This is the first part of a 3-part analysis on the Union Budget 2018-19, in which I propose to go into the basic strategy behind the budget, and look at its pluses and the minuses pointwise – in two parts;. The third part will be the background, history and Macro-Economic Framework analysis, which has been my standard approach in studying the budget. And my first impression of this budget was listening to it / reading about it, was “interesting”, but requires deeper analysis. My second impression, after talking to various people, reading extensive opinions, and going through the entire set of budget documents: “Excellent Budget

 

THE UPPER AND MIDDLE CLASSES

A lot of my friends are disappointed in the budget; all of them are highly educated, and are from the top 10% of the population – exceptions prove the rule, so please excuse me. To them, I can only state: India is about the rest of the 90% as much as it is about us, privileged top of the heap. We, the people with jobs, earnings and income, education, are actually the exception rather than the norm in our country where millions still are below the poverty line. And cities – I have said it before, and I will say it again: the cities of India deserve nothing, absolutely nothing. We have too many places that deserve a higher priority. We are one nation; and we, the urban elite, need to sacrifice just a bit for our brethren; we are, after all, one large family, so to speak.

 

THE RIGHT FOCUS AREAS

I have said it before on my blog, in a plain melancholy lament: that we need a much higher focus on Rural Areas, Agriculture, Health, and Education. In light of that, I have to admit that the direction being set by this budget is most promising, with its rural focus, purported emphasis on MSMEs and Health-Education. One can state that the Government’s hand has been forced by the overall Macro-Economic Situation, and the coming elections; but that does nothing to negate the fact of the direction being taken by this budget and its overall strategy and choices. That said, the direction is one thing, implementation another; given the ground realities.

 

CAVEAT

This Government’s implementation record does not inspire confidence, for starters. Next, this also requires working along with the states; and most importantly, it requires the strategy being backed up with numbers in terms of funds allocated. Lastly, it requires the tactical execution on-ground and proper follow-up, without which all strategies remain just that: strategies. With this standard disclaimer, let me now proceed into the specifics of what I liked and didn’t like.

 

AGRICUTURE AND RURAL ECONOMY

The fun starts with Section II on Page 3 of the section on Agriculture and the Rural Economy; the first 10 points are just self-praise, to be ignored for the large part. The key points in this segment are 13-15 dealing with MSPs, and 16-22 covering GrAMs, e-NAM, Cluster Farming, Farmer Producer Organisations, and Village Producer Organisations etc. The decision to increase the MSP to 1.5 times cost, as well as the extension of the same to all crops – {this later point missed by most people} – is a welcome one. Earlier, this was not the case till a few years ago and was a long-standing demand. The caveat in this is the cost is not specified – there are many levels of cost in Farming, ranging from A2, A2+FL and C2 as per the CACP {Commission For Agricultural Costs and Prices}. I myself have used the C2-R Cost parameter for calculating profit from farming in my series on this topic. Similarly exciting are the rest of the provisions identified; the budget talks of roads, farming clusters around crops etc – this is a promising idea, on the lines of the Industrial Clusters. We will, of course, have to wait for more details on this specific point.

 

The Finance Minister calls this decision historic; I wholeheartedly concur. Both the decisions – there are 2 – are indeed historic. One I have given above; the second is the decision to extend the MSP to all crops. In fact, the entire section on Agriculture has much reason for us to rejoice: it is absolutely unique; the skepticism emanating from ground realities notwithstanding, which I shall go into later. The concept of clusters, FPOs are welcome; as is the stress on Grams’ and the upgrading of rural haats to Grams’, and linking to e-NAMs. But the point missed by 100% of all articles in the Media that I have read is: Exempted from regulations of APMC {Page-5, Point 17} which promises to be a game-changer and which clearly mentions facility to sell directly to consumers and bulk purchasers. This is a step in the right direction, as 50% of our population is directly dependent on Agriculture. This will facilitate the chance of higher price realization of farmers for their produce through higher MSPs and through direct to consumer sales at Grams’ and the e-NAM.

 

None of this is easy to do; in later articles this month, I shall detail the hindrances that some of these steps might face. This does not mean we criticize – let us, at the very least, appreciate the newness of the thought and the ideation behind these points. There are many other small points – like the one on lessee cultivators’ access to credit {Point 33 Page 7}, for example. There are also some issues – at least one that I could spot, name irrigation not getting the support it needs; but overall, this budget has proven to be near-magical for the Agricultural Sector and holds promise. Even more so, as it repeatedly acknowledges the difficulties that lie in the path, as in the notation on MSPs in Point 14, specifying the need for setting up of a mechanism to ensure farmers get the MSP. Let us all hope that all of these above are realized – the benefit to the millions in the farming sector will be realized if so.

 

HEALTH, EDUCATION AND SOCIAL PROTECTION

The next Section is on Health, Education and Social Protection.This section makes a series of observations and plans, but once you get into the specifics, a few flashpoints emerge, on the second or third reading. For example, points 50  talks of Tribal Schools and the Eklavya Model Residential School with a plan for a school covering every block with more than 50% SC/ST Population. Point 21 talks about a detailed plan for revitalizing higher education. Both of these plans are till 2022, the higher education point mentions a clear plan involving the setting up of a Higher Education Financing Agency which will have a corpus of 1,00,000 Cr. In both these, the specifics are missing, and one is left guessing as to the implementation. Let us wait and see.

 

Much has been made of Health in this budget; the numbers don’t add up. As we shall see in the last part of this series that there is a defined set of points in the budget speech that looks into this aspect, and gives the details of a National Health Policy and the National Health Protection Scheme. Yet, sadly, as we shall see in the numbers part of this mini-series, this has not been backed by numbers in terms of fund allocation. Point 59 lamely mentions adequate funds will be provided for this. For the rest of this section, there is a series of plans – some of them, like the Clean Ganga or the Crop Insurance Scheme, not having performed. It remains to be seen how the implementation will be. In summation, in Health and Education, this budget continues to disappoint just like the majority of other budgets in our history.

 

SUMMARY – FOR NOW

The next part I will take up in this analysis is the segment on MSMEs, points 71 – 82, Infrastructure and Financial Development, Points 83-114 and Building Institutions & Improving Public Service Delivery, Points 115-137. These will be taken up in the next part of this article, to be published tomorrow, where we shall also look into the specific allocations and funds to various schemes and heads as detailed in the Budget Documents, Budget at a Glance -> Expenditure and Receipts details, which provide further fascinating insights into this exercise. For now, let me just say that this is an excellent budget, despite its weaknesses, one which I have identified above. Rural India is 70% of India approximately. I further acknowledge the real world difficulties that exist, which will be enumerated later. But as a strategy, this belated shift to the right areas is welcome – now let us see if we can sustain this interest!