Budgets need to be built from below with community participation via district planning committees, which have a constitutional mandate but are largely non-functional. Citizen engagement and demanding accountability in the making of policies, programmes and budgets is critical to transformation of their lives.
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A lot of euphoria is built around the Union Budget and all kinds of expectations are associated with it. Each year the same tamasha happens on budget day. The 2023–24 budget is no different. The key trigger of excitement and glee in this budget is the changes in the personal income tax slab rates and exemption limits. Finally, do we have a middle class budget?
No, we do not. Union Budgets are always about the corporate economy and more so since the last two decades. Union Finance Minister Nirmala Sitharaman, in the regime’s move towards Amrit Kaal, has drawn up a strategy which she calls Saptarishi (I guess it means seven sages who would guide her). She does not tell us who these seven sages are but does say that the budget has seven priorities — inclusive development, reaching the last mile, infrastructure and investment, unleashing the potential, green growth, youth power and financial sector.
The budget has seven priorities — inclusive development, reaching the last mile, infrastructure and investment, unleashing the potential, green growth, youth power, and financial sector. There is no clear evidence of any significance of these priorities.
What do each of these seven priorities actually entail?
There is clearly no evidence of any significance of these priorities. Does having insignificant budget lines for minority development, schemes targeted at the Scheduled Castes and Tribes, women and child-oriented schemes, or schemes for the disabled constitute inclusive development? Yes, there are budgetary allocations for the above constituents, but when you look at them from a critical lens, these are mere sops and these schemes have no significant impact on the intended beneficiaries in terms of transforming their lives.
Does providing free food grains to antyodaya ration card holders comprise reaching the last mile? What about healthcare, education, employment and social security reaching the last mile? It is this compact of services within a universal access framework reaching the last mile that would create equity and social justice.
The 2023–24 budget does indeed have a strong priority for infrastructure and investment. As Sitharaman says, “Our vision for the Amrit Kaal includes a technology-driven and knowledge-based economy with strong public finances and a robust financial sector.” Keeping this in mind, the budget has made huge allocations for capital expenditure, which has witnessed a 33 per cent increase to Rs. 13 lakh crore. However, all the infrastructure projects they talk about clearly benefit the private sector as it would be involved in building this infrastructure and using all the investments being allocated for that. The poor may find some temporary wage labour in these projects but not sustained employment; meanwhile, the corporates will definitely rake in huge profits.
Also read: Union Budget 2021-22: Another Step Towards Privatisation
Even when the budget talks about strengthening agriculture, it is not with regard to the farmer or farm labourer; it is about creating an agricultural accelerator fund (sounds like a Mutual Fund scheme) to support agricultural start-ups. The beneficiaries would be the knowledge economy entrepreneurs, and not the poor farmer.
‘Unleashing the potential’ appears to be a little sinister. It is to do with Artificial Intelligence, data governance, digi-lockers, fintech and all such digital financial mechanisms which will integrate the larger economy; all of this seems to be via the involvement of the global private sector, especially finance capital. The seventh priority of the financial sector also links up with this and investments in this sector are mainly directed at fuelling the control of finance capital across the economy.
The green growth priority is indeed interesting in the context of climate change, and investments in green energy and carbon-neutral initiatives need to be done, but the problem with these budgetary allocations is that they involve only the corporate sector and not communities who should actually be at the core of such a transformation.
And finally, youth power through skill development in centres of excellence would create apprentices who would engage in the formal economy, but what one is understanding from this is that similar to agniveers, these newly skilled youth will populate the informal part of the formal sector and work as cheap labour without any social security benefits. So this will certainly not increase the formal sector workforce, but on the contrary will informalise the already declining formal sector.
How the budget short changes the common citizen
So that is the new foundation of the Amrit Kaal budget that was presented on February 1. But what meaning does this budget have for the common citizen? People pay taxes, both direct and indirect, to governments so that through such revenues the government can invest in creating equity and social justice. The pillars of equity and social justice are universal access to healthcare, education, welfare benefits and social security.
Global experience shows that delivering such services requires at the minimum 15 per cent of the Gross Domestic Product (GDP) to be invested, and for this, the tax-to-GDP ratio of the country should also be at least 25 per cent. Presently, India’s tax-to-GDP ratio is about 16 per cent, but within the existing tax regime there is a potential for pushing the ratio to 25 per cent.
First, all corporate tax expenditures (what we in India call revenue forgone) should be removed. Presently, revenues forgone are over 2.5 percent of GDP and direct taxes constitute 60 percent of these exemptions. Similarly, uncollected taxes are a huge burden that the tax administration carries because of its inefficient functioning. This is nearly Rs. 20 lakh crores or 10 percent of the GDP. Just mopping up all this will generate the resources needed to provide universal access to healthcare, education, social security and welfare, and create equity and social justice.
Also read: Union budget 2022-23: which of the inequalities will it impact?
Apart from this, increasing the share of direct taxes in total tax revenues from 35 per cent to over 65 percent is needed to create tax justice and reduce the tax burden on the poor via domineering indirect taxes. This will make the tax regime progressive, similar to most middle and high income countries. Just increasing the surcharge on taxes by one per cent for the richest 5–10 per cent will be adequate to bring in this change.
The 2023–24 budget, unfortunately, has reduced the surcharge for the rich tax payers, which will stall the process of increase in proportionate share of direct taxes in government revenues. So, generating additional resources is not such a great deal, but it needs appropriate political will that looks at governance from the lens of the common citizen and not the lens of the crony capitalist.
The 2023–24 budget unfortunately has reduced the surcharge for the rich tax payers, which will stall the process of increase in proportionate share of direct taxes in government revenues.
Inequities inherent in health budget
To transform the political economy of budgets, simple changes are needed in making budgets. Let’s illustrate this with the health budget of 2023–24.
Health is essentially a state subject; hence the larger burden of providing for healthcare services falls on state governments. In 2022–23, both the Union and state governments together budgeted about Rs. 3,40,000 crore or Rs. 2,460 per capita for healthcare, of which the Union’s net share was Rs. 40,000 crores (excluding grants to states). The National Health Policy of the present government benchmarks 2.5 per cent of GDP for healthcare, of which 40 per cent should be the Centre’s share. This means that as per the policy, the 2023–24 health budget for the country should have been Rs. 6,80,000 crore, of which 40 per cent or Rs. 2,70,000 crore should have been the share of the Union. But in the 2023–24 budget, the Union has budgeted only Rs. 92,803 crore, including grants to the states. This means that the deficit in this budget as per the policy is Rs. 1,78,000 crore.
Not only is the health budget too little, but within this meagre budget, the healthcare allocations for our Members of Parliament (MPs) and central bureaucracy is huge and smacks of inequity. While the general health budget for the country is Rs. 2,460 per capita, the budget for the Central Government Health Scheme (CGHS), which serves the MPs and bureaucrats is Rs. 6,066 crore or Rs. 14,314 per capita, including pensioners.
This is stark inequity in access to healthcare resources between the elector, and the elected and public servants with the latter having the privilege of 5.8 times more resources for their healthcare, in sharp contrast to those who pay the taxes. So built within budgets are gross inequities in access to resources. If this has to change, then the way budgets are made has to change.
Also read: Union health budget fails the people again
There is stark inequity in access to healthcare resources between the elector, and the elected and public servants with the latter having the privilege of 5.8 times more resources for their healthcare, in sharp contrast to those who pay the taxes.
Budgets need to be built from below with community participation via district planning committees, which have a constitutional mandate but are largely non-functional. Citizen engagement and demanding accountability in the making of policies, programmes and budgets is critical to transformation of their lives. If they can bring to account their elected representatives by questioning them continuously and using all democratic institutions like District Planning Committees effectively, only then the elected representatives would call the executive to account and assure that they perform to deliver all public services effectively and as per needs of the citizens.
Only such a shift in strategy will create a budget that provides universal access to healthcare, education, welfare and social security, and creates equity and social justice.
