'NOT A BUDGET INDIA SHOULD BE HAPPY ABOUT'

It has become commonplace for business leaders in India to sing the praises of any economic policies of the Narendra Modi government—even when they are clearly wrong and misguided (like the demonetisation of November 2016).

- JAYATI GHOSH

This is especially true of the Union Budget speeches.

This time round, there was some change, with less enthusiasm—largely because of new/higher taxes on capital gains and on trading derivatives. The stock market plunged immediately, recovered somewhat and thereafter has been volatile, and the rupee also depreciated against major currencies. Business leaders have also been more muted in their responses, and we are hearing fewer of the breathless cries of “gamechanger” or “masterstroke” that were earlier standard.

If the less enthusiastic corporate response is only because of the relatively minor new taxes, then it is a foolish reaction that does not recognise the massive and growing inequality in the country and the need to do much more to address it. But maybe there is more to it. It could be that the business leaders are also finally beginning to realise that the current economic strategy of the Modi government is not fit for purpose, worsening many of the deep imbalances and problems within the economy, and therefore is ultimately not even in their own self-interest.

Mind the Gap

By now it is fairly clear to most people that the Indian economy is much more fragile than the Modi government would like everyone to believe. The K-shaped recovery meant that the aggregate gross domestic product (GDP) increased mainly because of exploding incomes at the top of the distribution, creating extraordinary increases for the rich as well as for those sections of the upper middle classes that benefitted from the limited trickle-down. Meanwhile, the material lives of the mass of people actually deteriorated in important ways.