India

Viewpoint: Why Narendra Modi's budget looks strangely familiar

India farmer Image copyright AP
Image caption India's 120 million farmers need income security

So what is the verdict on India's Narendra Modi-led BJP government's third annual budget today?

Clearly, it is aimed at boosting farm growth and appeals to the rural poor - the government has proposed spending $12.7bn (£9.15bn) on rural development and promised higher incomes to farmers.

"We need to think beyond food security and give back to our farmers a sense of income security," said Finance Minister Arun Jaitley.

"The government will, therefore, reorient its interventions in the farm and non-farm sectors to double the income of the farmers by 2022."

This isn't surprising given that farm growth has been very low - 0.5% per year, over the last two years - due to bad monsoons. It is expected to be 1.2% this year, much lower than India's overall growth of 7.6%.

There are plans to allow farmers better access to the market, introduce judicious use of fertilisers increasing crop yields in unirrigated farms, and offer incentives for the production of pulses.

That is the good part.

Before Mr Modi's government came to power in 2014, the Congress-led government with Manmohan Singh as prime minster, was in power for a decade.

Landmark schemes

Mr Singh's government wrote off loans to indebted farmers and introduced the landmark federal jobs guarantee scheme - the government's most ambitious employment generation scheme for poor people - and the Food Security Bill which made food a legal right.

In July 2014, Mr Modi had criticised the food security scheme: "The government in Delhi thinks that just by bringing in the Food Security Bill there will be food on your plate".

In February 2015, he also mocked the jobs guarantee scheme, saying he would ensure that it is never discontinued.

"It is proof of your failings. After so many years of being in power, all you were able to deliver is for a poor man to dig ditches a few days a month," he said.

Image copyright AP
Image caption The jobs guarantee scheme is the government's most ambitious employment generation scheme for poor people

The jobs guarantee scheme aims to provide at least 100 days of guaranteed employment in a financial year to every household whose adults are willing to do unskilled manual work.

The trouble is that it has essentially became another scheme where money is simply given away without any substantial assets being created.

But Mr Modi's government has done a u-turn here and allocated $5.62bn (£4bn) to the scheme for 2016-2017 - the highest ever.

That is why Mr Modi is now looking more and more similar to Manmohan Singh.

Minimum government?

He is a better marketer though than Mr Singh and his regime is not seen to be as corrupt as the previous government.

Mr Modi had promised "minimum government and maximum governance". But with allocations to the jobs guarantee scheme at their highest ever level, this promise has gone out of the window, at least for now.

The food security scheme provides cheap rice and wheat to the poor.

But the government itself admits that nearly 54% of the wheat, 48% of the sugar and 15% of rice, meant to be distributed through through government-licensed "fair price shops", is stolen and sold on the open market.

Nevertheless, no effort has been made to plug this leakage which costs the country a lot of money.

Further, what India needs is the creation of a huge number of jobs - two years ago, Mr Modi had promised 10 million jobs.

Image copyright AFP
Image caption The government is betting on the creation of road and railway infrastructure to boost jobs

Only some 30 millions Indians work in the organised sector. And nearly 58% of its population continues to be dependent on agriculture which generates around 16-18% of India's GDP.

What this tells us is that there is huge over-employment in an unproductive sector and that jobs need to be created in other sectors so that people can move away from agriculture. And that is clearly not happening.

The government is betting on the creation of road and railway infrastructure for the creation of semi-skilled and unskilled jobs required for moving people away from agriculture.

Will this be enough to move people away from farms by creating a substantial number of jobs?

There are no easy answers.

Vivek Kaul is the author of the Easy Money trilogy. He tweets @kaul_vivek

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