Fooling People One Last Time, Prime Minister Modi?

How's the sops? That's what every minister in the Modi government should now be asking. 

As one of its final acts in office, the Modi Sarkar has abandoned yet another important bipartisan tradition. The budget in an election year is always presented by the new government, not the old. This time, Piyush Goyal stood up in Parliament and presented a Budget that is full of spending giveaways and tax cuts - a sixth, real Budget from a government facing re-election, for the first time in India's history. Perhaps the "interim" Finance Minister thought it would be too humiliating to present a similarly "interim" Budget? He admitted as much, saying "this is not an interim budget, but a road to development". 

Naturally, therefore, the Interim Finance Minister - IFM? - did not even have to have his sums add up. Thanks to the government's massive mismanagement of the structure of the goods and services tax, we have seen GST revenues being far short of what was expected. He has also promised that the fiscal deficit "glide path" will be followed. And he's also cut taxes and handed out cash to farmers and to small and medium enterprises! Who cares if the numbers don't add up? That isn't an outgoing Finance Minister's problem - leave alone an "interim" Finance Minister.

For a government that does not care about propriety or about India's institutions, this is a win-win game. If their irresponsible budget mathematics and giveaways win them re-election, well of course they win. And if for some reason it doesn't work and they're voted out, the next government will have an impossible task - either they, unimaginably, tell people the tax cuts and the promises are no longer valid, or they will have to abandon all forms of fiscal discipline. Either way, the BJP can attack them. The government has deliberately adopted a scorched earth policy - destroy the fisc and make any successor's task of restoring the damage impossible. No other government has done it - they may have overspent in their last year, like with the farm loan waiver of UPA, they did not push the costs forward. Look at the fiscal deficit jumping up in the last year of the 2008-09 government. 

What is really interesting, however, is the gaps. Not only do we to have to worry about the gaps in the mathematics, but a giant gap in priorities. 

After all, what's the big story of the week? That the government has been hiding the truth about the jobs crisis. We now know that the National Sample Survey - previously touted by government and BJP-friendly economists as the last word on judging the status of employment - shows that unemployment is at its worst since the dark days of the early 1970s. Youth unemployment has hit unprecedentedly high levels in India - data that substantiates anecdotes and also the evidence of our own eyes. The government may have concealed it, but now we know what has actually happened under Modi's watch. A man elected by India's youth has cruelly abandoned them.

But what did the Interim Budget contain for this vast mass of young unemployed? Not a thing. It is as if they no longer exist. Farmers get something, the middle class gets a lot - but is there anything to address unemployment? To address the shortage of investment that lies at the heart of this crisis? I'll tell you the answer: Zero. Why should the BJP worry? This group, they think cynically, can be won over by references to movies like "Uri". And, if not, by that old standby: the Ram temple. Or perhaps by the new Kamdhenu Yojana, given that gau rakshak is the only real job open to young people today. 

Note also how 'Make in India' - which the government itself correctly hailed as the best, indeed only, way to employ large numbers of under-skilled young people - has been largely abandoned. It was brought up only in the context of the Railways and when the IFM (Interim Finance Minister) was talking about customs changes. Nothing to boost private investment, which this government has allowed to decline as a proportion of GDP. The Centre for Monitoring the Indian Economy regularly points out that new project starts are incredibly low - in fact, just last month, new project starts hit a 14-year low. So nobody is setting up factories to employ India's vast mass of struggling young people. What has been done to fix this? I'll tell you: Zero. In fact, the promise made in 2014 that corporate tax would be reduced to Southeast Asian levels, to render Indian companies and workers competitive with its peer countries, has been abandoned. 

Narendra Modi knows how to win elections, we are told. This may be true. If the BJP successively spins this travesty as being equivalent to a real Budget - in which programmes are carefully costed in advance - then it certainly has a chance to reverse its declining popularity among the middle class. If it manages to get money into farmers' bank accounts, then it might have a chance of dealing with rural disillusionment as well. Never mind the biggest and most inexplicable giveaway is to those members of the "middle class" who have two houses! Contrary to what sententious pundits may tell you, the people of India are not all-knowing and always wise. It is entirely possible that Modi will be able to fool them one last time. Certainly, that's what he hopes. In the words of economist Nitin Desai, this is not an interim Budget: it is nothing but a 'Pradhan Mantri Bachao Yojana'.

(Mihir Swarup Sharma is a fellow at the Observer Research Foundation.)

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