is mostly distress employment. The poor are too poor to be able to afford not to work.
So they do residual work such as pulling a rickshaw, doing head-load work and selling peanuts on the roadside. This is self-employment and not work generated by the system. It yields low incomes and aggravates disparities.
Further, many workers lost work during demonetisation and lockdown and had to depend on the Mahatma Gandhi National Rural Employment Guarantee Act, 2005 (MGNREGA) at wages below what they were earning earlier. This again leads to a growth of disparities.
Seventh, the government giving free ration or gas to the poor increases consumption but not income. So income poverty persists even if consumption rises. Giving 5 kg of foodgrains free to 81 crore Indians is itself an admission that income poverty persists.
Finally, while money wages have risen due to inflation, they mostly lag inflation so that real incomes have fallen. So, who is getting the benefit of an increase in national income— the businesses?
RBI data shows corporate profits have soared. That is why the stock markets have reached new heights. Hence the incomes at the upper rung of the income ladder have risen and so has inequality. This should not be confused with the increase in the wealth of the well-off due to the rise in the valuation of stocks.
The government giving free ration or gas to the poor increases consumption but not income. Giving 5 kg of foodgrains free to 81 crore Indians is itself an admission that income poverty persists.
Conclusion
All the arguments used by supporters of the government to show a decline in inequality and, therefore, an absence of a K-shaped growth pattern, when carefully analysed, prove that indeed a K-shaped pattern of growth exists.
Their argument is based on the denial of the decline of the unorganised sector and the growth of the organised sector at its expense. Since the data is almost entirely based on the organised sector, it masks the K-shaped pattern of growth.
There are also other forms of inequality— gender, regional, between agriculture and non-agriculture, capital and labour and caste inequality.
In addition to K, what else will the officialdom deny?
Union Budget 2024: What is missing | Arun Kumar
Union Budget 2024 Has Elections and Not Ram Rajya in Sight
Neither its macroeconomics nor the sectoral allocations are such as to help either the poor or the economy to achieve new heights
The finance minister delivered a rousing speech trying to match the prime minister’s address at the consecration of Ram Mandir in Ayodhya on January 22. It promises to make India a developed nation by 2047 and a $7-trillion economy by 2030. It is said, the economy has done well in spite of the pandemic and the wars. Echoing the prime minister, she talked of benefiting the four ‘castes’ – poor, farmers, women and the youth.
Nirmala Sitharaman has followed through on the president’s address to the parliament, which listed the many achievements of the government in the last 10 years. But one thought that the budget, following the exhortation of the prime minister, would move towards establishment of Ram Rajya. So, it would chart a different path. It would present an honest picture of the economy and take steps to address the issues of poverty and uncivilised conditions of living of the vast majority of the citizens. Without these steps there can be no Ram Rajya.
So, what should the budget have contained? Big increase in allocations for employment and agriculture. That is what is needed by the youth, women and the farmers. It would have also mitigated poverty. The finance minister while announcing many things in the budget should have announced that henceforth workers will get a ‘living wage’ promised in the Constitution. For the farmers, the announcement should have been the implementation of the Swaminathan Commission promised full cost price MSP for all crops.
None of these critical steps were announced. Instead, vague promises have been made which cannot be achieved with the presently structured economy and the budget. Unemployment and poverty would persist so that the lot of the young and women is unlikely to improve.
In effect, the budget will not initiate the Ram Rajya promised by the prime minister just a week back. The first thing to do to move towards Ram Rajya is to be honest about data and one’s intentions. Neither of these are evident in the budget.
The macro aspects
If India is to become a $30-trillion economy in real terms by 2030, a real growth rate of 9.55% is required. Currently the average growth rate over the last 10 years has been about 6%. If this persists, India will only reach $14.1 trillion. The per capita income would also be only $9000, not the required $14,000 at which income a country is considered to be rich. So, why promise what is unlikely? It can only be for effect to get votes. That is not what maryada of the rulers should be.
To boost the economy’s average growth rate, there is need to tackle the macro constraints of the economy. The biggest constraint for a while has been the lack of adequate demand due to rising inequality and lack of purchasing power of the vast majority of Indians.
The budget could have been used to boost overall demand and also make it possible for the poor to have higher incomes through robust employment generation. On both these fronts the budget is lacking. Compared to last year, the overall expenditure is going to rise by only 6.1% which is barely above the rate of inflation, so that not much of a boost is going to come from this factor. The increase in expenditure should have been substantial. The primary deficit is also being sharply reduced from 2.3% to 1.5%. This will also reduce demand.
Regarding employment, capital intensive areas are being promoted not labour intensive ones. Even modern construction is highly capital intensive. What was needed was to boost MGNREGA, education, health and rural development spending, which are all big employers. No scheme for urban employment generation has been announced.
Sectoral aspects
The allocation in the last year’s budget for agriculture was Rs.1.44 lakh crore but what is spent is likely to be Rs.1.4 lakh crore. For the next year it is Rs.1.47 lakh crore which is barely 1.5% above the allocation currently. This will not even cover inflation so in real terms it will be less. So, even the inadequate allocation is not spent, so how can the farmers’ incomes improve?
The poor need education and health to upgrade themselves to be able to get better jobs/work. For education the allocation last year was Rs 1.16 lakh crore which was reduced to Rs 1.09 lakh crore and for next year it is slated to get Rs 1.25 lakh crore. For health the allocation last year was Rs 89,000 crore but what is spent is Rs 79,000 crore. For next year, the allocation is Rs 90,000 thousand crore. Not only are these inadequate compared to what is needed but even these allocations are not spent. One would have expected a quantum jump in the allocations to these sectors but this is not in evidence and even if allocations are made they are not fulfilled.
Also read: Budget 2024: How the Modi Government Has Neglected Social Security Pensions Once Again
Corruption and black economy
The finance minister has promised better governance which is so crucial for proper implementation and better outcomes from the schemes announced. In this regard, Transparency International has just released its report, pointing to India slipping in the rankings. Thus, better compliance is not in sight. That is why in India big announcements do not lead to big outcomes and/or improvements in the lot of the common persons.
For instance, a big scheme has been announced for installation of rooftop solar panels. Such a scheme has been ongoing for some time. Talking to those who install these devices, it becomes clear that the scheme is mired in corruption and non-implementation. So, how to get good intentions to fructify. The black economy has to be brought under control.
If the black economy had been checked in the last few years, as often claimed, direct tax to GDP ratio would have sharply risen. It has barely risen in the last 10 years to 6.1% from 5.7%. So, the black economy is not being dented by the steps taken by the government. No wonder there are daily reports of new cases of corruption. If the black economy could have been controlled, there would be more resources for development and the fiscal deficit would be eliminated. The economy would have become more efficient and growth rate would have risen further.
Conclusion
The optics of the budget presented is an election budget with big claims and promises on which the ruling party is going to campaign. Neither its macroeconomics nor the sectoral allocations are such as to help either the poor or the economy to achieve new heights. Is this not a slap on the face of the citizens who have been promised Ram Rajya, which stands for justice and honesty?
Arun Kumar retired as professor of economics, Jawaharlal Nehru University. He is the author of Understanding Black Economy and Black Money in India.
Source URL : https://thewire.in/economy/union-budget-2024-has-elections-and-not-ram-rajya-in-sight