Budget 2024: How to ensure a ‘Viksit Bharat’ @2047

As Budget 2024 expectations of a roadmap for “Viksit Bharat @2047” mounts, one crucial element is missing: Honest appraisal or review of the big bold initiatives taken in the recent years. This will provide insights into their performances and enable course corrections to yield the desired outcomes.

If the budget were to focus on this aspect, and less on new announcements, it may then become easier to make India a “developed nation” by 2047 – an idea that encompasses “economic growth, social progress, environmental sustainability and good governance, among others”, as the Prime Minister said in December 2023 to explain “Viksit Bharat @2047”.

Here is a brief account of how these big bold initiatives have fared.

Big Bang reforms and their outcomes

In October 2020, Arvind Panagariya, currently chairman of the 16^th Finance Commission and former vice chairman of the NITI Aayog, wrote an article describing the Prime Minister an economic “reformist” at par with former Prime Ministers Narasimha Rao and Atal Bihari Vajpayee but high above Manmohan Singh. He listed seven reforms of the Prime Minister to argue his case: (i) “two truly mega reforms” – GST in 2017 and corporate tax cut in 2019 – and (ii) five significant ones – IBC of 2018, four new labour codes of 2019 and 2020, three new farm laws of 2020, liberalisation of FDI regime and quality and corruption-free new medical regulator, National Medical Commission (NMC) which replaced Medical Council of India (MCI) brought in 2020.

Has any of these yielded the desired outcomes? Here are a few points to ponder about each one:

1. The GST’s focus has completely shifted to mobilising higher tax revenue – instead of eliminating the cascading effects of multiple state and central indirect taxes on businesses. Net result: GST collection overshadows (28-30% of gross tax) putting higher burden on the masses – thereby turning the GST’s original objective on its head. This has happened also because gross tax collection has failed to keep pace with GDP growth in a decade – rising by mere 0.1 percentage points in the past five fiscals vis-à-vis the previous five fiscals (averaging 10.9% during FY20-FY24 and 10.8% during FY15-FY19).

2. Corporate tax cut of 2019 (FY20) led to direct loss of ₹2.28 lakh crore in FY21 and FY22 (no further details are available). Corporate tax share fell from 32% of gross tax in FY19 (the preceding fiscal) to 26.8% six years later in FY24 (RE). This cut didn’t lead to the promised investments and job creations either – as the RBI’s annual report of 2019-20 said this was used for “debt servicing, build-up of cash balances and other current assets rather than restarting the capex cycle”. It contributed to the historic rise in corporate profits since the pandemic fiscal of FY21 (private GFCF remains below the average of previous decade).  

3. The IBC’s (a) recovery of debts and (b) revival of bankrupt firms is low and falling (IBBI). Total recovery fell to 16.9% by FY24 (cumulative) – down from 23.2% in FY20. It was 25% under the previous BIFR regime. Total liquidation or junk sale reached a new high of 81% of all firms under the IBC by FY24 (cumulative). But the RBI’s “compromise settlement” policy (June 8, 2023) for fraudsters and willful defaulters (bigger corporate entities) will hurt even more. Even the exceptions made in 2021 for helping smaller businesses, MSMEs, has failed – as the Pre-packaged Insolvency Resolution Process (PIRP) led to recovery of just 2.16% of personal guarantees (₹102.78 crore out of ₹4767.45 crore of admitted claims) by FY24 (cumulative). In PIRP, recovery is initiated by debtors, not creditors (as in the IBC).

4. Four new labour codes, passed in 2019 and 2020, are not operational yet because of strong oppositions, including from the workers union (BMS) of the ruling establishment who say these codes weaken workers’ rights and protections and empower employers (by further liberalising hire-and-fire and short-term contracts, plus higher working hours).

5. Three new farm laws of 2020 were withdrawn after more than a year-long protests by farmers who said these laws did the opposite of what they promised – weakened farmers’ rights and protections by seeking to dismantle state government-run markets (APMCs), kept state governments and courts of law out of dispute resolution process and proposed private markets without MSP etc. – leaving farmers vulnerable to exploitation.

6. Liberalisation of FDI hasn’t led to higher growth in FDI inflows (which remains below the previous decade); suspected round-tripping (recirculation of black money) continues to be extremely high (over 80% of FDI inflows and outflows through tax havens). Besides, growth in FDI inflows turned negative in recent years – at $44.42 billion in FY24, equity FDI was lowest in five fiscals since FY19 ($44.37 billion) after it (growth) turned negative in FY22 (-)1%), FY23 (-22%) and FY24 (-3%). Growth in total FDI inflows too was negative in FY23 (-16%) and FY24 (-1%).

7. The new health regulator, National Medical Commission (NMC), hasn’t improved quality of medical education or eliminated corruption. Private medical colleges have been given a free hand to fix fees for 50% seats (earlier 25%), thereby increasing the cost of education. Shortage of doctors (30% in CGHS) and faculty, as also ghost faculty (in private medical colleges/hospitals) continue to be high and so is medical infrastructure. Yet, the NMC decided, in March 2024, to do away with physical inspection and go complete digital for ease of private business. It is the NMC which paved the way for the NEET exam, now under clouds for postponements and exam paper leakages (a plea for re-exam is before the Supreme Court) – something that didn’t happen earlier. Government district hospitals are being handed over to private medical colleges and appointment of ad hoc doctors is back (reinstated in 2022). 

There is one more big bang reform Panagariya had supported as then vice chairman of the NITI Aayog – asserting that it would have a “very positive impact” in the long run by increasing capital investment through financial institutions (not intermediaries) and efficiency of (digitized) transactions. But in 2020, when he listed the seven reforms mentioned earlier, he omitted it altogether: Demonetisation.

It isn’t just about reforms. Here is an interesting episode that points to a chronic and intensifying job crisis.

‘Puncture repair shop’ for employment

On July 15, 2024, a BJP MLA from Guna in Madhya Pradesh hit the headlines for telling students: “We are opening a PM College of Excellence today. I appeal to everyone to keep one sentence in mind – that nothing is going to be achieved with these college degrees. Instead, open a motorcycle puncture repair shop to at least earn a livelihood.”

Ironically, he did it while inaugurating a “Pradhan Mantri Colleges of Excellence” in his constituency, Guna.

Before dismissing it as a cynical comment, consider two developments that preceded it:

(i) The BJP legislator said it two days after the Prime Minister said, quoting the RBI’s KLEMS data on July 13, 2024, that “approximately 8 crore (80 million) jobs have been created in the last 3-4 years, thereby silencing the critics”.

(ii) It is also a day after Home Minister Amit Shah symbolically inaugurated 55 such colleges in Indore (one in each district of Madhya Pradesh) on July 15, 2024. Shah said the “Pradhan Mantri Colleges of Excellence” was “not merely renaming of these colleges” but an investment “to upgrade” these colleges under the Prime Minister’s “New Education Policy”.

On the jobs front, consider the following facts:

· The RBI’s (KLEMS) job data the Prime Minister quoted was released on July 8, 2024. It claimed 46.7 million new jobs were created in one fiscal of FY24 (P) and 170.1 million new jobs in seven fiscals between FY18 and FY24 – using a statistical construction (total factor productivity or TFC) in absence of real data.

· Weeks earlier, on June 14, 2024, the ASUSE data of 2022-23 showed India had lost 1.65 million jobs in non-farm informal sector between 2015-16 and 2022-23.

The two above don’t necessarily contradict each other. The government came to power in 2014 promising millions of new jobs. In 2015, it launched ‘Make in India’ promising 100 million jobs in 10 years. In 2018, the EPFO data (formal sector jobs which was not in public domain until then) was cited for the first time to claim 7 million jobs were added in 2017-18 (the relevance would become clear soon) – citing a private study by two experts (SBI’s Soumya Kanti Ghosh and IIM-Bangalore’s Pulak Ghosh). The study itself didn’t say so clearly but a newspaper article did.

The EPFO data suffers from duplication errors but is now routinely used to make claims about job creation.

· In 2019, the analysis of PLFS of 2017-18 data by the Azim Premji University showed India had lost 9 million jobs between 2011-12 and 2017-18 “for the first time in India’s history”. Subsequently, the PLI (incentives for industry) was launched. The 2022 budget said, the PLI aimed “to create 60 lakh new jobs” in five years but four years later, how many jobs have been created is not known. Meanwhile, the DLI (another incentive for industry) for semiconductor was announced the US’s Micron is being funded with $2 billion (70% of project cost) – which is expected to generate 5,000 jobs – that is, each job would cost India $40,000 or ₹3.2 crore. The PLIs and DLI are redundant if the RBI’s claim of 170.1 million jobs in the past seven years is true.

· In 2022, the Prime Minister promised to fill 1 million jobs lying vacant in central government ministries and departments in one-and-half years. But how many vacancies have been filled is not known.

· 2024 saw thousands of youths lining up going to war-hit Israel for jobs – under a government-to-government (G2G) initiative of India and Israel, despite the Centre and its agencies refusing to assure their safety. In 2024, it also came to notice that scores (actual number is not known) have been “duped” into fighting the Russian war in Ukraine. These are in addition to thousands of Indians risking their life and life’s saving to “illegally” enter the US, the UK, Canada and other countries for jobs and better life. Meanwhile, engineers and postgraduates have joined the Delhi Zoo as keepers. In 2018, vacancies for 62 peons (messengers) in Uttar Pradesh attracted over 93,000 candidates – 3,700 of them PhD holders, 50,000 graduates and 28,000 PGs.