Calling the union budget merely a vision document and not a financial statement presented to parliament, Arvind Mayaram, a former finance secretary, said this year’s budget left out many critical issues, leaving the country to struggle. ask what will happen to them. .
“The economy is coming out of contraction. The Union budget is only a vision document and not a financial statement presented to parliament. Many critical issues have not been addressed, leaving the country wondering what what is going to happen on these issues. The finance minister and her officers should have defined the fundamental issues that the budget should address,” Mayaram said.
He was in conversation with Kailashnath Adhikari, MD, Governance Now, on the webcast as part of the Visionary Talk series hosted by the Public Policy and Governance Analytics Platform.
See the video:
He referred to the report entitled “State of Working India 2021: One Year of Covid-19”, prepared by Azim Premji University, which indicates that 230 million people have been pushed below the poverty line during the pandemic. and that is unprecedented. The report says that every year since 1995 has seen a reduction in the poverty line. In 2021, however, for the first time, people have fallen back into poverty and in large numbers. The gains made over the years have been wiped out during the pandemic.
Mayaram, who has served as a senior economic adviser to the government of Rajasthan, said the budget does not even mention or acknowledge that many people have returned to poverty – let alone how they will get out of poverty or be able to. to go out. .
He said the FM does not recognize the growing inequality in India even though it has been noticed globally and the budget has no reflection on it. He added that the allocation for MGNREGA, the program which has supported large numbers of migrants, has also been reduced.
“This year, it looks like the government has declared victory over unemployment and expects fewer migrants. There is no data to support this hypothesis,” he said.
He also referred to the World Inequality Report, 2022, by a team of leading economists led by Thomas Piketty and Lucas Chancel, which asserts that the income gap between the top 10% and the bottom 50% in India was 1:22 in 2021 and India is one of the most unequal counties in the world and this trend is increasing alarmingly.
“It is unprecedented that the annual income of the poorest 20% of Indian households, which has been rising steadily since 1995, plunged 53% in pandemic year 2021 from their 2015 levels. -2016. Over the same period, the top 20% saw their annual household income increase by 39%,” the report said.
“This is an alarming development. Who should worry more than the Minister of Finance about this happening in the economy? It is not recognized that this distressing phenomenon has been noticed globally, but it is not reflected in the budget,” Mayaram said, adding that when they can come up with a strategy for other activities for the next 25 years, they should also have recognized that they will be addressing inequalities over the next five years.
He added that the budget failed to recognize the severe fall in household savings, with the savings rate at a 15-year low. To encourage borrowing, savings must be encouraged and the domestic savings rate must be high.
As for divestment, he said, the figure is as low as 8% of the targeted amount and would be negative if Air India had not privatized. He said that the government is respecting its capital expenditure by reducing expenditure like in the social sector, by constantly reducing expenditure for agriculture, health, education, etc., not by increasing resources. He added that even according to last year’s CAG report, there was only around 50% spend in the first eight months of last year. “We have no indication why the government thinks that what it couldn’t do last year it could accomplish this year,” he said, explaining how the government will raise funds for capital expenditure.
He added that over the past eight years, private investment in the economy has stagnated for the first time since liberalisation. He said there are structural issues like manufacturing where 35% of installed capacity is unused.
“There is an intrinsic structural weakness in the economy that the government is unable to recognize and correct. The government’s track record does not evoke trust. For the private sector, it is more necessary to analyze why it does not invest.
Mayaram added that divestment processes are very difficult. Private sectors are very suspicious of legal interventions, CBI, ED or income tax investigations etc. and it is not easy for the private sector to do business with the government.
Mayaram said that even when private consumption is weak and in 2021-22 formed about 55% of India’s economy, “however, the economic study notes that private consumption is expected to have improved significantly to recover 97% of the level corresponding pre-pandemic, which is below the pre-pandemic level Consumption in 2022-23 is only expected to reach close to the level of 2019-20 When there is no demand in the market and you do not can’t expect new investments,” he said.
When asked if the economy is now immune to further pandemic shocks, he replied: “We have a very fragile recovery that is based on several external factors and requires careful management of the economy.”
Speaking on the term commonly used to describe India as ‘the fastest growing economy’, Mayaram said the term refers to an economy coming out of the worst. “If an economy was (-) 7.5% and is now growing at 8.5%, we get carried away with catchy words…we need to dig into the numbers and see if that really means anything. In a democracy , this can be considered political rhetoric, but not as an economist, as a finance minister, because those who listen to you start to believe that you do not really understand what is going on.
On structural reforms in the banking sector, he said that the administrative structure for supervising public sector banks should be dismantled as the RBI’s supervision over public sector banks is much lower than that of private sector banks. They must all be registered as banking companies under Indian banking law.
Regarding the capitalization of public sector banks, he said that once their management improves, they could exit with IPOs.