MacroScan - an alternative economics webcentre

Interim Budget 2019-20

The proposed cash transfer to farmers on election-eve is a poorly imagined scheme that is likely to have little positive impact. An alternative to it is the provision of universal basic services, universal employment guarantee and universal pensions.

The Budget sops will not provide a solution to problems of poverty and unemployment in India, which result from structural changes creating a mass of unutilised and underutilised labour force.

The interim budget 2019-20 is unlikely to bring relief to farmers and secure their approval for the coming elections. The approach to farmers in this Budget reaffirms the Modi government's tendency to rely on optics and jumlas rather than actual spending and concrete policies.

John Kenneth Galbraith noted in 1973 that establishment economics had become the "invaluable ally of those whose exercise of power depends on an acquiescent public." If anything, economists' embrace of that role has grown stronger since then.

Income support through 'universal basic income' has to be in addition to the existing welfare schemes and not replace these schemes. The expansion of public delivery of good quality basic services remains essential.

In trying to deal with large volumes of bad debt, especially corporate debt owed to the banking system, measures to activate the corporate debt market are being pushed. But experience suggests that investors are unlikely to bite.

In a period of upsurge of fascism, narrow nationalism and parochialism, Issa Shivji calls for the social responsibility of intellectuals to construct a counter-hegemonic project that would resonate with the lives of the vast majority.

Under the NDA government disinvestment is increasingly turning out to be a process in which surpluses are wrung out of PSEs or government linked institutions to support the budget, instead of the usual route of sale to private buyers. Apart from adversely affecting the modernization and expansion plans of PSEs, this change in the nature of disinvestment does not enable the government to raise its expenditure to the desired levels in a pre-election year.

The central government regularly fudges fiscal data, to pretend to meet the FRBM Act targets. This messes up public companies, but does it really matter for the macroeconomy?

The rupee's slide raises the question of whether India's central bank should intervene by selling dollars to prop up the currency. But past experience of such efforts has yielded mixed results, so other measures may be necessary.

The Modi government's claim of ushering in the largest healthcare scheme in the world is completely vacuous. The chosen method of enlarging healthcare access to the poor is wrong both because of the route chosen (the insurance route which benefits insurance companies more than it benefits the patients) as well as because of the ridiculously paltry financial provision.

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