With the 2018-19 Budget less than three weeks away, inflation rising to a 17-month high, at 5.21 per cent in December, and factory growth at a 25-month high in November, finance minister Arun Jaitley faces a tricky situation. The much-needed growth is a good sign as it means rising employment and purchasing power in more hands, but the flip side is that inflation could send his Budget haywire. While vegetable prices were the main culprits in December, this is likely to cool off as new figures show vegetable prices have fallen hugely and a fresh crop of onions are expected shortly.
If Mr Jaitley decides to provide relief from inflation to the vocal middle class by hiking the taxable limit from the existing Rs 2.5 lakhs to around Rs 3 lakhs, as speculated, it will be unfair to others. The middle class is just 27 crore people out of a 125-crore population, and a mere 1.5 per cent pay income-tax.
It’s time for the government to widen its horizons astronomically and horizontally, and come out of its unequal vertical world. In 2016, it was estimated around 22 per cent Indians live below the poverty line. Knowing how statistics rarely tell the real story, the situation could be worse than it looks, particularly in rural areas. It’s well known inflation hits the poor the most. This government is lucky there isn’t a strong Opposition party in the country now, otherwise there could be major social unrest. This is not to belittle the government’s schemes to uplift people out of poverty. But it needs a cadre to implement its programmes, like the flagship National Rural Enployment Guarantee Scheme, on a war footing. The widespread corruption that scuttled the true efficacy of this scheme hasn’t been properly tackled.
Prime Minister Narendra Modi’s recent meeting with top economists, along with his team, should be the lodestar that guides the Budget proposals. The emphasis should be on employment and rural distress. The PM needs to keep his promise of 10 million jobs, as the jobs produced so far are only in lakhs. The government can build on the uptick in Index for Industrial Production figures at 8.4 per cent on the back of the sharp growth in consumer non-durables and infrastructure sectors. So far it’s been mostly government spending. Private investment, that is necessary to sustain growth, is said to be slowly increasing. Perhaps the FM can provide some incentives to push them to invest.
The conundrum of rural distress, highlighted by the economists, should be acted upon as an imperative that the FM can ignore at his own political peril. There is unrest among farmers across India, and with a spate of elections looming, the PM’s unfulfilled promise of remunerative prices for farmers must be implemented.
