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Indian budget

Updated February 05, 2018


THE first point to note in the latest budget announced by the government of Prime Minister Narendra Modi is the gap between reality and rhetoric.

For a government that claims it is focused on outcomes, the spending on social sectors speaks volumes. Despite the tall claims made by the finance minister during his speech on the various programmes run by his government to enhance outcomes in health and education — two areas in dire need of urgent state action not just in India but in all countries of South Asia including Pakistan — the actual allocations made in these sectors remains woefully inadequate.

Some have calculated that the combined allocation for health and water and sanitation has actually come down in the budget, even as the total allocation for health rose by a nominal 2.8pc of GDP. Likewise for education, the total allocation has increased by 4pc, which is less than the CPI inflation rate, showing that rhetoric is more important to the government than actual outcomes in this crucial area. This is particularly noteworthy because it runs against the government’s own stated goals. In the health sector, for example, the goal is to bring resource allocation to 2.5pc of GDP by 2025 (it stands at 1.4pc today).

The second point to note is that the home-grown programme of shock therapy that was the demonetisation drive has produced limited results. The cash-to-GDP ratio was supposed to come down suddenly, but instead it stabilised by June 2017. After that, according to the Economic Survey, the reduction in cash-to-GDP was 1.8pc, which is appreciable but still cannot be considered a satisfactory outcome given the massive shock to the economy that it entailed.

The government appears serious in its efforts to promote documentation, by introducing the GST as soon as the shock of demonetisation receded. But the finance minister’s claim during the budget speech, that large-scale formalisation is happening in the Indian economy following the demonetisation drive, is largely hype. Now the government is trying to present itself as a pro-farmer, rural economy amongst other things, but the challenge in India is to separate hype from reality. Here in Pakistan, thankfully, the task is more limited and focused.

How far does the budget help us understand the intentions of Prime Minister Modi towards Pakistan? The answer is in the numbers, which thus far are telling a weak tale. 

Published in Dawn, February 5th, 2018