TH Editorial 02.02.2019
TH Editorial 02.02.2019
TH Editorial 02.02.2019
me/TheHindu_Zone_official
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10 EDITORIAL DELHI
Distributing the rewards of reform
The expansive Budget refl ects the fruits of fi scal consolidation, tax reform and streamlined delivery of subsidies
rose to 3.2 against the budgeted 3. constrained by low demand at pre
But 3.4% of GDP is not a large sent, except for a few sectors
A
s electioneve budgets go, Interim Budget 2019
there will be no more rise; it is like election, it is necessary that shar
20 must rank as one of the most politically expe
SANDEEP SAXENA
ince Budget 2019 is the last ly to maintain its balance sheet. ing of growth benefi ts is done in
dient ones this country has seen. The shadow of before the general election Emerging market infl ows are set to ways that sustain growth, reduce
the general election falls squarely on the budget propo this year, it was widely ex rise, creating demand for GSecs distortions, and improve capabili
sals, which are aimed at seeking votes in the name of va pected to be an assessment of the up to the current cap of 6% of the ties to participate in growth.
rious schemes that rain cash on benefi ciaries. Whether government’s performance. There domestic market. Soft oil prices Welltargeted transfers can be
the strategy will work at the hustings remains to be was a debate on whether the Bud services tax (GST) and other steps prices are crashing. In fact they will encourage foreign investors to made without destroying fi scal
get should have announced any towards formalisation increased are likely to help stabilise prices so return to Indian markets. But consolidation and creating ma
seen. But there is no denying that a lot of thought has
substantive measures since they the tax base, and it follows that tax that farmers do not cut production since global growth is slowing, in croeconomic vulnerabilities. As
gone into identifying and targeting the sections of pop would bind the next government, rates can themselves be cut. Again in the next crop cycle. fl ows are unlikely to be as large as competitive populism creates talk
ulation across social segments that are in distress and postelection. it is fair that the aam aadmi, who Moreover, this year, the revenue they were in 2017. Therefore, there of unfunded universal income
unhappy with the Centre for a variety of reasons. There It turns out the report card is bore some of the costs of reform, defi cit has been maintained, the will be more room for open mar schemes, or farm loan waivers
is an income support scheme for farmers who are reel good enough to create space for should now benefi t from the suc primary defi cit been reduced, and ket operations (OMO) from the Re that hurt growth of farm credit, it
ing under the impact of falling realisations for their some substantial measures. Pain cess of these. It makes good eco expenditure on capital account serve Bank of India that support is better to bind the next govern
crops, and a pension scheme for informal sector work staking fi scal consolidation, tax re nomic sense to move towards a been increased. Better quality of the debt market. Softening inter ment to schemes that are less dis
form, more effi cient delivery of system of a wider base and lower government expenditure as well as est rates will also make banks torting.
ers earning up to ₹ 15,000 a month. There are income
subsidies, and a rise in the share of rates. Tax receipts have grown the GST tax cuts, reductions in ob more willing to hold GSecs. The Budget continues the eff ort
tax concessions for the middle class that have been capital expenditure, have created from 10% of GDP — a level at which stacles to interState trade, and When international demand is to reduce transaction costs and
carefully framed to target the lower rung. The ₹ 6,000 a the space to reward taxpayers as they had stagnated since the tax soft commodity prices will keep slowing, it is important to main improve compliance incentives.
year income support to farmers will benefi t 12 crore well as announce a relief measure cuts after the global fi nancial crisis infl ation low. tain domestic demand. Therefore, Stamp duty amendments that
households, which is almost half of the total number of for farmers in distress without — to 12%. Although the GST has not The Budget points out that high tax cuts, more income to farmers seek to tax just one transaction,
households. Similarly, the increase in standard deduc substantially compromising fi scal yet resulted in a rise in indirect tax ways are being built at the rate of and various schemes to improve which will be shared across State
tion from ₹ 40,000 to ₹ 50,000 may be small but it will consolidation. It is fair that this go ratios above 5.5%, it is likely to do 27 km per day, which makes India demand for housing, which has governments, on the basis of the
vernment, which imposed the so in the future as it stabilises. The the fastest builder in the world. been under stress, are all domicile of the buying client, will
cover three crore taxpayers, which is again almost half
painful reforms and undertook dif transfers to farmers and tax cuts Railway safety has improved. Bet appropriate. reduce a major market irritant, in
of the 6.8 crore taxpayers. The income tax rebate on fi cult action, should also distribute amount to only 0.4% of GDP this ter implementation and reduction While the budgetary contribu crease transactions and take the
those with taxable annual income of up to ₹ 5 lakh a some rewards of that reform. year and are partially funded by a in waste brings down costs across tion to capital expenditure re country further toward becoming
year will benefi t three crore middle class voters that in 0.3% rise in tax ratios. the board. The shift in the Budget mains at about 1.6% of GDP there is one eff ective market.
cludes traders, small businesses, those who have just Rewards of higher growth The JAM (or Jan DhanAadhaar date to earlier in the year and the a rise in internal and extrabudge As income tax returns rise, a
joined the formal workforce and pensioners. It may be asked how payment of Mobile) complex is the other ma focus on spending in the fi rst half tary resources, which are now less than 0.05% will be selected for
While these sops will benefi t sections of the popula ₹ 20,000₹ 75,000 crore can be jor set of reforms that enable a have resulted in a better achieve larger than gross budgetary sup scrutiny in nondiscretionary, ma
made to farmers and the tax bene smaller expenditure to have a larg ment of sectoral spending targets port. But public enterprises must chinebased ways without any in
tion, the question is whether it is correct for a govern
fi ts given with only a marginal im er impact on social welfare. Jan this year. be able to raise and use internal re terface between the taxpayer and
ment that will be in power for less than two months in pact on the fi scal defi cit. But a larg Dhan bank accounts opened sources. This is a healthy sign of ef the examining offi cers, thus reduc
the next fi nancial year to write into the statute books er size economy can aff ord to through the country and the Aad Government borrowing fi ciency, market viability and re ing potential taxpayer
proposals that are permanent. Though some past go spend larger absolute amounts haar data base make a costeff ec The size of government borrowing duced dependency on the harassment.
vernments have announced sops in their interim bud with only a small rise in defi cit ra tive Direct Benefi t Transfer (DBT) is larger than what the market an government. Even market borrow India is a very diffi cult country
gets with an eye on elections, this budget has gone tios and borrowing requirements. possible for farmers. ticipated, and this has raised GSec ing by such enterprises used for in to change. Problems remain, but
much further by announcing very signifi cant measures. The fact that India is the sixth lar rates. The rise in gross borrowing vestment when private investment the rewards are beginning to ap
In political terms, the strategy cannot be faulted as it gest and fastest growing economy Rewards of lower infl ation is because of higher redemptions remains low, is likely to crowd in pear and should be greeted with
in the world has some advantages A slight rise in fi scal defi cits to but net borrowing is similar to that (rather than crowd out) private in cheers.
appears to have put the Opposition in a diffi cult spot —
as well as responsibilities to equit fund transfers to farmers does not last year. There was a sharp rise in vestment. It will raise demand
protesting too much about the concessions given to ably share the rewards of growth. threaten macroeconomic stability GSec yields that year. As a result, which will induce more private in Ashima Goyal is a member of the Prime
those in distress may be counterproductive. That said, Demonetisation, the goods and when infl ation is low and food interest payments as a ratio to GDP vestment. The latter remains still Minister’s Economic Advisory Council
some of these ideas may actually work in economic
terms as they put money in people’s hands. The hous
ingrelated tax proposals can give a legup to the real es
tate sector, which is a jobcreator and is now in trouble.
The return of targeted cash transfers
The sops come with a cost, though. The Centre will Schemes promising cash to the poor absolve the state of its responsibility to provide basic services like health
miss the glidepath for reducing the fi scal defi cit, yet
living at the poverty line. The prin riments is also that universalisa ture to GDP ratio as far as expendi
again. The estimated slippage of 0.10 percentage point
ciple of universality is at the core tion is the key to effi cient delivery ture on health, education and so
is not signifi cant if we assume that the concessions will of it given the problems of target
#70929 of services against targeting pro on are concerned.
spur spending by the benefi ciaries. This is, of course, ing. But some form of income sup posed by these cash transfer
assuming that the gross tax revenue projection of port to those who are unable to schemes. Jobs, best antidote
₹ 25.52 lakh crore, which is a 13.5% growth over the re participate in labour market has The obsession with cash transf The best antidote to poverty is
vised estimates of 201819, is achieved. But this arith Himanshu been there in most countries in ers also comes with an under enabling citizens to earn their liv
metic will be the headache of the next government. some form or other including in standing that these will take care ing by providing jobs. For those
GETTY IMAGES
W
ith the announcement of sistance Programme (NSAP) pen proposals claim these as silver bul such as the Mahatma Gandhi Na
T
he bloody unrest in Zimbabwe suggests that Pre now the proposal of MIG is only an jected by a threefourth majority tribution system (PDS) where it is even with free and universal ac
sident Emmerson Mnangagwa’s political honey electoral promise with no further in Switzerland, Finland which Not leakage proof clearly established that inkind cess to public services and access
moon is over. The veteran of the struggle for free details available. On Friday, the started a pilot has now disconti It is not just the fascination for tar transfers are twice as eff ective in to livelihood opportunities, there
dom was the benefi ciary of the overthrow of strongman general budget announced a nued it. But even in Finland, the geting the poor which is at the increasing calorie intake com may be a role for cash transfers,
Robert Mugabe in November 2017. Mr. Mnangagwa scheme, Pradhan Mantri Kisan pilot was not a strict UBI but a so core of these proposals but also a pared to equivalent cash transfer. particularly for those who are un
raised hopes in the runup to the July general election, Samman Nidhi, under which vul cial protection scheme aimed at belief that all existing forms of so The real issue with the ap able to access the labour market or
nerable landholding farmer fami only the unemployed. While there cial security transfers are ineffi proach of a targeted cash transfer are marginalised due to other rea
promising free and fair polls and inspections by inter
lies, having cultivable land up to 2 have been some pilots by NGOs in cient. While there is certainly scheme is that it envisions the role sons. The NSAP seeks to do exactly
national observers. But his victory proved controversial hectares, will be provided direct developing countries in Asia and some exaggeration in such claims, of the state to only providing cash that by providing pensions to el
as allegations of voterigging by the ruling ZANUPF ma income support of ₹ 6,000 a year. Africa, they have varied in content it is not true that the system of income to the poor. This kind of derly, widows and disabled. But
chinery in the rural areas began to bear echoes of the The appeal of some form of in of transfer and coverage with only cash transfers is effi cient and the ‘Robin Hood’ approach seeks to even for these vulnerable and mar
Mugabe era. In six months since his election, the exse come transfer is now seriously be few being fully universal and only refore leakage proof. Several stu absolve the state of its responsibil ginalised groups, the Central con
curity chief’s pledge to distance himself from his mili ing discussed by all political for the Namibia pilot experiment pro dies on cash transfers including ity in providing basic services such tribution to pensions has been on
tary legacy and open the economy for foreign invest mations. The idea is not new and vided income transfer to people in one by JPAL South Asia for NITI as health, education, nutrition and ly ₹ 200 per month. If governments
ment has been put to severe test. A case in point is Mr. has been in discussion for some the poverty line. Aayog found that cash transfers livelihood. But it is also iniquitous cannot ensure decent incomes to
time among academics in India The proposals in the Indian are not greatly superior in terms of since it seeks to create demand for the poor, then the issue is not of
Mnangagwa’s handling of the fallout of the recent steep
but attracted attention after it was context have mostly been for a tar leakages compared to other services without supplying the ser details of minimum income transf
fuel price hike in which over 10 protesters are said to proposed in the Economic Survey geted income transfer scheme and schemes of inkind transfer such vices, leaving the poor to depend ers but that of intent of those who
have been killed. Zimbabwe’s defence forces have come of 2017. not UBI. In developed countries, as the public distribution system on private service providers. are promising to eradicate poverty
under severe condemnation for the general crackdown, the UBI is supposed to supplement (PDS). On the other hand, numer There is now suffi cient evidence through income transfers. On this,
involving arbitrary detentions, torture and a country Who will benefi t? existing social security provisions ous studies have documented that which shows that privatisation of there is no ambiguity.
wide Internet blackout. Harare’s main opposition, the In simple terms the proposal of and a topup over and above un a move towards universalisation basic services such as health and
Movement for Democratic Change, has faced attacks on transferring some income to every iversal provision of health, educa and use of technology enabled education leads to large scale ex Himanshu is Associate Professor, Centre
citizen is built on the twin princi tion and so on. In the Indian con Chhattisgarh and Tamil Nadu to clusion of the poor and marginal for Economic Studies and Planning,
its main offi ce, while trade unions behind the nation
ples of universality and a notion of text, most arguments in favour of reduce leakages in the PDS. But ised. In any case, India is among School of Social Sciences, Jawaharlal
wide strike appear resolute in their bid for redress. The minimum basic income to those UBI are premised on the ineffi cien the real message from these expe the countries with lowest expendi Nehru University, New Delhi
crisis forced President Mnangagwa to call off his trip to
the World Economic Forum in Davos. But his attempt to
put the blame both on the security forces and the prot
LETTERS TO THE EDITOR Letters emailed to letters@thehindu.co.in must carry the full postal address and the full name or the name with initials.
esters may merely point to his own political vulnerabil
Budget 2019 signifi cant and earlier general election round the unemployed youth are still safely cited as a manifest Minister would tackle the
ity. The offi cial response to the mass opposition against The Budget is to be seen promises. The fact is that the corner, the BJPled National struggling to make a decent failure of the government. It obstinate problem of
fuel price hikes were directed by his deputy, Constanti more as an election BJP did not pay much Democratic Alliance living. Whatever may be the is no wonder that jibes such unemployment has come to
no Chiwenga, when the President was away. Mr. Chi manifesto than what it is — attention to issues of public government has little time to facts in the NSSO report, on as ‘Pakodanomics’ and nought. The ranks of the
wenga was the mastermind behind the 2017 coup, and an interim budget. The interest even after four and a resort to any course unemployment data, the ‘Nomo jobs’ stick and gain unemployed are swelling by
the man he installed must assert his authority to ensure government has chosen to half years of rule. The correction in an issue which ground reality is that the rate currency. the day.
accountability and respect for the rule of law. kick the can down the road. Opposition did take some of is critical to nation of unemployment is growing Modinomics has come to be G. David Milton,
How resources will be the wind out of the sails of development. It is by leaps and bounds every equated with ‘jobless Maruthancode, Tamil Nadu
The sudden doubling of fuel prices has amplifi ed
found and whether the the BJP. Sugarcoated interim unfortunate that industrial successive year. Job creation growth’. The hope and
Zimbabwe’s chronic shortage of U.S. dollars to sustain schemes announced will be budgets by the government bodies too have not made an is grossly disproportional to expectation that the Prime
more letters online:
www.hindu.com/opinion/letters/
the import of basic goods. Following the hyperinfl ation realised is anybody’s guess. at the fag end of its term are eff ort to make their own the exponentially growing
of the previous decade, the country abandoned its own About the pension scheme? only to win the elections. evaluation of the job market numbers of employable corrections & clarifications:
In the graphic, “The new Arctic normal” (World page, Feb. 1,
currency. The electronic alternative, “bond notes” that How much funding will be Mohan Arimboor, or even cautioned the youths in the country.
2019), in the fourth point under the heading “How it is linked to
were introduced without physical backing, unleashed a needed to ensure an Thrissur, Kerala government about its fallout Agrarian distress caused by global warming”, the reference to solar vortex should be corrected
vicious cycle of hoarding and price infl ation. The de assured pension? The on the economy. There vicissitudes of the monsoon to read as polar vortex.
cline in the value of the surrogate currency against hard inability to present the Big data on jobs would not have been any and low farm prices of The headline, “BJP eyes to harness discontent in JD(U) and
customary Economic It is very clear that there has need for 10% reservation for produce as a result of Congress” (Feb. 1, 2019, some editions) is wrong. It should have
money has caused distress among public servants. Ma
Survey and the controversy been a yawning gap between the economically backward middlemen and government been JD(S) and Congress.
ny businesses have folded up for want of adequate fo around unemployment what was promised by Prime had the government, soon policies have made farming The last paragraph of the report headlined “Jaya panel calls
reign currency. Mr. Mnangagwa’s government has data refl ect badly on the Minister Narendra Modi and after assuming power, less attractive for rural doctors for reexamination on Feb. 5, 6” (Feb. 1, 2019, some
moved to reduce the issue of electronic debt, and to government. what the common man got tackled in right earnest the youth. There need to be editions) talked about an affi davit fi led by the Apollo Hospitals
curtail the ballooning fi scal defi cit. While these may be Manohar Alembath, on his plate (Page 1, issue of employment aggressive transformational which was subsequently withdrawn. Actually, it was returned.
Kannur, Kerala “‘Unemployment data based generation. structural reforms to attract An OpEd page article titled “The case for minimum basic in
steps in the right direction, they are too small as incen
on draft report’,” February V. Subramanian, huge private investment come” ( Jan. 31, 2019) wrongly expanded KALIA as Krushak Assist
tives to entice a deeply sceptical investor community Chennai ance for Livelihood and Income Assistance. It should have been
■ Many within the Bharatiya 1). Demonetisation is sure to which in turn facilitates
that was once turned away. Mr. Mnangagwa has his task Krushak Assistance for Livelihood and Income Augmentation.
Janata Party are well aware have had an impact on massive job creation.
cut out: to shore up his own base in the ZANUPF esta that even with a fl ood of employment, with the ■ It is unfortunate that the N. Sadhasiva Reddy, It is the policy of The Hindu to correct signifi cant errors as soon as possible. Please specify
blishment and to restore calm across the country. Bengaluru the edition (place of publication), date and page. The Readers’ Editor’s office can be
promises, most people are informal sector badly hit. It issue of unemployment is contacted by Telephone: +91-44-28418297/28576300 (11 a.m. to 5 p.m., Monday to
Equally, he cannot abandon the diffi cult path of reform, not going to believe them as was a move that did not help being raked up by the Friday); Fax: +91-44-28552963; Email:readerseditor@thehindu.co.in; Mail: Readers’
Editor, The Hindu, Kasturi Buildings, 859 & 860 Anna Salai, Chennai 600 002, India.
which is the only guarantee of stability in the long term. the ruling party has been root out black money either, Opposition only at election ■ The alltime high
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unable to fulfi l any of its as trumpeted. With the time even as millions of unemployment rate can be visits. The Terms of Reference for the Readers’ Editor are on www.thehindu.com
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