The slogan with which the present government came to power was “Sabka Saath, Sabka Vikas” -- Growth for All by Involving All. They assured inclusive growth, where all groups of people participate in the growth process and are all benefitted equitably. This happens when inclusion is embedded in the growth process, and when, in an unequal, poor economy like India, the increase in the incomes of the bottom 40 percent of the population is more than that of the rich top 10 percent of the population.   

However, as per the recently released Oxfam Inequality Report, in India, since 2015 more income has gone to the top 1 percent at the cost of the bottom 40 percent. The report shows that the top, richest 1 percent of India’s population hold 42.5 percent of the national wealth while the bottom 50 percent has a mere 2.8 percent.  

At present (2021-22), the 100 richest billionaires in the country have $775 billion wealth and have lifestyles that are a stark contrast with the squalid living conditions of the bottom poorest 555 million (40 percent) population. The number of poor has increased from 59 million in 2020 to 134 million in 2021, while the number of billionaires also increased by 40 percent! Clearly, the bottom 30-40 percent population is marginalized and excluded. This is certainly not “Sabka Saath Sabka Vikas”.   

Unemployment 

Massive expansion of productive employment is one of the basic requirements for inclusive growth. However, the unemployment rate was already high (highest in the last 45 years) before the pandemic, and it increased further in the last two years. Even after some recovery, the unemployment rate is, as per the latest CMIE data, 7.9 percent in December 2021, of which 7.3 percent is in rural areas and 9.3 percent in urban areas.   

The budget has offered no solution to this problem. The jump in capital expenditure under the PM Gati Shakti programme will, according to the Finance Minister, increase 60 lakh jobs in the coming five years. This amounts to 12 lakh jobs per year, which falls far short of taking care of the backlog of unemployment. Infrastructural development is good, but it takes time to create sustained jobs. Also, the State governments that are expected to participate in the Gati-Shakti programme are low in resources and particularly in capabilities. One is not sure how successful they will be in implementing this programme. As regards the rural areas, there is the MGNREGA scheme, which has proved to be a kind of a lifeline to the rural people. Now the MNREGA funds have been cut by 25 percent to help the ‘vikas’ of the rural poor!   

With Rs 20,000 crores as wage dues that the government has to pay to the workers of the programme, rural employment is bound to suffer in the coming years. In the absence of any employment guarantee programme, the urban areas, where the unemployment rate is as high as 9.3 percent, is also likely to suffer. The urban unemployed will have no respite in the coming years. 

Subsidies 

In addition, the budget has reduced food subsidies by a huge 28 percent, fertilizer subsidy by 11 percent and petroleum subsidies also by 11 percent. The budget for rural development is reduced by 0.3 percent and the agricultural budget has increased by only 2.5 percent. Considering inflation, this increase may reduce the agricultural budget.   

MSMEs needed a big boost in the budget. However not much is offered to this sector in the budget. The total consumption expenditure in the economy declined by 5 percent last year. In the absence of any cash transfers and inadequate employment situation, consumption is not likely to increase in the economy, particularly with high levels of inflation for which the government has no clear solution. The demand deficiency may persist in the coming years, restricting private investments on the one hand and intensifying the conditions of the population belonging to the bottom 30-40 percent population. 

As regards health and education, the allocation on health has increased by only 1 percent, which may be negative if we consider inflation. The budget for education has increased by 11 percent, which in real terms may be less. Both the budgeted data, however, does not meet the norms for the two sectors. What is surprising is that the government intends to set up 200 TV channels for school education – this after the loss of education for two years, when schools are now gradually turning to off-line education! Too late indeed!   

The government could have easily raised its expenditure on health and education, on employment generation, on investing in agriculture and for promoting MSMEs as well as for raising consumption of the poor by cash transfers – all to give a big boost to equitable development. This could have been achieved by taxing the rich. One clear message of the abnormally high and rising inequalities in wealth and incomes in the country was to increase taxation on the wealth and income of the rich to raise resources. The budget however shows no changes in taxation.   

Rich-poor gap 

The wealth tax rate remains zero, income tax rates remain the same as the last year and there are no major changes in other tax rates. The increase in tax revenue is due to the buoyancy of the economy. The tax-GDP ratio in India is low. It was 10.7 percent in 2017-18 and it declined to 9.9 percent in 2020-21. This rate is perhaps among the lowest in the world at this GDP level.  There is big scope to raise the ratio. 

To conclude, the commitment of the government to the bottom 30-40 percent population seems to be very limited.  The government’s main focus is enriching the rich at the top and the corporate sector, by offering all kinds of due and undue wealth-enhancing favours to them. The government still considers high GDP as a major goal (for example, the target of reaching $5.00 trillion economy), irrespective of the composition of this growth. This is not capitalism, nor is it a market-friendly development path. This is a distorted neo-liberal growth path that originates from a distorted political economy. 

(The author is Director and Professor of Economics, Centre for Development Alternatives, Ahmedabad. The views are personal. Under arrangement with The Billion Press.)