Does the Union Budget 2014 lack focus on the poor
July 17, 2014
Any government’s budget that misses focus on the poor cannot be termed as progressive. The thrust for a developing economy needs to be on programmes for poverty alleviation. This requires a holistic approach enshrined in the fundamentals of the welfare state and not ad-hocism and populist measures. A mix of growth and increase in social spending to ensure basic means for the poorest of the poor has to be the pre-requisite of budget. It is in this light that the very first budget of the Narendra Modi government should be analysed.
Confusion persists on poverty figures
Yet, any pro-poor budget needs to first have a well-accepted definition of poor in place. During the UPA regime, the image of the Planning Commission was sullied with its controversial definition of poverty line. It repeatedly erred on fixing the poverty line by following a controversial method. In July last year, it finally capped poverty benchmarks at Rs 27 and Rs 33 for rural and urban India respectively but the public refused to buy such calculations and the sufferer was the UPA which was overwhelmingly voted out of power in the 2014 general elections.
The new ruling dispensation has rubbished the planning commission cap on poverty benchmarks. Yet it is still not clear whether the government is willing to accept the new definition of poverty, coined by the Rangrajan committee set up in 2013, which has put the cap at Rs 32 and Rs 47 in rural and urban India, respectively. The new committee estimates that 363 million people or 29.5 per cent of the 1.2 billion people living in India are poor. This is a much higher figure than the 269 million previously indicated.
Obviously, any further change in the poverty benchmarks would drastically change the figures of the poor and hence it would have been appropriate for the government to confirm the figures of the poor before allocating the funds in the budget for uplifting their conditions.
Reinventing NREGA
Another major area of concern as far as alleviation of rural poverty is concerned is the new thrust on creation of more ‘productive assets’ under the Mahatma Gandhi National Rural Employment Guarantee Act (NREGA) which aims to provide at least 100 days of guaranteed wage employment in a financial year to a rural household. Obviously, corruption in implementation of NREGA prompted the government to rethink better ways. However, many experts feel that the Rs 34,000 crore budgetary provision for NREGA as against the last budget’s allocation of Rs 33, 0000 crore, is not enough and a higher amount was required to be allocated to sustain NREGA. A deficit budget further impinges on the scope of social development in rural areas.
Farm credit is another issue. There is an allocation of Rs 800,000 crore for farm credit but experts’ apprehend that it will also increase the farmers’ debt trap. The Union Budget misses the point that agrarian distress is the single biggest contributor to the economic crisis!
Yet another budgetary provision to finance 5 lakh landless farmers through National Bank for Agricultural and Rural Development (NABARD) too seems devoid of insurance against leakage and corruption as in the case of NREGA. However, concessional loans at four per cent interest rates for funding local entrepreneurship under the ‘Aajeevika’ programme run by the rural development ministry is being seen as a positive step.
Can ‘smart cities’ wipe off urban poverty?
As for the urban poor, the decision to exempt low cost affordable housing projects from the FDI restrictions for them needs a close scrutiny. The government has allocated Rs 4,000 crore through the National Housing Board (NHB) for providing cheaper loans for low cost housing to urban poor. Yet to what extent can it improve the conditions of rural poor? As the Union Budget envisages alleviating urban poverty by focusing on developing urban centres, there needs to be an increase in social spending too as merely improving infrastructure cannot help reduce poverty.
To compound the matter further, the government’s emphasis doesn’t seem exactly on uplifting the urban poor but on cultivating a better off ‘neo middle class’ (coined by prime minister Narendra Modi, the term means those who have risen from the category of poor but are yet to stabilise in the middle class), in ‘smart cities’. The budget allocates Rs 7,060 crore for 100 smart cities but only Rs 100 crore is earmarked for creating infrastructure for villages.
Obviously, rural areas will continue to reel under distress in the absence of proper infrastructure
In this context, it is imperative to point out that only Rs 100 crore has been allocated for creating infrastructure for villages as compared to Rs 7,060 crore that has been allocated for 100 smart cities. This amounts to abandoning our rural areas to deep neglect.
In this context, it is imperative to point out that only Rs 100 crore has been allocated for creating infrastructure for villages as compared to Rs 7,060 crore that has been allocated for 100 smart cities. This amounts to abandoning our rural areas to deep neglect.
Budget lacks focus on the poor
To the credit of the finance minister, the budget has outlined steps to achieve fiscal prudence, a stable tax regime, generation of job, and FDI push. Its thrust is on the infrastructure and manufacturing sector as well as on increasing the agricultural productivity.
However, a better chalked out plan on execution and implementation of pro-poor programmes could have made the difference. Credit rating agency, Crisil, has warned that the scope for fiscal slippage remains high unless the government cuts back on expenditure. We may well blame the erstwhile UPA II government for this mess, but a proper mechanism to identify the poor along with a detailed emphasis on execution of anti-poverty measures were expected from the Narendra Modi government, in its maiden budget.
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