How Jaitley went from neo-middle class to farmers, jobs to welfare

The BJP had swept the 2014 general elections on the promise of radical change, which was widely expected to include an approach to running the economy that was starkly different from the outgoing UPA’s.

Written by Udit Misra | Updated: March 1, 2016 5:44 pm
arun jaitley, jaitley, budget, budget 2016, farmers, union budget 2016, nda, upa, bjp Finance Minister Arun Jaitley

It was widely believed that Finance Minister Arun Jaitley’s third Budget would be a make-or-break one. Since the beginning of economic liberalisation in the early 1990s, the Narendra Modi-led NDA government was the first to have got a clear mandate — one that could implement the policies it truly believed in without being distracted or weakened by the compulsions of coalitions.

The BJP had swept the 2014 general elections on the promise of radical change, which was widely expected to include an approach to running the economy that was starkly different from the outgoing UPA’s. However, with three out of the possible six Budgets done, it is becoming clearer that instead of charting a substantially different course from the UPA, the NDA is, in fact, retracing the UPA’s welfare-led agenda.

Jaitley’s first Budget, in July 2014, came soon after the new government was sworn in. His third, presented on Monday, was different from the second — presented in February 2015 — in at least three clear ways.

Tone: Fewer pats

The latest speech was in stark contrast to the Finance Minister’s self-congratulatory tone in last year’s budget. Here’s how he introduced the Budget in 2015:

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“In short, Madam Speaker, we have turned around the economy dramatically, restoring macro-economic stability and creating the conditions for sustainable poverty elimination, job creation and durable double-digit economic growth. Domestic and international investors are seeing us with renewed interest and hope. While being mindful of the challenges, Madam Speaker, this gives us reason to feel optimistic. With all the humility at my command, I submit that this opportunity has arisen because we have created it. The people of India had voted resoundingly for quick change, faster growth and highest levels of transparency. They wanted the scam, scandal and corruption Raj to end. They wanted a Government in which they can trust. We have lived up to that trust… Growth in 2015-16 is expected to be between 8 to 8.5%. Aiming for a double-digit rate seems feasible very soon.”

The high spirits were understandable. The almost precipitous, and totally unexpected, fall in oil prices over the course of FY15 had in one stroke buoyed various parameters of the Indian economy. Inflation rates, both wholesale and retail, were reduced to half and the trade and current account deficits had fallen due to reduction in the value of oil imports. The reduced oil prices also led to a significant consumption boost as people found larger disposable incomes in their hands. This also opened up a lot of fiscal space almost magically. The general euphoria found expression in the stock markets, which rose by almost 20-25 per cent and touched all time highs just before the Budget in 2015.

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However, the story suffered an equally sharp turnaround as back-to-back droughts depressed agricultural productivity and, as a result, rural incomes and consumption. The fall in oil prices was just an early indicator of a global demand slump, which meant that Indian exports fell right through the year. The lack of corporate profitability within India, as well as rising NPAs in the banking sector have threatened to derail the growth momentum.

Not surprisingly, the stock markets were back to May 2014 levels by the time the FM stood up to deliver his speech. The mood was far from gung-ho and the FM resorted to blame the UPA for leaving behind an economy with deep-rooted ailments. “The International Monetary Fund has hailed India as a ‘bright spot’ amidst a slowing global economy… We accomplished this despite very unfavourable conditions and despite the fact that we inherited an economy of low growth, high inflation and zero investor confidence in Government’s capability to govern… We had to work in an unsupportive global environment, adverse weather conditions and an obstructive political atmosphere.”

Less faith in ‘Team India’

The second key shift is in the notion of co-operative federalism, and signals a change in the Modi government’s likely future engagement with state governments. Last year’s Budget speech stressed on the phrase “Team India” — that is states and the Centre together — when outlining the ambitious agenda for India in terms of housing, 24×7 electricity, clean water, toilets and roads for all by 2022. “…We have also embraced the States as equal partners in the process of economic growth.”

But the phrase was conspicuous by its absence in this year’s Budget. It is hard to say whether the political alienation of the BJP at the national level, with the Congress and other regional players forming coalitions against it, has anything to do with this. However, it was significant to note that the FM introduced two new cesses — Krishi Kalyan Cess and Infrastructure Cess — as well as doubled the Clean Environment Cess to fund his initiatives. The key significant in choosing a cess over a tax is that collections from a cess, unlike from a tax, do not have to be shared with the states.

Neo-middle class left out

Lastly, but perhaps most importantly, the FM’s speech also showed how the NDA’s focus has shifted not just in terms of whom it targetted but also the policies it used to do the targeting. The July 2014 speech talked about, for the first time, the neo-middle class. This was presumably the class of people who were now struggling to come out of poverty, but who were aspirational, who did not think not being poor was good enough. The Budget presented the NDA as the political force that would work towards fulfilling the requirements of this aspirational class, which had never found articulation in the policies of any previous government.

“The people of India have decisively voted for a change. The verdict represents the exasperation of the people with the status-quo. India unhesitatingly desires to grow. Those living below the poverty line are anxious to free themselves from the curse of poverty. Those who have got an opportunity to emerge from the difficult challenges have become aspirational. They now want to be a part of the neo middle class. Their next generation has the hunger to use the opportunity that society provides for them.”

However, the focus had broadened in the 2015 Budget, which followed immediately after a surprise and comprehensive drubbing in the Delhi elections. “I think I can genuinely stake, for our Government, a claim of intellectual honesty. We have been consistent in what we have said, and what we are doing. We are committed, Madam Speaker, to achieving what we have been voted to power for: change, growth, jobs and genuine, effective upliftment of the poor and the under-privileged.”

In this year’s speech, words like ‘neo-middle class’, ‘change’, and ‘jobs’ did not figure. “I have outlined the agenda of our Government to ‘Transform India’ for the benefit of the farmers, the poor and the vulnerable,” the FM said.

A second, related, part of this change was in the importance that different policies received over the years. For instance, Agriculture, which was introduced in para 75 in the 2014 speech, made its entry before any other topic — in para 14 — of this year’s Budget. But it wasn’t just the positioning, even the tone and tenor was completely different.

MGNREGA, a flagship UPA scheme, received a solitary mention in last year’s speech. “In spite of the consequential reduced fiscal space for the Centre, the Government has decided to continue supporting important national priorities such as agriculture, education, health, MGNREGA, and rural infrastructure including roads. Programmes targeted for the poor and the under-privileged, will be continued by us.”

This was around the time that the Prime Minister had stated that he would keep MGNREGA running as a “monument to the Congress’s failures”.

In contrast, this year the FM actively informed the House about the details of MGNREGA. “At least 5 lakh farm ponds and dug wells in rain-fed areas, and 10 lakh compost pits for production of organic manure will be taken up by making productive use of the allocations under MGNREGA.” He followed up by allocating Rs 38,500 crore to the scheme and stating that if this money was eventually spent, it would be highest ever expenditure under MGNREGA.

In this regard, it is quite revealing how the nine priorities of the FM stack up. The top three are “Agriculture and Farmers’ Welfare”, “Rural Sector”, “Social Sector including Healthcare”. And the bottom three are “Governance and Ease of Doing Business”, “Fiscal Discipline” and “Tax Reforms”.

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  1. C
    crickin
    Mar 1, 2016 at 2:44 pm
    Time to pack tax heavy govt and send them to govt. Total disaster by any measure. People of india foole d by a f a ker. Can't bjp select someone else as their leader and run the country. Ex; yaswant sinha or arun shourie etc
    Reply
  2. A
    arc
    Mar 1, 2016 at 1:36 pm
    Mauni baba modi is increasingly looking like manmohan Singh. Upa budget plagiarised wscale by modi/jaitley duo wholly bereft of ideas. In 2014 bjp/modi misled w country, now they are fooling the ried cl selectively. And if they think farmers can be divided by fomenting communal riots on the one hand and claiming upa schemes as their own on the other to get votes, god/durga/vishnu etc above all Ram Tulla of ayodhya help them.
    Reply
  3. T
    truthsayer
    Mar 1, 2016 at 3:31 pm
    Good Job Modi Ji and Arun Jaitley...Congratulations!!!!!
    Reply
  4. G
    greenspace
    Mar 1, 2016 at 3:57 pm
    Silent economic growth is being generated despite huge "politics-based obstructions". Kudos to the Modi-Jaitley team. Way to go. Jai Jawan, Jai Kisaan, Jai Vigyaan.
    Reply
  5. P
    pkpk
    Mar 1, 2016 at 2:17 pm
    All politicians are the same in India. They feel populist measures will win them elections. BJP did not lose Delhi and Bihar because of economic policies. There were other reasons and those reasons will remain for future elections too. Urban youth, especially the educated lot, let's say heavy majority of urban people voted for BJP for this great Gujarat CM, thinking he will bring radical changes in business and economy? After 2 years, this great former Gujarat CM and current PM is scared of talking about urban lower and lower middle cl. He only talks about villages, farmers and rural poor. He has picked Indira hi's pet slogan GARIBI HATAO. Well Mr. PM this country was not destined to be super power anyway and we will see to it in next general elections that you go back to Gujarat!
    Reply
  6. R
    Raghu
    Mar 1, 2016 at 9:01 pm
    Superb, after a long time this govt presented a budget focused on agriculture, rural development and low end job creation. Now the big task is to explain comman person of this country in a simple understandable manner.
    Reply
  7. S
    Smart
    Mar 1, 2016 at 3:29 pm
    Media, we can understand your frustration. You never thought that Modi govt could come up with such a smart budget that tries to address many core issues and get acknowledged. You have been entrusted with the job of only talking negatively about this budget and thereby establishing your political allegiance to Congress (and PAAP), which a media house should avoid at all cost.
    Reply
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