India’s Next Budget: Subsidies for Big Business and Debt for Citizens


SHARMINI PERIES, TRNN PRODUCER: Welcome to The Real News Network. I’m Sharmini Peries, coming to you from Baltimore.

The newly inaugurated Indian prime minister, Narendra Modi of the BJP, unveiled the government’s budget this week. Much of his campaign for office boasted replicating the Gujarat model of development, where he was the chief minister. His new finance minister, Arun Jaitley, presented a budget promising to lift economic growth from the current 4.3 percent to 7-8 percent by promoting manufacturing, infrastructure, and overhauling the populist subsidies that was helping the poor. But it was difficult to decipher this in his speech to the parliament, which paid much lip service to the poor. Let’s have a look.


ARUN JAITLEY, INDIAN MINISTER OF FINANCE: While higher growth is a sine qua non, we cannot be oblivious of the fact that there is a large population of this country which is below the poverty line. It is the poor who suffer the most. We have to ensure that our antipoverty programs are well-targeted. The growing aspirations of the people will be reflected in the development strategy followed by the government, led by the prime minister, Sri Narendra Modi, and a mandate of Sab ka Saath, Sab ka Vikas. [snip]

My government is committed to the principle of minimum government, maximum governance. To achieve this goal, time has come to revive the allocated and operational efficiencies of government expenditure to achieve the maximum output. [snip] I also propose to overhaul the subsidy regime, including food and petroleum subsidies, and make it more targeted, and provide full protection to the marginalized, poor, and SC/STs. A new urea policy would be formulated.


PERIES: Joining us today to discuss the new budget is Jayati Ghosh. Jayati is a professor of economics and chairperson at the Centre for Economic Studies and Planning at Jawaharlal Nehru in New Delhi. She writes for Frontline India and The Guardian and several other economic blogs. Among her publications, she has coauthored with Professor C. P. Chandrasekhar Crisis as Conquest: Learning from East Asia and The Market that Failed: A Decade of Neoliberal Economic Reforms in India.

Thanks for joining us, Jayati.


PERIES: So, Jayati, the last few years, the ordinary Indians have really suffered. What do you think of the new economic plans ahead?

GHOSH: Well, I think the problem is that there really aren’t any economic plans ahead, and the trouble is that this current government, having come in on a promise of change, had promised basically that the good times are coming and they’re going to bring them in, has delivered essentially the same economic model that has already failed the Indian people for the last decade.

PERIES: Jayati, you took a closer look at the Gujarat model of development. What did you find?

GHOSH: Well, you know, this is one of the great sort of con games of the media at the present, which is this feeling that the Gujarat model somehow delivered growth with greater inclusiveness and, you know, with better conditions for people and so on. In fact, the Gujarat model is a very old model. It’s a model of crony capitalism that is based on natural resource extraction, large subsidies to the private corporate sector, and low wages, suppressing the incomes of not just the poor but most of the middle classes, not delivering on basic essential services like health, sanitation, water, infrastructure, housing, and somehow basically pointing to just GDP growth as the only measure of success.

PERIES: So inequality is perhaps the biggest issue in India. With 1.2 billion people to serve, the government has an enormous task. What are some of the more progressive ideas that can be adopted instead?

GHOSH: Well, the problem in India really has been and the reason why growth has not delivered for most of the people is because we adopted this model also at the national level: the idea that, first of all, GDP growth is all that matters; secondly, that only the private corporate sector can deliver that GDP growth; and thirdly, to enable them to deliver that growth and to encourage them to do that, you have to incentivize them by providing them all kinds of subsidies, fiscal and otherwise, by giving them a lot of leeway in terms of acquisition of land, by suppressing workers’ rights. And, unfortunately, what we find is that even when you get the growth, it doesn’t deliver in terms of better conditions for most of the people. So we still have at least half and probably more of our population not just with undernutrition, but really at the very margin of subsistence in a way that is quite inexcusable for a 21st century economy.

PERIES: Jayati, unpack for us, you know, the whole subsidies scheme. And it sounds like from listening to this budget today that, you know, the government’s looking at more subsidies, really, for big business and more debt, and the citizens are going to have to pay for that debt. And you were writing about this in your paper. Elaborate for us what all this is.

GHOSH: Well, this is the problem. You see, the Gujarat model that is so hyped up at the moment is really one where the taxpayers’ money has been used to subsidize these large corporates. And partly it is taxpayers’ money, and partly it is just the Gujarat state taking on a lot of debt. Now, sooner or later the people will have to be paying for that, because these are unsustainable at that level.

At the national level, what is being tried out is something similar, which is that you incentivize the large private corporate sector, both the domestic and the multinational, and in the hope that they will come and invest, that that investment will deliver growth, and from that growth you will get taxes in the future. But, in fact, we know that that simply doesn’t really work. And what is worse is that that generates much more inequality because you do not provide the basic needs that the people need. So part of the problem is that we are going to get an accentuation of the inequality.

The two most important problems at the moment in India are the fact that we have a very high price rise, inflation, especially in essential commodities like food, and we don’t have enough productive employment generation. Now, a budget or the economic policy really has to address both of those. This budget has done none of that. But the economic policy in general is all focused on how to incentivize the large private corporate sector somehow to come and invest. It is not about curbing inflation. It’s not about generating employment.

PERIES: So what does this mean for the ordinary Indian? This is a government that’s now in power with a huge majority. They can essentially do whatever they like. There’s very little opposition to this. What will this mean?

GHOSH: Well, you know, the very fact that they have such a huge majority is—again, it’s a reflection of the eccentricities of the Indian political system. It’s the first past the post, because this is a government that got 31 percent of the vote, which means that one-fifth of the electorate actually voted for it. And yet, because of the fact that the opposition’s vote was divided, it managed to slip through and get an absolute majority. Now, this actually is quite dangerous because it means there are very few checks and balances. And the BJP agenda, whether it is in terms of the social divisiveness, or its attempt to change education policy and give it a much more communal sort of angle, or it is its attempt to actually go all-out in terms of favoring the corporate sector vis-à-vis citizens—all of these really are kind of unrestricted. I’m hoping that popular society and civil society in general is not going to allow this to happen, but certainly we are living through very uncertain times where the chances that they can push through a lot more of this agenda are quite high.

Now, the problem for the BJP is that this still doesn’t solve the basic economic issues that confront the country. We have a large current account deficit, we have slow GDP growth, we have terrible employment generation, and we have not met the basic needs of 60 or 70 percent of our population. How are you going to deliver those? You must have a strategy. So far there is no strategy evident. This government seems to believe that if it just offers a lot of sops to the private sector, they will come and deliver all of these things. We know that’s not true. We know that they don’t come and invest in roads and rural connectivity and sanitation and housing for the poor. We know that they don’t invest in education and health. So none of these is really going to be met unless there is active public involvement in investment.

PERIES: And are there attempts on the left to rethink strategy and put up a serious opposition?

GHOSH: I’m hoping so, because as you know, the left, not just the organized left, but even those who are center-left, have been very badly affected in this recent election. Size has been cut dramatically. But on the other hand, I do believe that there is so much left politics in this country that it cannot be—it cannot suppressed for long. I think we will see the emergence and the revival of left movements once again. I think that many of the policies that are being sought to be implemented are going to be resisted. It will take a couple of years, but I do believe that we are going to get a much more radical reemergence because the material situation of most of the people of the country is such that you really cannot get away with a completely right-wing agenda for very long.

PERIES: Very well. Thank you so much, Jayati, for joining us today.

PERIES: Thank you.

GHOSH: And thank you for joining us on The Real News Network.