The Political Fix: India presents a damage-control Budget 2020 after a horrible year for economy

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The Big Story: Damage control

Finance Minister Nirmala Sitharaman presented the 2020 Budget on Saturday, offering a mix of tax cuts (with caveats) and promises to build towards an “aspirational” India that develops economically while also caring for its people.

In July 2019, Sitharaman had presented the first budget of Prime Minister Narendra Modi’s second term, one in which she laid out a vision of growing into a $5 trillion economy by 2024.

In the intervening eight months, Sitharaman had to roll-back a significant number of her budget announcements, acknowledge that many estimates were wildly off the mark and lower expectations of Gross Domestic Product growth from 7% for the year to 5%, a big drop.

Budget 2020, then, was mostly an exercise in damage control after a horrible year for the Indian economy. Sitharaman had to suggest that the government was doing what it could to address the downturn, while also reassuring the markets that India was still on the road to balancing its budget.

Over two hours and forty minutes on Sunday – the longest Budget speech in recent memory, so long that she was unwell by the end and couldn’t finish it – Sitharaman attempted to do exactly this.

She presented a vision of India that had been radically altered under Modi and was poised to grow even further. Even the word “paradigm shift” got thrown in. Yet the $5 trillion figure was only used once, and actual numbers of growth were mostly muted, not surprising since this will be India’s worst GDP growth year in more than a decade.

In fact, as I wrote in Hard Times, ours series attempting to simplify the Great Indian Slowdown, Sitharaman’s speech seemed transplanted from a world in which India was booming, not one in which the government faces a massive shortfall in tax collections, indications of the worst unemployment in four decades and no clear path out of the morass.

Before you go any further, go see this illustrated explainer on India’s banking crisis, by Nithya Subramanian, to understand how we go there.

In short here were five big points from the Budget:

• India is offering individuals lower income tax rates, but only if they give up exemptions and deductions – which may not be very useful for most. I wrote about this here.
• The minister triggered an “escape clause” in the law governing the balancing of budgets, allowing the fiscal deficit to grow from the estimated 3.3% of GDP this year to 3.8%, though even that number may be optimistic. The Budget documents also included off-budget borrowings, taking the overall deficit number to 4.6%.
• The government has set itself a huge Rs 2.1 lakh crore disinvestment target next year, a huge amount of which will come from the proposal to sell the Life Insurance Corporation.
• Sitharaman devoted the opening portion of her speech to agriculture, reiterating a commitment to doubling farmer incomes by 2022, with a 16-point plan to do so (although the task is large).
• The Budget anticipates a nominal GDP growth rate of 10% for the upcoming year, up from 7.5% this year. That means a “real” GDP growth rate of around 6%, with inflation targeted at 4%.

Obviously, there was much more hidden away that we will unpack over the coming weeks, including a collection of Budget specific links for you later this week.

The immediate reaction from the markets was bad, with both of India’s key indices immediately tanking, while the commentariat broadly said that this was an uninspiring Budget.

Two other documents were also tabled in Parliament:

• The Economic Survey, which talked a big game (and quoted Wikipedia), but couldn’t avoid acknowledging the Great Indian Slowdown.
• The 15th Finance Commission’s interim report, which recommended mostly the same tax share to states for this year. We’ll have more on this, including discussions of how it addresses the population question, in the coming week.

Focus will likely shift immediately away from the Budget, not just because these documents have rarely offered any big bangs but also because Delhi elections are now less than a week away.

In case there’s something interesting you would like us to look at more closely, or if you read an interesting piece on the Budget, send it in to rohan@scroll.in

Recommendation Corner

Narayani Basu, whose book, VP Menon: The Unsung Architect of Modern India, about an important figure of India’s freedom movement and what came after, recently came out (read an excerpt here) writes in:

I’d highly recommend 

• Tripurdaman Singh’s newly released Sixteen Stormy Days. The book is a concise retelling of the history of our Constitution’s First Amendment, which is crucial to understanding the history and politics behind the law which would define constitutional amendment in India.
• Siddharth Singh’s The Great Smog of India demystifies the issues that are driving the appalling air crisis in India: Where we are, how we got here, and what we can do about it. It is an immensely readable tract and deserves a wider audience, especially as he makes the repercussions of ignorance alarmingly clear. 
• In terms of podcasts, everyone should listen to Amit Varma’s The Seen & Unseen, which covers Indian economics, history and politics. His most critical podcast so far has been with Srinath Raghavan, where Raghavan deconstructs the history of the NRC. 

Have recommendations for an article, book, podcast or academic paper that deals with Indian politics or policy? Send it to rohan@scroll.in. Previous recommendations from the Political Fix are collected here.

Catch-up

Protest Watch: Two armed men spouting Hindu nationalist ideology attempted to attack Citizenship Amendment Act protesters. The two incidents in Delhi came days after a Union Minister had led a chant calling on “traitors” to be “shot.”

Election Watch: The gap between the Aam Aadmi Party and the BJP, which we covered in last week’s newsletter, is narrowing – but not by much, according to latest numbers. The BJP is relying on a blatantly communal approach, with Uttar Pradesh Chief Minister Adityanath being the latest to take up the mantle.

Is Rahul Gandhi going to be re-launched yet again? So says this report in the Economic Times, less than a year after he stepped down as president of the Congress. (Back in 2014, I wrote about Rahul Gandhi being “launched”, in 2011, 2012, 2013…)

Nitish Kumar kicked out two of his party’s leaders who were questioning his stance on secularism. The Bihar chief minister and Janata Dal (United) head expelled political strategist Prashant Kishor and former bureaucrat Pawan Varma, moves that re-assert the hold the BJP has on Kumar.

The Ministry of External Affairs launched a major internal reorganisation. With new “verticals” headed by “political directors”, the rejig is an attempt to modernise the often change-resistant ministry.

A minister said the government would go “beyond rules” to punish a comedian who criticised a pro-BJP news anchor. Kunal Kamra, the comic, has now sent a legal notice to IndiGo, the airline that banned him from flying for six months after he questioned Republic’s Arnab Goswami on board. Read Shoaib Daniyal’s piece on how the government pulled out all the stops on Goswami’s behalf.

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Last week on Scroll.in

• Sruthisagar Yamunan reports from Amravati in Andhra Pradesh, where farmers protesting a decision to build three state capitals allege brutal police action.
• In rural Bengal, an intense fear of the proposed National Register of Citizens is sparking violence and a deep mistrust of any outsiders, reports Ipsita Chkarvarty.
• The Assam government linked the anti-Citizenship Act protests to Maoists – to justify sweeping arrests of land rights activists, finds Arunabh Saikia.
• Vijayta Lalwani set out to ask Delhi voters what they thought of the BJP’s communal election campaign. They only wanted to tell her about unemployment and the economy instead.

These reports were brought to you in part by the Scroll Ground Reporting Fund. To contribute and help our reporters go further and dig deeper, click here.

• On the streets, India’s youth are completing the unfinished business of the freedom struggle, writes Harsh Mander.
• Samar Halarnkar writes about the BJP’s perilous descent from Hindu appeasement to incitement.
• With CAA protests and questions over sponsors, the Jaipur Literature Festival has to make choices, writes Parvati Sharma.

Poll Toon

Reports and Op-Eds

India needs to recognise all of its urban areas – and administer them accordingly. Kadambari Shah, Vaidehi Tandel and Harshita Agrawal of the IDFC Institute write in Mint about how India is not acknowledging its urban spaces, causing governance and policy-making to suffer.

“The Indian state flails because it is simultaneously too large and too small.” A paper by Shruti Rajagopalan and Alex Tabarrok from last year asserts that the Indian state mimics ideas from developed countries without adapting them to local conditions or needs.

A new kind of ethnopolitical majoritarianism is behind the BJP’s rise. Read this thread by Rahul Verma on a new paper by him and Pradeep Chhibber, that examines how the new BJP coalition is different from the old supporters of Hindu Nationalism.

Can (delicious) Pulicat seafood play a role in taking on the Adani group’s port expansion? Sreedevi Jayarajan in the Newsminute reports on a fightback by fisherwomen against an effort to turn a wetland into industrial area.

What Coimbatore’s shutting factories tell us about the Great Indian Slowdown. Nidheesh MK reports in Mint on a phenomenon that is repeating itself around the country.

“Sub-sector level insight form the smallest chunk of policy advice reaching officials.” Banuchandar Nagarajan writes in Swarajya about what kind of policy thinking India needs to focus better on generating and implementing.

It’s not India centric, but you need to read this report on what it is like to be detained in Iran. The Economist’s Middle East correspondent offers a fascinating picture of the country and what detention can feel like.

Can’t make this up

Honking is incessant in India, enough that I’ve considered buying myself an air-horn in the past, just so I can blare it back at drivers annoyed that a pedestrian might come in their way. So any effort at bringing it down – or at least getting people to talk about how awful it is, gets a thumbs up in my book.

Here, Mumbai’s Traffic Police have a novel way to drive a conversation about honking, if not actually bring it down.

Have better ideas for how to reduce honking? Spotted a great piece that we missed? Need to send a hilarious GIF to someone? Write to rohan@scroll.in