Budget must strike a balance between growth and equity

The Global Risks Report 2022 (GRR), released by the World Economic Forum (WEF) a week before its virtual meet last week, has flagged social cohesion erosion, livelihood crises and mental health deterioration as more immediate concerns. In the medium to long term, climate change, bio-diversity loss and extreme weather are the areas of major worry.

The GRR is based on the views of over 12,000 country-level leaders who identified critical short-term risks to their 124 countries, gathered through the WEF’s Executive Opinion Survey. Only 16% of respondents feel positive and optimistic about the outlook for the world, and just 11% believe the global recovery will accelerate. Most respondents instead expect the next three years to be characterised by consistent volatility and multiple surprises or fractured trajectories that will separate relative winners and losers

Many in India may find this report a bit too pessimistic given that our economy has rebounded sharply in this financial year, more people in the hinterland have access to broadband internet and over 1.60 billion vaccine doses have been administered in the country. However, the uneven growth across various sectors and unequal distribution of benefits of economic growth cannot be ignored. In its latest briefing ‘Inequity Kills’, Oxfam India points out that while 84 percent of households in the country suffered a decline in their income in a year marked by tremendous loss of life and livelihoods, the number of Indian billionaires grew from 102 to 142 and says that the stark wealth inequality in India is a result of an economic system rigged in favour of the super-rich over the poor and marginalised.

There is no dearth of people who dismiss such reports as motivated. Yet, even they need to take note of the Niti Aayog’s Multidimensional Poverty Index report released September 2021, which shows that 18.6% of the people in Gujarat are poor compared to Kerala (0.7%), Delhi (4.8%), Sikkim (3.8%), Tamil Nadu (4.9%), Punjab (5.6%), Himachal Pradesh (7.6%), Mizoram (9.8%), Haryana (12.3%), Andhra Pradesh (12.3%), Jammu and Kashmir (12.6%), Karnataka (13.2%), Maharashtra (14.9%), Tripura (16.7%), Manipur (17.9%) and Uttarakhand (17.7%). Recently, Gujarat overtook Maharashtra to emerge as the no. 1 State in manufacturing. Yet, the famed business-friendly Gujarat model has not helped it reduce its poverty levels as much as the States that have prioritised education and healthcare.

It is true that unless the economy grows at a brisk pace, it will be difficult to create enough job opportunities.  Also, unless the tax collections improve, the policy options to increase the outlays on social sector will be constrained. So, the central theme of the upcoming budget should be to strike a fine balance between growth and equity.

The GRR highlights fracture in inter-state relations, debt crisis in large economies, widespread youth disillusionment, failure of technology governance and digital inequality as top five key risks associated with India. It also says that restoring trust and fostering cooperation within and between countries will be crucial to addressing the challenges and preventing the world from drifting further apart.

So, the Central government must avoid surcharges that need not be shared with the States. It must increase the kind of revenues that put more money in the hands of State governments who are mainly responsible for education, healthcare, rural infrastructure and agriculture growth that help the people.

email:tncrajagopalan@gmail.com