This year’s Budget marks the first big shift in India’s political economy in 30 years. It is also a shift in the right direction. Right, ideologically as well as prudentially. The more political way of putting it is that it is the Modi government’s first BJP budget. The ones so far were all Congress+ to Congress+++.
It is fashionable in the chic circles to blame all of India’s problems on the reforms of 1991. India’s curse, on the other hand, has been how rare these moments of reform have been. That’s why when you get one of those, you call it a dream Budget.
After 1991, we had P. Chidambaram’s Budget in 1997-98, as the finance minister of Deve Gowda’s United Front government, backed by the Left. In fact, its first cabinet had CPI leaders Indrajit Gupta and Chaturanan Mishra holding key portfolios, home and agriculture respectively.
We could probably add the three Budgets from Yashwant Sinha and Jaswant Singh in the latter, reformist, ‘India Shining’ half of Atal Bihari Vajpayee’s NDA. In spite of the many rollbacks, the tariff and taxation cuts, seen with a privatisation push — cut short by a terrible Supreme Court order — this was a good phase.
The Rao-Manmohan Singh reform lost steam in about 18 months; Chidambaram’s 1997-98 one was a one-off. And Vajpayee’s surprise defeat in 2004 led to that ridiculously cynical new formulation from the UPA: Inclusive growth. That followed the self-serving presumption that the poor of India had voted for the Congress, upset by Vajpayee’s proposition of growth-mania. Never mind that the gap between Congress and BJP was just seven seats.
By the second term of UPA, growth was being blamed for everything that was rotten in India, and the supposed decline in the fate of the poor. That’s when we passed our rights-based laws, from education to food to jobs. A pity, UPA didn’t last long enough for Sonia Gandhi and her NAC to pass laws guaranteeing good monsoons and cricket victories.
These governments can say they didn’t have a majority. Modi was denied this alibi by India’s voters twice. He made a big first move by passing the new Land Acquisition (Amendment) Bill in the Lok Sabha. Then came the ‘suit-boot ki sarkar’ blow and the recoil. It knocked out any thought of larger reforms for six years. Demonetisation made it worse.
Also read: Winners & losers: Who got what in Nirmala Sitharaman’s Budget 2021
In this Budget, Narendra Modi, ironically helped along by the pandemic, has turned the clock back. In a democracy, everything, from health to education to defence, economy, welfare and the markets, rides on politics. The management and direction of the economy in a democracy is all politics.
You can no longer carry out reform by stealth. All the low-hanging fruit in that orchard have already been picked. On the contrary, the first six years of Modi saw the return of many bad habits — fresh empowerment of bureaucracy, protectionist import controls and tariffs, and worst of all, tax rate uncertainty.
Economists and public finance experts would know the finer points of the Budget. My vantage point is political. I see this as a turn in India’s political economy. The best news in this Budget is that there is no news on taxation. All tax rates are the way they were. This is progress. And it is political.
Because the air was rife with a hundred bad ideas, from increasing tax rates to confiscation of wealth, return of the failed inheritance and wealth taxes, and even presumptive taxation of unrealised capital gains. Much oomph was seen in those ideas in hallowed circles. Would we, however, want to imagine what the day after would have looked like if the Budget had followed those ideas?
The Modi government is notoriously honest about one fact: It does not listen to economists. In this case, it is good that it didn’t. Because, economists do not have to be accountable on the day after. It’s the politicians. Like it or not, the Modi government has made this distinct political call.
For decades now, especially the three since the 1991 reform, India has been trapped in the growth-versus-inequality binary. It is a bogus debate. Because if growth causes more inequality, what does the lack of growth do? Growth makes the rich richer, but does it make the poor poorer, even if the trickle-down is flawed and leaky? The rich do alright even when growth is declining in double digits. Check out this global rona-dhona (wailing) now over how the mega billionaires have added to their wealth in the pandemic year while hundreds of millions lost their jobs.
The political signal of this Budget is, the Modi government is now betting on growth even to raise more revenues. I can conclude this with the words of Michael Douglas’s Gordon Gekko in Wall Street, of course with some tweaking: The point is, ladies and gentleman, that growth, for lack of a better word, is good. Growth is right, growth works. Growth clarifies, cuts through, and captures the essence of the evolutionary spirit. Growth, in all of its forms; growth for life, for money, for love, knowledge has marked the upward surge of humankind.
Also read: India prevailed over Covid. Now Budget 2021 sets the design for economic growth
just do what china, south korea,japan and singapore are doing.
the poor -mostly due to own incompetence- are a burden on india. time to get on with business of wealth creation-
the poor are like the holy cows of india-
a 100 ambani,s, adanis,tatas will solve most of india,s problems.- poor should limit their families and work hard to get
jobs in new dynamic india..
put the co,mmies, etc in jail.
i live in danmark, a model investor friendly country, with superb welfare system- best in the word.
possible because we are so rich. no commies, no jehadi lovers.
You have very conceited and fascist thought modes. The poor are incompetent, they are the majority, so slaughter them so Ambani and Adani can live nicely.
‘poor should limit their families and work hard to get jobs in new dynamic india..’
First get rid of the caste system and educate everyone. What is the new, dynamic India ? It is more corrupt, communal and casteist than even before with a failing economy. India has a consistently bad image under Modi in the western press.
You need communists to get rid of fascists.
I am marvelling at your contradictions :
‘put the co,mmies, etc in jail.’
China is communist, and in the first sentence you are advising emulating them.
‘just do what china, south korea,japan and singapore are doing.’
You seem to be a typical smug foreign bhakth, who is very proud he lives in Denmark and extols its social democracy, but backs fascism in India.
Can you not see the contradiction ? India is failing and you are clutching the ones taking India down, as if they are the saviours. Of course, you know you will not drown, only the people of India will.
Growth, as Reliance used to say, is a way of life.
You mean crony capitalism aka corruption is the way of life for Reliance. That is why they are successful only in India, and failed when they tried to go abroad.
Gupta is an erratic and inconsistent writer.
Often he writes the Indian economy has been in free fall since demonetisation. Which is correct. But he will write in the same article gushingly about Modi’s fan following. To him, all the unsavoury things Modi’s govt. has done to minorities, liberals, students, Dalits etc. can be overlooked because the majority adore him.
Now the latest is Gupta is back to saying Modi is doing something that will be transformative for the economy, whose effects we shall see tomorrow. A tomorrow that never arrives. Demonetisation was transformative and corruption was about to end tomorrow. A 5 trillion dollar economy – it will not arrive, but blame corona. Car industry went down – Sitaraman said Indians take Uber. Farmer’s income doubled – why are they agitating ?
I wonder why Gupta is projecting a bright future without a shred of evidence ? Perhaps he fears being hauled in for sedition.
Let’s hold our horses till we see some implementation. Right now the government has held back it’s progressive farm laws. It has been talking of privatisation for years with nearly no results on the ground. It’s tax laws, such as retrospective taxation and tax terrorism stinks. There is no talk of power sector reforms without which no manufacturing can take off. All in all a government high on rhetoric and not much action. The PM himself can give the India’s left wing cabal a run for their money. Unless this government sheds it’s arbitrary decision making powers, downsizes government by scrapping useless ministries, useless laws that hinder rather then enable, rationalise taxation and completely get out of running temples, banks, companies, businesses etc. this cannot be called a reformist government. Unfortunately the PM himself is no reformer otherwise it would not be difficult for him to convince voters, being a great communicator. In reality this government has botched up all it’s reformist laws be it the land acquisition or farm reforms simply because there is no real conviction at the highest level.
Surely the ED and CBI must have visited you. Guptaji you have become a bh akt. All article is Modi Modi and Modi. In the whole article not one word how this budget is growth oriented. By the new GDP scale UPA had 12% growth. UPA lifted 200 million out of poverty. This govt before covid had gone to 3%. Or as a newly minted bha kt you are claiming that the 12% growth during UPA was actually due to Modi?
Ronald Reagon claimed his trickle down theory will make the poor richer. When no such thing happened, the theory was tossed aside and now it is a joke. Even assuming the trickle down theory will work in India as is claimed, Rich getting richer makes the existing inequality even greater because rich’s growth is at a higher percentage than the growth of income for the poor. That is a true FACT !
Will not growth take care of inequality. Why is it either-or situation. I do not know how you can divorce the two. How many Indians have been brought out of poverty should be the measure of inequality redressal. And this has always been directly corelated with growthnot only in India but all countries. . Also is there a correlation between growth of sectors like manufacturing , housing with purchasing power. is aanything being done to increase the purchasing power. All budgets sound good on paper and the problem is more often than not is poor implementation. Alternatively is Shekar Gupta talking about the growth of india or only the growth of top industrialists.
Shekher has this misconception that in a democracy govt. job is to make the rich cronies richer, and that is what is called growth!
No, that is not the job of the govt. Shekher, Govt. job is INCLUSIVE and EQUITABLE GROWTH. This is achieved by govt. spending in social i.e. healthcare, education, environment, and infra. sectors.
Good article.
In his next term, Modiji should do something about unnecessary and arbitrary protests.
Maggie Thatcher did it in the UK. She made the UK unions reform such that no party after that was able to reverse them – even when folks like Jeremy Corbyn stood on the platform of doing so.
[Maggie Thatcher lost because of the poll tax, not due to Union reform]
So Mr Shekhar Gupta never sipped expensive champagne with the rabid jhollahwah crowd while railing against GDPism — all the while enjoying the luxury and technological innovations made possible by capitalism.
That’s a revelation. (Btw, what is so “chic” about the nihilist gang of leftists who have been against the opening up of the economy since 1991?)
Good article. Thank you for pointing out that growth in UPA I was partly because of Vajpayee govt( you mentioned in cut the clutter video). I would say not many media agencies talk about the lag between the policy and implementation(benefits are sometimes seen in the next govt). I appreciate the clarity with which you present the idea, but I would say you are a victim of your own skill as journalist. When other media equates GDP growth directly with govt of the time without looking at the investment environment( NPA, global growth, geopolitical factors, economic cycles.. .) i give it a pass. But when you do i feel a bit hurt and lost.
You made a walk the talk with Jairam Ramesh or Digvijay singh soon after vajpayee govt fell in 2014 (cant remember the right person). When Jairam ramesh/Digvijay was saying these things about inequality and stuff, i expected you to step in and say that it is not such an obvious victory as they claimed but unfortunately you did not. Perhaps you were unsure then. We needed sustained growth then and when not enough people ask such questions, left hijacked the UPA govt.
We lack the depth in analysis and we have this herd mentality even in journalism. One media house says something and everyone else follows. More sensational the better.. Since you have the most experience and you also have a very inquistive mind I hope you dont fall into this herd mentality.
Thank you.
PS: I also have made donation to print. Dont want to subscribe but will keep donating
If the Modi the Govt. “does not listen to economists” it is for a good reason – is there any consensus amongst economists on any policy matter ? Demonitization was supported by one. and as vehemently opposed by others, and the jury (amongst them) is still out on whether it was “good for the country” or not. The farm bills again are opposed by one set, who had earlier supported them, such as the likes of Raghuram Rajan and Kaushik Basu, changing their tunes according to their politics of the day, and the “increasing tax rates to confiscation of wealth, return of the failed inheritance and wealth taxes, and even presumptive taxation of unrealised capital gains” were ALL proposed by economists, comfortable perched in tenured University chairs, as well as the likes Rupa Subramanya, supposedly a proreform “economic journalist” !!!!!
First let there be growth. Redistribution can wait till the time pie is bigger
Yes, grow Ambani, Adani and other corrupt Gujarati cronies first, the rest can wait.
Shekhar writes articles that are pummeled by the left and the right alternatively – which makes me have faith in Shekhar as a person unbeholden to anybody. We need more political analysts and opinion writers who can go beyond the political propaganda of each side and advocate policies that make us a wealthier nation.
I agree with your views about Growth and Inequality.
Wealth is getting accumulated in the hands of a few with or without growth. And you’re against increasing the Corporate Taxes also.
Then how will you reduce the inequalities?
Will you not tax the rich & tax the poor instead to reduce inequality?
Ms. Patnaik made wonderful start in one of the debates saying she was looking for what was not there in the budget. Doll outs and increase in taxes.
There is small section which did it best to dig out some negative aspects of the budget asking very loaded question but failed miserably.
Reforms cannot be without resistance. Just as farmers are resisting the other resistance comes from Babus who create maximum hurdles which gets questioned as “what about implementation”
These are vested intrests.
A nice article by Shekhar ji. I would like to appreciate ThePrint’s illustrators/cartoonists. They are creative and great.