Ever since I emerged from the utopian dream of socialism, I have believed in three driving forces for building a progressive, prosperous and plural nation: Work, Well-Being and Wealth. None of the three is less or more important than the other two.
The context will of course vary. Over the past 30 years we have seen radically different economic contexts in 1991 (near default), 1997 (globalization), 2002-03 (drought), 2005-08 (global recovery), 2008 (international financial crisis), 2012 -13 (taper tantrum), 2016-17 (demonetization, drought) and 2020-22 (pandemic, recession). Each context will require a different and nuanced response, particularly when presenting the budget, but the basic philosophy of promoting work, well-being and wealth should not change.
Homo sapiens are no longer just hunters and food gatherers. As his wants and needs grew, he embraced the work culture. In the modern era, work is an integral part of life. In a developing economy, an important indicator is the number of people aged 15 and over who make up the workforce. In the active population, the LFPR (Labour Force Participation Rate) is the proportion of the population currently employed or looking for work. In India, the current figures are labor: 94 crores, LFPR: 37.5%, or 52 crores (source: Economic Survey, appendix).
The most serious economic challenge facing India – a young nation where the median age is 28.43 – is unemployment. Mr. Narendra Modi understood this when he ran for power but, over the years, his philosophy seems to have changed. His promise to create 2 million jobs a year electrified young people. Later, he said that selling pakoras was also a job! Over the past seven years, unemployment has increased. The pandemic and the lockdown have brought more unemployment in their wake. 60 lakh MSMEs were closed. Millions of people have lost their jobs, including salaried jobs and non-regular jobs. Self-employed workers (eg tailors, electricians, plumbers) lost their jobs. Many of those jobs did not come back. Current unemployment rates are urban: 8%, rural: 6%.
In addition, those who returned to work faced pay cuts. Over the past two years, 84% of households have suffered a loss of income. In this context, the budget promised that 60 million jobs will be created over the next five years. Compared to 12 lakh new jobs per year, the number of people entering the labor market every year is 47.5 lakh (source: Labor Bureau). My conclusion: unemployment will increase, especially among the less educated.
Why social assistance?
Well-being is a broad concept that includes many aspects such as livelihood, employment, food, health care, education, social security, rest and leisure, etc. Well-being measures aim to address these challenges. For example, the MGNREGA aims to address the livelihood challenge, the National Food Security Act to address the food challenge, free public health facilities and health insurance to address the healthcare challenge, the right to education law to meet the challenge of education, etc. to. What did the budget do? Look at the allocations:
The total subsidy bill has been reduced by 27%!
The budget messages are not cash transfers or free rations to the poorest; no increase in social security pensions; no intervention to address malnutrition, stunting and wasting; no intervention to overcome the huge “learning loss” among schoolchildren over the past two years; no tax relief for the middle class; and no GST relief for consumers. My conclusion: well-being has been thrown to the wind.
I support wealth creation. Wealth is the source of new capital and, therefore, of new investments. Rising incomes, after taxes, will lead to an accumulation of wealth. Income and wealth are triggers for investment, risk taking, innovation, R&D, charity, and other uses. My opposition is not to the creation of wealth but to the accumulation of wealth which widens inequalities in society. India, according to some studies, is one of the most unequal countries in the world. A budget that relies on capital-intensive investment, advanced science and technology, digitalization and sophisticated ecosystems to the exclusion of the capital, technology and labor needed to sustain life and livelihood of millions of poor people is a travesty of the poor. If more resources are needed to help the poor, the right approach will be to harness the wealth of the rich – the very, very rich in India are 142 people whose wealth is Rs 53,000,000 – and use the resources for programs and Interventions to help the poor. My conclusion: this budget is a capitalist budget that has ignored the poor.
The ongoing debate in the media and in Parliament has revealed the deep divide between the privileged sections and the disadvantaged sections. The capital market may salute this budget, but the poor and middle classes will not forgive the makers of this budget.