With less than 70 days left for general elections to begin, I shall recall and examine some major policy changes and data revision (or distortion) moves of Narendra Modi’s government along with the Interim Budget, that are directly aimed at influencing the electorate, in order to clear their road for securing a second term in the 17th Lok Sabha.
The Interim Budget – 2019
While the arithmetic concerning fiscal prudence shows irresponsible budgetary allocations; it can still be argued that this budget is a masterstroke in the big game that the BJP is going to play.
The PM-KISAN scheme, for which Rs. 75,000 crore has been allocated, is only superficially attractive; as when you do the math, 12.56 crore beneficiaries will only be receiving Rs. 16 per day. And so, it wouldn’t be unwise to concur with Rahul Gandhi, who has called this scheme a big joke and an insult to farmers. Moreover, Piyush Goyal stressed PM-KISAN to be the reason for keeping 3.4% as the fiscal deficit target for FY’20. Not only is this contravention of the NK Singh Committee recommendation for FRBM Act, 2003 – which insists keeping a fiscal deficit target of 3% for FY’18, FY’19 and FY’20 — but also silly to do so for such a scheme which practically does no good, apart from wooing votes.
Further, the much predictable changes in tax slabs for direct tax-payers, is a good reason to celebrate for the middle class; yet, having said that, a logical debate around consumption rate versus tax rate is needed to be done. As it is known that consumption drives production, production drives investments, and investments further drive economic growth; but in a country like India, which has immense poverty and hundreds of poverty alleviation schemes, public expenditure with fiscal prudence can’t be compromised. And also, more money supply due to tax cuts might be inflationary, for a while.
Another major announcement was a pension scheme for unorganized sector workers, which will involve Rs. 3,000 monthly payment to around 10 crore people. It requires a premium payment, of Rs. 55 per month for those who join the scheme at 18 years of age, and a premium of Rs. 100 for those who join at 29 years of age. I can’t clearly say, whether the math behind this scheme is fiscally prudent or not. Yet, in a country with a huge formal sector unemployment crisis, expecting an informal sector worker to pay such premiums for apparently more than 30 years, eventually to get a pension of Rs. 3,000, seems completely unjust. However, since this is the time first time such a policy has been implemented, Mr. Goyal has done his job.
Looking at such budgetary sops, I must commend Mr. Modi and his Finance Minister for presenting their election manifesto in disguise of an interim budget, which has made the pulses racing of the entire nation. Mr. Modi, with his shrewd political acumen, has made a clear statement that if voted out of power, these measures may not be implemented, precisely the tax cuts. Albeit, if voted in, these measures will destroy every sort of fiscal discipline, which will further prove to be very difficult in remedying.
Revision Of GDP figures
This government has also been accused of manipulating data to suit their interests — as recently seen by the revision of GDP growth rate figures of financial years 2017-2018 and 2016-2017.
The growth rate in Demonetization year has been revised to 8.2% from 7.1% — which is very surprising, as Demonetization had severely impacted the supply chains of MSMEs, and jobs in the informal sector. So 1.1% upward revision raise pertinent questions on the credibility of these figures.
Also, if these figures are so accurate, then Demonetization was a blessing in disguise for the economic growth, perhaps the government should now think about demonetizing Rs. 100 notes. It might boost the GDP growth even further, right?
Revision Of Back Series GDP Data
Other controversial statistics that invited sharp criticism from economists were about the revision of back series GDP growth rate data. In August, the Committee on Real Sector Statistics had submitted its report to the National Statistical Commission (NSC). The report stated that the average GDP growth rate of 8.37% (2004-05 -2008-09) and 7.6% (2009-10 – 2013-14) was higher during the UPA govt.’s two terms than the present NDA govt.’s average growth rate of 7.4% in 4 years. However, the govt. termed these figures as “unofficial”.
So, the CSO released another series, in November that trimmed the growth rate to 6.7% making it convenient for Arun Jaitely, to boast about the NDA’s performance and to criticize the Congress.
One can say the reasons for the change sounds convincing to them, because it involves complex changes in methods of calculation, which apparently very few people understand; however, this clearly shows the political intentions of the current govt. that wants to make everything look good, even if involves distortions of statistics to suit their populist political interests.
The E-commerce Policy
In December, the DIPP changed FDI policy – which became applicable from February 1 — for online market places owned by foreign companies, which prohibited such e-commerce companies from giving preferential treatments to any particular supplier. The rules said,
- Related entity associated with the E-com company can’t sell on the platform
- E-commerce portal can’t discriminate among vendors and,
- Single vendor can’t sell more than 25% to one portal.
Flipkart and Amazon asked for an extension of the deadline, but were unsuccessful. So an important question arises, why were these policy changes introduced at a time that resulted in a major disruption of their business model? Answer is – because of populism.
In an interview to ET, a senior e-commerce industry executive said, “It looks like someone has studied the business models of Amazon and Flipkart, and introduced clauses to systematically kill the two companies, especially at a time when e-commerce companies are providing jobs and investing in an ecosystem in India.”
With such a policy change, brick and mortar sellers, domestic e-commerce companies with less capital and small sellers on online platforms will be hugely benefited; irrespective of their incompetence in providing the number and kind of jobs that will be lost. And ostensibly, BJP will get their votes.
Now, let’s wait for the general elections to begin, we’ll get to see the number of seats Narendra Modi wins with his tryst with populism.