health spending

Modi Govt’s Fiscal Policy on Welfare: Trends So Far and What to Expect

Union government spending on health and education has been sub-par for far too long.

This is the second article in a two-part series produced by the CNES InfoSphere team analysing past budget trends, the current state of the economy, and the possible scenarios of actions considered for Budget FY2023. Read the first article here.

This article looks more specifically at the Narendra Modi government’s fiscal policy towards social welfare and the development sector.

Healthcare and education

The Union public expenditure on healthcare in India was hovering around 1.2% of GDP since 2014. It was only around 2020-2021 that the overall expenditure rose above 2%. This was largely because of COVID-19-related spending that was temporal and did little to improve the overall medical (non-COVID-19) infrastructure.

Keep aside the ‘state vs Union’ constitutionality of ‘who spends on healthcare and education’ – the Union government has spent sub-par on these areas for far too long and expects far more from the states on the subject of supporting long term fiscal outlays.

Source: InfoSphere

The figure above shows the public expenditure on healthcare since FY 2014-15. The trend line has a measurable slope of 0.1154, suggesting that the increase in year-to-year expenditure levels to 0.1154%, and that too appears from a disruptive rise in covid related spending done in 2020-21. Compared to most well performing emerging market economies, India still spends the least on healthcare, particularly on a per-capita basis. Japan spends around 9% of GDP and Brazil, another developing country, spends around 4%.

Source: InfoSphere

The above figure illustrates state-wise expenditure on medical, public health and family welfare (as a ratio of aggregate expenditure, for the past three years).

A majority of the states still spend roughly 5% of GSDP on public health and family welfare (NCT of Delhi spends the highest).

On education, the Union government expenditure on (higher) education since FY 2014-15 has increased but only marginally.

In the figure below, the measurable trend line slope is 0.035, indicating that the increase in spending over year-to-year is only by a margin of 0.035%. In comparison to the UPA-I and UPA-II terms, before 2014, the expenditure on education has decreased from a peak of 3.36% in 2012-13, to a low of 2.84 in 2014-15.

Source: InfoSphere

Moreover, in relation to India’s population and the much popularised demographic-dividend chorus, the current rate (and pace) of spending is too low.

This is also concerning as the New Education Policy (NEP) requires drastic changes for the long-term plans to support education for all. With minuscule public funding, and the existence of problems like shortage of teachers in rural schools and lack of proper infrastructure, it will be a chimera to anticipate that implementation of NEP is made possible in an efficient and effective manner.

The UGC draft bill being tabled now to invite ivy leagues to set up campuses in India is also (somewhere) a realisation – a signal by the Modi government that it considers higher education not a right, but a privilege, a private good, entitled to a few by the most affluent (unaffordable) institutions. It also speaks of the disaster that the UGC has been, failing to create ‘institutions of eminence’.

On research and development, as seen in the figure below, Union government expenditure since 2010-11 has been oscillating between 0.78% and 0.7% of GDP. It has always been under 1% of the GDP.

Source: InfoSphere

The Modi government hails India’s role in the world as a ‘Vishwaguru’ but compared to more advanced nations like Japan, South Korea and the US, India spends the least on promoting research and innovation. The average expenditure in 2018 on research and development by low- and middle-income countries was around 1.5%, while India’s remained below 1% for over a decade.

As far as allocation of Union government expenditure on research and development is concerned, the maximum priority has been given to research and development in areas of health, defence and agricultural industry.

Moreover, agency wise, the highest percentage of research and development expenditure is by the Defence Research and Development Organisation (DRDO) at 31.6%, followed by Department of Space (DOS) and Indian Council of Agricultural Research (ICAR) at 19 and 11.1%.

Source: InfoSphere

Source: InfoSphere

On scheme-wise outlays

Here we plot the numbers on the volume of government spending on various social welfare schemes, such as MGNREGA, PMGSY, PLI, Ayushman Bharat, and the PM-Poshan scheme and their share in the Union Budget.

MGNREGA’s importance as one of the largest job-security social welfare scheme in the world is defined by the fact that under the scheme every rural household where an adult member works manual labor has a guaranteed 100 days of paid employment per year.

The programme, which guarantees at least one-third of the jobs to women, has become a crucial safety net for low-income residents and migrant workers in rural areas.

Source: InfoSphere

As seen in the figure above, the funds allocated for the MGNREGA were lowered by 25.2% to Rs 73,000 crore under the 2022–23 Budget, which was announced by finance minister Nirmala Sitharaman. In the previous year, that is FY 2021-22, Rs 98,000 crore had been set aside under the programme’s updated estimate in the previous budget.

The scheme received a significantly more amount of funding in 2020–2021 and 2021–2022 to accommodate the demand for work during the COVID–19 epidemic, which is essentially why there has been a reduction, as we can tell from the figures of the current budget. Net-net overall spending in MGNREGA has remained sub-par. Wage payments have been delayed as well.

Interestingly, when we compare the data of the spending of the UPA government on this scheme, to the current government, as a percentage of overall government expenditure, annual spending on MGNREGA, 2.4% is in the same range as in UPA, which is close to 2.6%.

Continuing with our scheme-wise analysis, we move onto the Pradhan Mantri Gram Sadak Yojana (PMGSY) which aims to connect all eligible unconnected habitations that are part of the country’s core network to all-weather roads.

The ministry has been spending less than what was budgeted since 2016–17. Between 2016–17 and 2020–21, there has seen a worsening tendency in underutilisation.

Source: InfoSphere

In the figure above, we see that the allocation to Pradhan Mantri Gram Sadak Yojana (PMGSY), the rural roads construction scheme, in the budget for the year 2022-23 has been raised by a stupendous 36 per cent to Rs 19,000 crore. Although the allocation for 2022–23 is significantly higher than the revised forecasts from the previous year, the program’s spending has been falling since 2015–16.

On further analysis, we see that the Modi government has laid out and built roads much faster than the UPA government, having almost trebled the construction of rural roads. Several thousand roads have been built and this has been done at a much faster rate than the UPA-led regimes. If we compare the NDA’s performance with UPA-II, NDA has done better in road construction.

Coming to the next scheme, PMJAY aims to reduce severe out-of-pocket costs associated with serious medical episodes while giving poor and vulnerable families access to high-quality inpatient secondary and tertiary care.

Source: InfoSphere

Allocations for health insurance surged fivefold with the introduction of PMJAY in FY 2018–19. Budget Estimates (BEs) for the plan have stayed around 6,400 crores since FY 2019–20, while REs has been far lower. For example, REs was half at 3,200 crore in FY 2019–20 and less than half at 3,100 crore in FY 2020–21.

As seen in the figure above, in 2022-23, PMJAY has been allocated Rs 6,412 crore – this is double the estimates of 2021-22 (Rs 3,199 crore). Experts are predicting that this amount may be low considering the expenditure required on PMJAY.

The amount of money that should be allocated to health-related programmes should be between 2.5 and 3 percent of the GDP. Ayushman Bharat, the state health scheme framework, needs to be continued to be emphasised.

Additionally, the primary healthcare care system needs to be strengthened and the goals of the National Digital Health Mission need to be implemented gradually through regional pilot-based rollouts.

The Mid-Day Meal (MDM) programme aims to give school-age children nourishment. Schoolchildren are provided with healthy cooked lunches as part of this programme. The programme was given the new name PM-POSHAN in September 2021.

Source: InfoSphere

To provide proper planning for the COVID-19 pandemic during Financial Year (FY) 2021–2022, there was an increase in PM POSHAN funds to 12,700 crore from 11,500 crore in the Budget Estimates (BEs). A budget of around Rs 10,234 crore has been approved for the Pradhan Matri Poshan Shakti Nirman (PM POSHAN) programme in 2022–2023. In FY 2022-23, the scheme is to be expanded to include pre-primary students.

The real issue: Where’s the money now to spend more on welfare?

The Union government’s own tax revenue (and non-tax revenue) situation has been bad for some years now.

While it wants to increase spending on capex, more than 65% of budgetary requirements are on the revenue expenditure side (due to the high interest payment costs and government wages/salaries, social welfare needs). This government has compromised on that, while projecting the need to ‘spend on growth’. Now, it has less money to even do that.

On other revenue sources, the Modi government, across terms, has consistently failed to meet its own set disinvestment targets year after year.

When we see the released budget numbers for 2022-23 more closely, our sense is that we will again see the government not meeting the targets it envisaged in 2022 budget (much like what was seen in 2021 and 2020). That is likely to accentuate the fiscal deficit problem, which has already been a serious concern.

Maybe, but one must ask the Union finance minister a question: Why was all that money over the last few budgets spent on capex, private investment boosting needs, when the results on efforts at growth weren’t seen?

In the time of a pandemic-induced crisis, there was room to maybe encourage a job-focused social security plan (an urban designed MGNREGA) or provide higher outlays for rural-MGNREGA where the rural job demand has outweighed, by a large margin, the existing scale of spending (both in terms of job creation and payment of wages). This could have complemented capex spending, but wasn’t.

Through supply-side economics, the Modi government’s fiscal roadmap has indifferently ignored demand side considerations. And, if this is still the path the government takes, we might see another bad year for overall social sector expenditure for the vulnerable and the poor: with less outlays for women-child-nutrition based schemes, and even lesser outlays for MGNREGA and other job-focused social welfare plans.

The poor maybe expected to make their living out of the ‘free ration’ promised while the ultra-rich class of corporate class rake in profits from hyper-optimistic stock market illusions, and through continued government support.

This is an essay extrapolated from the latest edition of the InfoSphere team, Centre for New Economics Studies (CNES), Jindal School of Liberal Arts and Humanities, OP Jindal Global University.

Deepanshu Mohan is associate professor of economics and director, Centre for New Economics Studies (CNES), Jindal School of Liberal Arts and Humanities, OP Jindal Global University. Aniruddh Bhaskaran, Hemang Sharma, Soumya Marri and Malhaar Kasodekar are all members of the CNES InfoSphere team and working as research analysts with CNES.

Health Spending, COVID-19 and Desired Outcomes

To understand how vulnerable a country to a pandemic is, it is necessary to create an index that not only consider existing level of health infrastructure but also ability of a country to spend, to create more healthcare assets.

The COVID-19 pandemic has crippled the global economy and showcased the urgent need for better health infrastructure and efficient accessibility to healthcare services.

India’s healthcare system is not in great shape. There are gaping holes when it comes to availability of hospital beds, doctors, and paramedic staffs to react to a health emergency. What is true for India is true for many other countries – a poor healthcare infrastructure may make it difficult to react to a health emergency.

However, as COVID-19 has shown, merely spending more on health may not necessarily lead to a desired health outcome.

For instance, data reveals that the US government spent almost double the amount on medical care in comparison to eleven other wealthier nations. The higher amount spent by the US (and this excludes money spent by the private insurers) is mostly on account of high costs of labour, pharmaceuticals, and administrative costs, and this do not translate to having better health outcomes. Life expectancy is still lowest and infant mortality rates still the highest in the US, in comparison to the 11 developed countries in the OECD group.

We create a new index – Health Infrastructure Index (HII). HII ranks countries based on availability of physicians, dentists, nursing and midwifery personnel, pharmacists, hospital beds, number of hospitals, and skilled health care professionals – such as anaesthesiologists, radiologists, etc. – all of which are normalised with respect to the population. Additionally, HII accounts for variables such as money spent on account of healthcare activities by the governments.

Also read: How Chhattisgarh Is Deliberately Inviting COVID-19 To Stay Over

India gets a lower rank, 113 out of 184 countries, putting her in the vulnerable category in the fight against COVID-19. Luckily though, the COVID-19 fatality rate is low. This may be because of factors such as tropical climate (virus are less active in hot and humid climate), young population (less likely to be comorbid), and universal vaccination program (administering Bacille Calmette-Guérin “(BCG)” vaccination).

South Asian neighbours offer a mixed bag: Bangladesh (120), Pakistan (160), Nepal (109), Sri Lanka (108), Bhutan (135). In general, we find the high-income countries scores well in terms of HII (Figure 1). Western European and Scandinavian nations have high HII scores, which is not surprising. Monaco (1), Switzerland (2), Norway (3), Iceland (4), and Germany (5) are the among the countries with highest HII scores. Number in the parenthesis indicates the rank. It implies these countries are better equipped to handle pandemic. Whereas African countries such as Somalia (184), Niger (182), Guinea (181), and Central African Republic (180), have a very low HII score making them most vulnerable. Afghanistan ranked 183.

Figure 1: HII Score and Log Income

Among the middle-income countries, Cuba (10), Uzbekistan (21), Kazakhstan (25), and Russian Federation (27) performed well, making them less vulnerable. Per-capita availability of doctors is highest in Cuba, making it less vulnerable. The erstwhile Soviet block scores well in terms of availability of hospitals and hospital beds, and money spent as a percentage of GDP on healthcare.

The HII index highlights critical areas where domestic or multilateral interventions are required. For instance, multilateral organisations such as WHO, IMF, or World Bank, may want to give more funding to the countries, which are more vulnerable in terms of HII. Even within a country, HII showcases the areas where a government, or multilateral organisations, should intervene, and how they may prioritise such interventions.

It is to be noted, although, COVID-19 is equally likely to affect all the low, middle, and high-income countries in terms of spread of the virus. Plotting HII against the number of COVID-19 deaths (Figure 2), reveals a horizontal trend suggesting that COVID-19 is equally likely to affect countries irrespective of their level of per-capita income.

Figure 2: HII and number of COVID-19 deaths

However, the lower-income households, within a given country are more to be severally affected thus far. Evidence suggests 5% of the poor income-households residing in the low- and middle-income countries, spend disproportionately more than the rich as a percentage of household income on health care. For a rich nation, like US, life expectancy for the bottom five percent of poor people did not change between 2001 and 2014. However, during the same period, the life expectancy of people in the high-income bracket showed improvement. Poor health outcomes for individuals with lower income directly result from exposure to harmful environments. In Europe, it was found for the disadvantaged, unmet need for medical care tended to be higher in countries with larger income inequalities, regardless of the average economic standard in terms of GDP per capita.

Irrespective of what the HII suggests in terms of disbursement of COVID-19 fund, some world leaders are demanding that China should pay the price. China’s actions in combating the pandemic are in violation of Article 6 and 7 of International Health Regulation (IHR). If any government wants to sue China, must do so by identifying the jurisdictional basis for such action. Article 56 of IHR allows such punitive action but it can only be executed when China agrees to the wrongdoing on its part. Similarly, to protect their economic and tourist activities, some countries such as Turkey, Indonesia, Russia, etc., have under reported number of COVID-19 cases. Governments of the affected countries can also ask for compensation. To play it safe, WHO had to introduce a total cross country travel ban.

Also read: What NFHS-5 Says About Violence Against and Empowerment of Bihar’s Women

There can be a spillover effect. Many governments are imposing sanitary and phytosanitary sanctions and imposing restrictions on goods originating from China. This has seen an increase in the number of lawsuits, especially, under Article XI of WTO (dealing with quantitative restrictions). Investment arbitration to settle disputes between foreign investors and host States can come in handy.

International Investment Tribunals, and other tribunals can be asked to review the States’ guidelines against the pandemic and thus can address many disputes related to the same. Peru, for example, has developed online digital platform aimed at providing public access to key pieces of information about arbitration. With more countries following the suit and COVID-19 fatality waning, we may be heading for a better time.

Nilanjan Banik is professor, School of Management, Bennett University, Greater Noida. Julien Chaisse is professor, School of Law, City University of Hong Kong; and President, Asia Pacific FDI Network.

Parliamentary Panel on COVID-19 Finds India’s Response to Pandemic Ineffective

The panel has observed that the lack of specific guidelines from the government has led private hospitals to charge exorbitantly from patients.

New Delhi: Amid rising COVID-19 cases, inadequate beds in government hospitals and the absence of specific guidelines for the treatment resulted in private hospitals charging exorbitant fees, a parliamentary panel on Saturday said, asserting that a sustainable pricing model could have averted many deaths.

Chairperson of the parliamentary standing committee on health, Ram Gopal Yadav, submitted the report on Outbreak of Pandemic Covid-19 and its Management to Rajya Sabha chairman M Venkaiah Naidu.

This is the first report by any parliamentary committee on the government’s handling of the COVID-19 pandemic.

Underlining that healthcare spending in the country with a population of 1.3 billion is “abysmally low”, the panel said the fragility of the Indian health ecosystem posed a big hurdle in generating an effective response against the pandemic.

“The committee, therefore, strongly recommends the government to increase its investments in the public healthcare system and make consistent efforts to achieve the National Health Policy targets of expenditure up to 2.5% of GDP within two years as the set time frame of the year 2025 is far away and the public health cannot be jeopardised till that time schedule,” the report stated.

The National Health Policy 2017 has set a target of government expenditure on healthcare up to 2.5 per cent of GDP by 2025 from just 1.15 per cent in 2017.

Stating that the public had to undergo trauma and distress due to the absence of a dedicated healthcare system, the committee observed that the number of government hospital beds in the country were not adequate to handle the increasing number of COVID and non-COVID patients.

“Cost of health service delivery increased due to absence of specific guidelines for COVID treatment in private hospitals as a result of which patients were charged exorbitant fees,” the committee noted in the report.

Stressing on the need for better partnership between the government and private hospitals in wake of the pandemic and shortage of state-run healthcare facilities, the report said, “The Committee is of the view that arriving at a sustainable pricing model to treat COVID patients could have averted many deaths.”

The committee believes healthcare should never be limited to only those who can afford to pay but should move towards the noble vision of universal health coverage. For this to happen, the government needs to be considerate and support the private health care sector, the report said.

The committee was all praise for healthcare workers and doctors for being on the frontline in the handling of the deadly virus and said they should have defined working hours, predictably functioning reliever rosters and scheduled off-duty days.

The doctors, who have laid down their lives in the fight against the pandemic, must be acknowledged as martyrs and their families be adequately compensated, it suggested in the report.

(PTI)

Why the ‘Gujarat Model of Development’ Has Seen the Highest COVID-19 Fatality Rate

Narendra Modi’s track record in Gujarat sheds light on his approach to public healthcare.

Data updated by the Ministry of Health and Family Welfare on the evening of April 7 indicated that the fatality rate due to COVID-19 in Gujarat is the highest among all states and union territories of India.

The total number of infected persons reported in Gujarat was at 165, with 13 deaths. Thus the fatality rate in Gujarat is 7.88%. The fatality rate of COVID-19 in India as a whole is 2.87%.

The high fatality rate in Gujarat perhaps reflect the alarming conditions of the public health system in the state. There is a need to understand this, particularly since Gujarat has been projected as the model state in the past for India to follow.

It was only after the total lockdown was imposed throughout India that the Gujarat government started the process of reserving hospitals for treating patients with COVID-19 exclusively, procuring 156 ventilators and training its 9,000 health workers to manage ventilators. This lack of urgency reflects the poor condition of public healthcare in Gujarat.

Gujarat has a legacy of a bad public healthcare system. The four terms of Narendra Modi as chief minister of the state played an important role in creating this legacy.

Modi became the prime minister while flaunting the Gujarat Model of Development (GMD) in 2014. He had been the chief minister (CM) of Gujarat for almost 13 years between 2001 to 2014. Modi’s achievements as chief minister of Gujarat in the field of public healthcare may reflect on his healthcare policy at the Centre, and help us understand his response to the coronavirus pandemic.

Currently, Gujarat has 0.33 hospital beds per 1,000 population. There is only one state that has smaller ration – Bihar. The national average is 0.55 beds per 1,000 population. This disparity between Gujarat and the national average needs to be understood. According to the World Health Organisation, India had 0.70 hospital beds per 1,000 of population in 2011.

Gujarat was ranked 17 among the 18 largest states in India by the Reserve Banks of India in terms of social sector spending. Gujarat was spending only 31.6% of its total budgetary expenditure on the social sector.

In terms of per capita health expenditure, Gujarat’s rank slipped from fourth in 1999-2000 to 11th position in 2009-10. During the same period, Assam improved from the 12th to the third position and Uttar Pradesh from the 15th to ninth position. In 1999-2000, Gujarat was spending 4.39% of its total state expenditure on health, but by 2009-10 this came down to 0.77%.

In terms of health expenditure as a share of NSDP, Gujarat went down from 0.87% to 0.73% between 1999-00 and 2009-10, while the average of major states increased from 0.95% to 1.04% during the same period. Tamil Nadu and Assam almost doubled their expenditures during the same period. This indicates the increasing disinterest of the Gujarat government in public health services.

In 2004-05, when the United Progressive Alliance came to power in the Centre, public expenditure on health as a percentage to GDP was 0.84%. It went up to 1.41% by 2008-09 before being reduced again to 0.98% by the new National Democratic Alliance government (Modi’s first term) in 2014-15. In the current financial year (2020-21), it was set at 1.28%.

Also read: While the World Fights COVID-19, Indians are Busy Communalising It

In Gujarat, Out of Pocket Expenditure on Healthcare (Hospitalisation) in government hospitals is higher than the national average and higher than even states like Bihar. This means those visiting government hospitals in Gujarat have to spend more money from their own pockets than the people in Bihar have to. In terms of per capita spending on medicine, Gujarat ranked 25th in 2009-10.

In 2001, when Modi became the chief minister of Gujarat, the state had a total of 1,001 primary health centres, 244 community health centres and 7,274 sub-centres. In 2011-12, while the number of the primary health centres and community health centres marginally increased to 1,158 and 318, the number of sub-centres remained the same. Even today the total number of primary health centres in Gujarat is less than even Bihar. The total number of public rural hospitals in Bihar is almost three times of the total number of rural public hospitals in Gujarat.

Also read: The Pandemic Should Serve as a Wake up Call to Revamp Public Healthcare

While the world is dealing with the current pandemic, countries across the globe are estimating their strengths and weaknesses, capacity and potential, and deciding on policy accordingly. It is important to identify and understand our vulnerabilities amidst this crisis. India currently has only around 7,13,986 hospital beds and 20,000 ventilators. According to an estimate, around 5 % of those infected from COVID-19 will need ventilator support.

Under these conditions, the moment the total number of infected persons in India crosses four lakh, India will not have enough ventilators for =critical patients. According to an estimate, by May 15, the total number of infected people could reach up to 22 lakh. The estimate from Indian Council of Medical Research and IndiaSim is even higher.

While the situation is scary across the countries, we have to question the model of development we have chosen and where that has left us in times of crisis. And we may have to think about a more sustainable model of development in the days ahead.

Sanjeev Kumar is a senior researcher at Tata Institute of Social Science. He can be reached at subaltern1@gmail.com

Nirmala Sitharaman’s Maiden Budget is an Exercise in Taming Policy Uncertainty

While pragmatic, its fiscal marksmanship is a pressing concern.

Policy uncertainty can cause a severe drag on economic growth. The maiden budget by finance minister Nirmala Sitharaman was a judicious narrative of how to lessen the policy uncertainties. She has not deviated from the fiscal consolidation path and presented the budget from a position of strength.

It was a budget of a government re-elected back to power with full mandate.

The budget was presented from a positive backdrop; that India is an economy with the fastest growth rate in the world. However, one feels a disconnect between budget proposals and the budgetary allocations marked for each of these proposals.

This significant deviation – technically referred to as “fiscal marksmanship” – between what is proposed and what is budgeted for it is a pressing concern. The fiscal marksmanship requires a detailed analysis examining the demand for grants sector-wise.

Also read: Budget 2019 Reeks of a Lack of Real Ambition

But a quick look tells us that that certain budget proposals, like doubling farmer income, requires the sector to grow at 14%. Yet another instance is whether the promises regarding Ayushman Bharat are actually backed up by adequate allocations in the budget or if it is based on a ‘cooperative federalism’ model where state governments have to figure out the financing requirements of the scheme.

Attracting foreign capital

Infrastructure investment and foreign capital are two components that have been given emphasis in the budget to revive economic growth. However, triggering private corporate investment can never be confined to just reducing interest rates. Though the monetary policy committee has reduced the policy rates, the transmission of it to the economy may take time.

Foreign capital has two components – Foreign Direct Investment (FDI) and Foreign Institutional Investment (FII) including the portfolio investment. The transition of emphasis from FII to FDI is a welcome trend as “hot money” content of portfolio foreign investment can become “flighty capital” responding to the differentials in the rate of interest. If US Fed Reserve increases interest rates, such “hot money components” of foreign capital can always be unstable.

Also read: Union Budget 2019-20: All You Need to Know

Raising the cap of FDI in certain sectors also needs to be judicious. Such deliberations have begun in the Indian economy with Arvind Mayaram’s report on rising the caps of FDI in certain sectors. The massive FDI proposed in the aviation sector and the media in the present budget is something which we need to wait and watch.

Within aviation, FDI should not be just confined to “airlines”. Aviation is not “airlines” per se, it also means the aviation infrastructure and avionics and related technology where there can be scope for foreign direct investment.

India’s Finance Minister Nirmala Sitharaman leaves her office to present the federal budget in the parliament in New Delhi, July 5, 2019. Photo: Reuters/Anushree Fadnavis

The maiden budget of Sitharaman had a dual-fold objective.

One, how to carve a roadmap towards achieving a “5 trillion-dollar economy” at the end of the next five years. And two, how to ensure the “last mile connectivity/delivery” to people.

The former is against the backdrop of a ten-point strategy which includes, among other things, the need to strengthen social and physical infrastructure, reduce the rural urban digital divide, Make in India, a new industrial policy, blue economy frameworks, enhancing the nutrition for women and children, Ayushman Bharat and “less government and maximum governance”.

For the latter, the government has strengthened their budget commitments in programmes like Ujjwala (gender budgeting in energy sector by providing clean fuel to women in low income households) and UDAY (aimed to make a turnaround in DISCOMS by improving the financial and operational efficiency to ensure 100% electrification for households).

On the taxation front, reducing the corporate tax to 25% for the firms that earn upto Rs 400 crore in revenue, is welcome, especially when India has one of the highest corporate taxation rates in the world. This high tax rates can affect the competitiveness of Indian firms. Two, the incidence of business taxation analysis reveals that the firms whose turnover upto Rs 400 crore has higher effective tax rate than the firms above Rs 400 crore. Yet another point is that only less than one per cent corporate firms belong to “above Rs 400 crore turnover” category.

Also read: Union Budget 2019: Fiscal Deficit Target for FY’20 Pegged at 3.3%

When Sitharaman was the member of National Commission for Women, she had deliberations with NIPFP, which has done pioneering research in gender budgeting, and she has believed that gender budgeting is a promising framework to ensure gender equality. In the present budget, she has scaled it up to “second generation reforms” on gender budgeting by announcing that an expert group committee will be constituted to evaluate the last 15 years of gender budgeting to deepen the analysis of examining the budget through a “gender lens”.

With this announcement, an emphasis to “Leave No One Behind” (LNOB) motto of Modi 2.0 was given emphasis. Yet, another announcement relates to ensuring the SDG goal was on “blue economy”.

Over all, it is a pragmatic budget. It has signalled towards the new macroeconomic framework of our country, though many of these structural policy announcements require a thorough follow up.

And yet, there are inconsistencies in the budget which relate to the economic diplomacy of Modi government. For instance, at international forums like G20 meetings and World Economic Forum, India has indicated that there is no “retreat from globalisation” – but the budget announcement of rising custom duties has signalled a “protectionism wave” in India.

Lekha Chakraborty is a Professor at the National Institute for Public Finance and Policy.