The Union Budget 2019 presented in the Parliament on Friday, the First February has been widely acclaimed as an exercise which has deftly provided benefits and concessions to the farmers, the unorganised labour-force and the middle-class especially at the lower band of the category without imposing any new taxes & levies or raising the rates on the existing. Yet the governmental financial statements for the ensuing fiscal year 2019-20 do not envisage a significant rise in the fiscal-deficit up by a paltry 0.1% of the GDP from the current year’s 3.3%. Thereby it has virtually silenced the vast number of sceptics who had been asserting that no worthwhile welfare measure in India is conceivable since the Central Government does not have the means to fund them. By assuring significant payouts to about 12 crore farmers and reducing the burden on 3 crore taxpayers, without demanding more from the other citizens, the NDA Government under Prime Minister Narendra Modi, has given credence to the belief that good economics can also be good politics.
A growing criticism of the incumbent NDA government at the Centre has been that while it may have succeeded, during the last four and half years, in putting back on rails the faltering economy of the country, this was achieved without much job-creation. Such fault-finding tends to become more stinging when the powers-that-be are reminded that they had promised, in the 2014 run up to the general elections that when voted to power, their Government would create 2 crore new jobs annually or 10 crore in its five-year term to mid-2019. Whether it has succeeded or not in fulfilling this landmark assurance remains unanswered since official data about the state of employment or unemployment in the country has not been put in the public domain for the last couple of years and the evidence cited to support or criticise is segmental and anecdotal.
A comprehensive official document like the just presented Budget for 2019-20 has also cited only such sectoral data on achievements of the Government in this important arena of economic and social consequences for the year just ending or for all the previous 4 years of the current ruling dispensation. No doubt a budget need not spell out the full state of the economy but this time there was no Economic Survey released by the Government prior to it, a practice usually observed, and which indicates the position on all the economic issues. There were expectations that the Finance Minister’s Speech would cover such aspects as well. This he no doubt did but only in parts of his otherwise comprehensive statement.
Amongst these were his job-relating references to the “high growth and formalisation of the economy has led to the expansion of employment opportunities as shown in EPFO membership which has increased by nearly 2 crore in two years reflecting formalisation of the economy and job creations “ ; “we have harnessed Yuva Shakti through self-employment schemes including MUDRA, Start-Up India and Stand -Up India the concept of employment is changing all over the world, now the employment generation is not confined merely to Government service or factories. With job seekers becoming job creators, India has become the world’s second largest start-up hub”. Moving on, the FM also mentioned that the country’s installed solar generation capacity had grown very rapidly and that it is “ now creating lakhs of new age jobs” and the 3 lakh odd Common Service Centres to create digital infrastructure in the villages were reportedly employing 12 lakh jobs.
While these may be the direct touch -points to employment in the Budget, what is important to recognise that for certain major sectors of the economy it has provided several incentives and concessions and these have huge ramifications for job-creation. The real estate industry is amongst these. Amongst these are granting exemption of levy of income tax on notional rent on a second self -occupied home and increasing of the benefit of rollover of capital gains under section 54 of the Income Tax Act from investing in one residential house to two for capital gains up to Rs 2 crore though only once in the lifetime of a taxpayer. On a similar mode, to incentivise the real estate sector, the period of exemption from levy of tax on notional rent on unsold inventories, has been increased from one to two years, from the end of the year in which the project is completed. Yet another measure augmenting the personal taxes to give a boost to affordable housing, the benefits under Section 80-1BA of the IT Act have been extended for one more year viz to the housing projects approved under the new Real Estate Regulation Act (RERA) till 31 st March 2020. The significance of these tax-related measures for giving impetus to the construction industry must be seen in the light of it having huge backward and forward linkages—an estimate puts it at 248 other economic industries. Needless to remind that Indian construction is hugely labour intensive, though still largely comprised of unorganised labour and it directly provides several million jobs, skilled as well unskilled. Growing it through tax and interest subvention measures, as were initiated in the last year’s Budget, can be hugely employment-creating.
In addition to the real estate construction industry, the Budget has increased the outlays for the infrastructure sector across all spectrums. This has been done over and above the high budgetary provisions and the actual physical achievements in previous years. Amongst the largest ‘beneficiaries’ of the governmental focus is the Indian Railways (I.R.)for which is envisaged a life high capital programme of almost Rs. 1.59 lakh crores with Rs 64,587 cr, viz. 21% more than last year coming from the central government. For its capital asset building programme and its huge operating expenditure, the Government also announced the new hiring of 2.8 lakh regular employees in IR. (government jobs like in the railways are highly preferred).
Another rapidly expanding segment of infra -industry and in fact with the most employment -generating potential, is road building. An impressive attainment of 27 km of new roads per day has been reached by the Government and there are intentions of reaching 40 km/day. Realising that the private sector capital and managerial prowess can be once again brought back under its PPP scheme and NHAI is in a position to borrow funds from the open market, the budgetary support has been only marginally hiked up. A part of the needed resources would flow to NHAI from the separate Central Road and Infrastructure Fund, This authority also plans to raise about Rs 15,000 cr by monetising its built roads. Greater focus on inland river transportation as well coastal shipping through higher investments and regulatory easing is expected to open up an altogether new area of employment. FM rightly also drew attention to the large job-openings in the growing civil aviation industry which has seen a double-digit CAGR in the last decade and overseas airlines, aircraft manufacturers and other operators are being attracted into this industry in India. Opening up of Tier 2,3 and now even a few 4 cities under the three UDAAN schemes would see thousands of jobs in airport construction and operations as well in the skies. Ongoing emphasis on transport -infrastructure development thru’ a judicious mix of public and private resources bodes well for the country. As is well known, the rapid interwar period economic and social development in the United States of America was preceded by the building up of a huge network of rail and road across the country.
Conscious that the overwhelming need for job -creation is in the rural areas where almost 65 % of the population continues to reside, the Government- focus in the Budget has rightly moved to agriculture and allied animal husbandry besides fishery-development. Much higher budgetary support through interest subsidy schemes on loans against Kisan credit cards and crop insurance schemes without reducing the existing subsidies on farm- inputs like fertilisers, seeds and insecticides has been promised. The outlay on centrally funded irrigation schemes also stands approved while giving assurances of continuing to raise the MSP for the 22 crops covered last year. All these measures are to be supplemented this year onwards by an annual grant of Rs 6,000, to be paid in 3 equal instalments, to all farmers with holdings below 5 acres of land under the newly launched Pradhan Mantri Kissan Samaan Yojana (PMKSY). This is a most welcome measure which can insulate them against serious natural calamities and crop failures and enable them to buy the inputs for the ensuing crop-season . Many congenital critics might find the amount paltry but given the fact that 12 crore farmers are eligible for this cash dole, it is a good beginning . Once a plan to source additional funding has been firmed up and similar schemes run by states like Telangana and Odisha are aligned with it, the payout to the farmers can be expected to increase.
Building up rural prosperity through direct cash benefit schemes like the new PMKSY is imperative to build the aggregate demand in the country and get the Investment -GDP ratio on its path of rising trend. Bad monsoons and a growing farm production dipping the open market price of produce in normal years had adversely impacted the plight of the farmer in different parts of the country. To alleviate that and help in their march to modernity had called for such proactive steps as initiated in the Budget. With higher disposable incomes, the demand for manufactures and services would grow sharply and reduce the incidence of stagnant capacity -utilisation in the provider- industries. That, in turn, would call for new capacity creation and new investments. As is the global experience, including in India, higher capital-formation results in greater economic growth rates and job creation, both in the organised and informal sector. Going forward we can expect to see that happen soon.
Job creation in the unorganised sector is the key to a happy and contented citizenry. The Budget has rightly seized the opportunity to introduce a pension scheme for 85 odd % of the country’s workforce. Called the Pradhan Mantri Shram -yogi Maandhaan Yojana ,an assured monthly pension scheme giving Rs 3,000 pm on reaching 60 years of age for all enrolling in the scheme on paying a nominal premium This is more in the nature of a social security measure which will apply to unorganised workers earning less than Rs 15,000 a month. This should help to give emotional and physical security to them and their families as well as reduce the incidence of old age poverty besides making for greater aggregate demand in the economy, a sin qua non for employment creation.
-Dr Ajay Dua, Economist & Former Secretary, Union Ministry of Commerce & Industry