Budget ducks socio-economic concerns

Yoginder K Alagh | Updated on July 14, 2019 Published on July 14, 2019

Education, rural distress and revival of jobs through public investment have not received due emphasis

Being sanguine about rural prospects even when you are an optimist like me is becoming increasingly difficult. Education holds the key to the future. But recent figures come as a rude awakening to optimists.

As many as 62.7 per cent of rural girls in the age bracket 5-15 years drop out of school. So do 58.1 per cent of the boys. This issue is crying for priority. Apart from water, this is important and has been ignored.

In the short run, two priorities are important in the second quarter of this year. The first is to finance a credible package of relief and recovery for the rural economy after a bad monsoon, from the viewpoint of drinking water and delayed sowing. The second is to revive investment. Economic policy must reflect thinking on critical issues and not score brownie points.

For example, the EAC to the Prime Minister has rightly said that Arvind Subramanian’s critique of GDP changes is not substantive, since estimating a relationship between GDP and some variables in the past misses the point that productivity is rising. But more serious critiques, like those of the Expert Group under Sudipto Mundle and past members of the National Statistical Commission, have been ignored. An assurance from the JNU-trained Finance Minister that institutional integrity in the statistical systems will be respected would be welcome.

Her views on real priorities are eagerly awaited. Rural distress is real; it needs to be acknowledged. Drinking water, improving efficiency of existing irrigation systems, rural finance, including temporary waiver of loan repayments, need funds, which the affected States don’t have. Meanwhile, rich States such as Punjab and Haryana are not affected.

Macro priorities

The priorities stated in the NITI Aayog’s Council meeting are correct. But the Aayog does not have allocation powers. We must provide funds and an assurance that allocations will be rule-based, as in the erstwhile Planning Commission formulas, and not based on political considerations.

Job creation will depend on the revival of industrial production, continuing growth of exports, and agricultural revival. In the short run more money will be needed for MGNREGA. The Budget should concretely raise public investment to revive private investment to reverse the declining growth rate in every quarter. The fiscal deficit is a real issue and leads to pressures on the bank rate and exchange rates. The solution is to raise resources through taxation. There are no free lunches. Rural revival will need sound macro policy. There is no scope for concessions demanded by industry groups.

Reform systems should be manned by experts and not civil servants, however, distinguished they might be. Why do the Urjit Patels, Panagariyas and Arvind Subramanians leave? Rural reforms need expert support. In the past experts like PD Ojha and Yashwant Thorat played that role. We are now not able to use such talent for rural policy.

The problems raised by the NSS Round of 2012, should be addressed and success stories as in Karnataka replicated. We have to boost agriculture exports. The necessary infrastructure and financial incentives must exist. Cluster-based growth schemes will need funding.

The heart of economic policy in the short run is to give fewer lectures on reforms, which are well spelt out, but to implement policies through last mile interventions and in the WTO. This Budget will be judged accordingly.

Gujarat’s experience shows that a high manufacturing output growth reduces the workforce dependent on agriculture. Even with an employment elasticity of 0.25, with a 12 per cent growth in IIP employment rises by 3 per cent, which is double the workforce growth rate. So jobless growth is our own creation. In any growth plan on agriculture has to be integrated with non-agricultural growth.

My book on The Future of Indian Agriculture has a model with an example from the Twelfth Plan of such integration; it leads to a 20 per cent increase in the income of the poorest Indian. A good step the Budget has taken is with respect to self-help groups. For many others, there are long-term perspectives such housing, water and energy for all.

If NITI Aayog gives us a working paper on each, we could discuss them. Statements of good intent are not enough. They need to be followed up.

The writer is a former Union minister

Published on July 14, 2019
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