Misdirected Criticism

Domain experts, economists and columnists have been berating Finance Minister Nirmala Sitharaman for a budget purportedly still caught up in ‘election’ mode. Particularly under fire is the increase in taxes for the super rich, and a ‘protectionism’ leading to rise in import tariffs. The desire for ‘big bang’ reforms in emulation of other countries that are quite dissimilar in size and complexity makes them unhappy with the direction taken by the budget. It needs to be remembered that there are basic expenditures that have to be met and cannot be avoided. The funds for these have to be arranged from the resources available. The rich, in particular, should not be averse to paying for them as they too will benefit even in the short term. The emphasis that the government has paid on building of basic infrastructure from the early days of its first term will first and foremost improve conditions for industry and other sectors of the economy. There are a number of factors that are also being overlooked. India’s economy is in a transformative state. Demonetisation revealed more than anything else how much of it was outside the formal sector and the tax net. This not only was exploitative of, both, the consumer and the working class, it was also parasitic in nature in that it utilised infrastructure paid for by the taxpayer. That ultimately a substantial number of people got rich does not justify the inefficiencies involved. Bad practices have to be reformed and brought in line with the system, which will definitely exact a price but the process is unavoidable. In fact, the sooner the better! The critics are also overlooking the contribution of the service sector to the economy, which has led to a rise in wages. While bemoaning the drop in the sale of manufactured products such as cars and tractors, they are failing to notice a burgeoning demand likely in other areas because of money in the hands of a different section of society. Also, there is a limit to how much the government can provide incentives for business; entrepreneurs too need to do their bit by identifying the new opportunities and planning ahead of the loop. When criticising the government for being caught up in past attitudes, they also forget that so much of the ‘growth’ in the past took place because of crony capitalism. Industrialists are conditioned to being given advantages at the cost of other sections of society to make profits, when they should be leveraging technology and innovation, instead. Is India incapable of inventiveness? Part of the problem is the failure among academics to understand India specific economics, mostly because they spend much of their lives studying and working abroad. Change is necessary, but not necessarily that prescribed by those who have learned everything second-hand.