Budget 2017 and Deepening of the Demonetization Disaster

This year the annual budget was tabled on the first and not the customary last day of February. This was also the first time when the railway budget was stripped of its separate existence and appended to the general budget almost as a passing footnote. Most importantly this was a budget presented right on the eve of a crucial round of Assembly elections. In ordinary times, the budget would perhaps have been deferred till the elections were over, but these are extraordinary times with the trappings of an undeclared Emergency, and the budget was considered an essential electoral ingredient for the ruling party. Even the news of the unfortunate demise of Kerala IUML MP E Ahmed was sought to be stopped from becoming public till the budget was presented and when the news eventually became known the traditional obituary courtesy was also sacrificed at the altar of political expediency.

For the common people of India, the real point of interest about this year’s budget however lay in the fact that it came in the wake of Modi’s massive demonetization blow. The Prime Minister had himself promised that the fifty days of pain were but a gateway to a new era of gain. Having withstood the pain, the people were looking forward to the budget for the promised gain. The Sanghi rumour brigade which had earlier been agog with the presumed mythical powers of the new 2000 rupee note, worked overtime with promises of redistribution of wealth from the corrupt rich to the honest and hardworking poor. Even the Economic Survey of the government preceding the budget talked about a ‘windfall’ gain from demonetization in terms of extinguished notes and mooted the idea of a universal basic income! Viewed in the context of the demonetization-hit people and the economy, the budget has turned out to be not only a damp squib but a brutal betrayal.

There is one most glaring and inescapable fact about demonetization that the budget has sought to evade. The scrapping of the two big currency notes has not managed to extinguish any currency, almost the entire amount of scrapped currency came back to the banks ruling out any possibility of a windfall gain for the government exchequer. Whether the forcible harnessing of 86% of the currency in the banking system will yield any additional tax revenue is anybody’s guess, the government just does not have the machinery to investigate every deposit and tax claims made by the government will anyway be subject to protracted litigation and dispute resolution processes.

By all accounts, demonetization has squeezed demand in the economy by destroying jobs, lowering income, weakening purchasing power and making transactions difficult across the board by creating a massive cash crunch. Projections for economic growth have been revised downward by all agencies and even the government’s own economic survey has had to acknowledge it. Against this backdrop of depressed demand, the budget should have been used as a corrective instrument to increase public expenditure and boost demand. But in the name of ‘fiscal prudence’, the government has adopted precisely the opposite course to further curtail expenditure.

The only increase being highlighted by the government is a marginal increase in MNREGA outlay, which is however less than the revised estimate of expenditure on this count incurred last year. MNREGA is supposed to be a demand-driven employment guarantee scheme and the real subversion of the scheme is taking place through a progressive reduction in the wage component vis-a-vis administrative costs and a growing role for contractors and machines which the Act was supposed to avoid altogether.

In his demonetization discourse, Modi has often talked about the growing inequality in India and pointed to the ridiculously low level of income declaration and tax payment among the rich. What he of course does not disclose is that it is the super rich which have been the backbone of his support whether in Gujarat or now at the Centre. His organic intimacy with the likes of Gautam Adani and Mukesh Ambani has been common knowledge and the rise of Adani’s economic muscle has happened in tandem with the rise of Modi’s political fortunes. The share of the top 1 per cent in the country’s total wealth has grown significantly during the two years of Modi rule at the Centre – from 49% in 2014 to 53% in 2015 and 58% in 2016. Fifty-odd top business houses claim as much wealth as the bottom 70% of Indian people.

Has the budget done anything to challenge this growing inequality? The answer is a loud NO, if anything the budget has only reinforced the process where mass impoverishment is mirrored by continuing concentration of wealth in fewer hands. Demonetization itself disproportionately affected the people, while the poor were hit hard, the rich had every protective cushion at their command. And now the budget has only handed out tax cuts to the limited number of direct tax payers while the common people are left high and dry with the growing burden of indirect taxes.

The main thrust of the budget has been a stronger push for further digitalization of the Indian economy. While the public sector has already been effectively downsized and dismantled through disinvestment, public-private partnership and outright privatisation, the government is now bent upon dismantling the remnants of a welfare framework by propping up the so-called JAM platform (a convergence of Jan-dhan accounts, Aadhar cards and mobile internet). The Universal Basic Income mooted in the Economic Survey is only a step in this direction.

Instead of ensuring universal welfare measures including a minimum income for all, the UBI scheme being talked about would only replace the existing welfare measures with a paltry amount of direct cash transfer to a targeted group. We have already seen the travesty of such targeting which results in large-scale exclusion of the needy and the deserving from basic welfare measures, and if the measures will now be replaced by a token amount of cash transfer, it can only sound the death-knell of any notion of mass welfare.

The restructuring of the state that began with the onset of the policies of liberalisation, privatisation and globalisation a quarter century ago has thus reached a new and alarming level. The so-called economic retreat of the state which has already resulted in unprecedented accumulation and concentration of wealth through corporate exemptions and write-offs is now being stretched to a complete abandonment of the welfare agenda and abdication of the responsibilities of the state in this regard. The republic is being systematically redefined with steady devaluation and subversion of the institutions and processes of democratic accountability and citizens are being reduced to the status of subjects at the mercy of the king. And now in the name of digitalization the state is arming itself with extraordinary powers of intrusive surveillance.

Both demonetization and Budget 2017 should be seen in this unfolding political context. While the government arms itself with a digitally powered state-corporate convergence, we must confront it with a counter-convergence of wide-ranging struggle for people’s rights, with a rainbow of popular resistance to the state-corporate tango. 