In an election year, India has an apolitical budget

If you ask any sane Indian in 2022 what the most complex issue facing the nation is, they would say: unemployed youth. In political debates on television channels, “unemployment” becomes a highly political issue.

Shortly before the presentation of this year’s union budget, jobseekers applying for jobs with India’s railways clashed with local police in Patna and Allahabad.

According to the Department of Railways, the recruitment process that began in 2019 for 140,000 positions at Indian Railways has attracted more than 20 million applicants.

Those who agitated had applied for non-technical jobs that would earn them a monthly salary of Rs 20,000-35,000. When some students felt that exams taken in 2020 were allegedly rigged, they began damaging railroad assets. On January 25, the police used excessive force against them, injuring many young applicants. The event became national news.

During this event, Finance Minister Nirmala Sitharaman presented her fourth budget to the Indian Parliament. She noticed that the vision of Atmanirbhar Bharat (self-sufficient India) has the potential to create 6 million new jobs.

Sitharaman also spoke about jobs below GatiShakti Program identified with Prime Minister Narendra Modi’s development vision, which aims to accelerate the development of highways, ports, railways, airports, logistics, waterways and infrastructure. She said these combined efforts would “result in tremendous employment and entrepreneurial opportunities for all, especially youth.”

dealing with the labor market

The finance minister spoke about additional credit facilities for micro and small businesses and digital systems that support sustainable development and further expand job opportunities.

However, that wasn’t enough to satisfy critics, who felt the focus should only be on job creation and not just some long-term plans – for the next 25 years – under the label of “Amrit Kal.”

Shortly after the budget speech, former finance minister P. Chidambaram said: “In the last two years, millions of jobs have been lost, some perhaps forever.”

He added: “The unemployment rate has reached 8.2 percent for urban workers and 5.8 percent for rural workers. After the budget was presented… we wondered what the budget has done to address these serious challenges. The blunt answer is nothing.”

Actually it is not the case.

In India, opinions on how to deal with the labor market differ greatly.

The Modi government believes that public investment in road, port and airport construction will create jobs through massive labor input.

And in turn, the high level of connectivity and better access to markets will “attract” private investment, which would help build factories, boost production and create more jobs.

Sitharaman has significantly increased capital spending by 35.4 percent from 5.54 lakh crore in the current year to 7.50 lakh crore in 2022-23. It’s a historic rise.

tensioning the belt

This government’s economic belief in making investments and building durable infrastructure and not handing out populist projects that bring immediate relief was targeted by Chidambaram when he said that in the budget “there is not a word for those who leave their jobs have lost; not a word about job creation. The budget speech was by far the most capitalist speech ever read by a finance minister.”

It seems PM Modi’s critics want job creation right now.

Mahesh Vyas, CEO of the Center for Monitoring Indian Economy, says: “The increase in investment will only have a limited impact on the labor market. Even if the state actually spends what it has promised, it doesn’t make much of a difference because demand is low and private investment is also low. Without generating demand, you cannot attract private investment. Without private investment, there are no permanent jobs that offer lifelong security.”

These two fundamentally different approaches are behind the policy on the labor situation. Even Rashtriya Swayamsevak Sangh’s (RSS) team, Swadeshi Jagran Manch, has complained that the budget is “good for growth but has no boost for jobs”.

Such is the interest of people in the issue of employment that after the budget, Sitharaman asked the question in Hindi: “What happened to the 20 million jobs that were promised?”

The clip of this question and Sitharaman’s answer, when posted by a media house, received 4 million views on Facebook in less than 12 hours.

Vyas, who monitors the employment situation weekly, argues: “Work on the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) project is not work, likewise workers building roads or airports will lose their jobs when the project is completed . People look forward to real jobs. This is only possible if private investment builds new factories. But if the capacity utilization of existing factories is 60%, how is private investment supposed to “flow in”? In this budget, the demand side will not be repaired.”

Professor Shamika Ravi, a former member of the Prime Minister’s Economic Advisory Council, says: “It’s a political risk. The government has decided to tighten its belt. While we choose the long-term economic growth strategy, the trade-off is clearly in terms of immediate consumption and demand support.”

According to Ravi, global data suggests the investments are having a multiplier effect. Revenue expenditure on MGNREGA-type projects has a much smaller impact on economic activity.

Many observers are surprised that despite the budget coming during elections in five states including Uttar Pradesh where the job market is critical, Modi has chosen to keep the budget non-political.

Shramika Ravi says: “In fact, youth from UP have suffered a lot more than the average Indian during the pandemic. Indian youth income fell by about 20% but UP youth lost 30% of their income since lockdown.”

Ila Patnaik, economist and co-author of the book The Rise of the BJP: The Making of the World’s Largest Political Party, thinks: “The budget effectively begins on April 1st. By then, the five general elections will be over. The strategy seems to be this: Invest in infrastructure now and save some ideas for budgets closer to 2024.”

Most BJP leaders I spoke to note that Modi never champions the populist budget. “Its budgets are pragmatic and inside the box,” confided a senior BJP leader.

Prof Ravi adds: “The 2022-23 budget is a calculated risk. They rely on systems such as PMAwas Yojana and ‘Har-Ghar-Nal‘ to get them votes.”

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