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The Indian Budget 2018: The Good, the Bad and the Ugly

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It won’t be a hyperbole to call the preparation of the Indian Budget the world’s toughest tightrope balancing act. In a country of 1.3 billion Indians, a gazillion sects and a country where the dialect changes every 20 kilometers, the Indian Budget is a unique unifying factor. Sitting in a small office, a select group of individuals charts the course of the Indian economy, soon to be the world’s fifth largest. A multitude of Intelligence and Security agencies are tasked to ensure that the Budget remains a secret before it is presented and the markets wait with a bated breath to gauge the winds that will blow with the onset of the Indian Budget. These winds can help the markets move at roaring speeds or topple the very applecart of their existence.

The Narendra Modi led National Democratic Alliance presented it final full Budget on Feb. 1, 2018. With elections due in eight states and the coming of the all-India General Elections, this budget was a final attempt by Modi to deliver on his promise of “Ache Din” (Good Days). But did he? Large sections of India is now restless. Farmers are suffering from a lack of good prices and mounting agricultural loans. Youth is suffering for the want of jobs. Businesses are under stress due to a new tax regime that they are yet to understand and comprehend. The Indian Middle class, BJP’s strongest supporters and among the minuscule few who actually pay a direct tax is reeling under high taxes. This was the last grab attempt to placate these sections and retain power for another five years. But what did it deliver? Sure enough, the budget contains a slew of measures for the agriculture and rural sectors, a new health insurance scheme has been announced for the poor and a small relief in income tax for the salaried class and senior citizens.

Let’s take a closer look at the Indian budget and break out the good, the bad and the ugly.

The Good

To placate the Farmers who have been protesting across the length and the breadth of the country, this budget promises to raise the minimum price offered to farmers for their crops. Stating that the focus of the government in the coming fiscal would be agriculture and rural India, the finance minister has announced that all Kharif crops will be paid a minimum support price (MSP) that is 50 percent more than the cost of production. It has also identified a need to invest heavily in the agricultural markets across India. It has also earmarked more money for rural areas, including that for irrigation projects and for aquaculture projects. The Kisan credit card will be extended to fisheries and animal husbandry farmers while Rs 2,000 crore provided for the development of agriculture market. The central budget directs state governments to purchase extra solar power generated by farmers using solar-powered pumps who have become cheaper after this budget.  The credit to agriculture would be raised to Rs 11 lakh crore in the coming fiscal from Rs 10 lakh crore. The budget provides for a 100 percent tax deduction for farm producer firms with Rs 100 crore turnover. There is a special impetus to promote “Operation Green”. In total, there has been a record allocation of Rs. 14.34 lakh crores for the agriculture sector.

In a bid to provide universal healthcare, the Budget announces a ‘National Health Protection scheme’ to provide health cover of up to Rs 5 lakh to each of the 10 crore poor families per year. Under the Aayushman Bharat programme, a total of 1.5 lakh centers will be set up to provide health facilities closer to the homes for which an outlay of Rs 1,200 crore to be allocated. A total of Rs 600 crore have been allocated for tuberculosis patients who will be provided with a grant at the rate Rs 500 per month during the course of their treatment. There are plans to set up 24 new medical colleges and hospitals by upgrading district level ones.  The budget lists that the PM JivanBimaYojana has benefited 5.22 crore families with more in the pipeline. And here we were really thinking that Obama-care was game changing?  Apart from all these announcements, the Budget contains a slew of announcements for the senior citizens of the nation like Incentives for Senior citizens like exemptions in income of Rs 10,000 from Banks FD and post offices and Rs 50,000 per annum exemption for medical insurance under Sec 80D.

With the finance minister promising a record infrastructure spending on roads and railways, construction and engineering firms, as well as train wagon-producers, could benefit. There is a plan to expand airport handling capacity by five times to handle 1 billion trips a year. It is estimated that Rs 50 lakh crore is needed for infrastructure building and the government will allocate Rs 7,140 crore for the textiles sector in next year.  National highways exceeding 9,000-km will be completed in 2018-19 and allocation of over Rs 1.48 lakh crore has been planned for railways. Regional air connectivity scheme shall connect 56 unserved airports and 31 unserved helipads for better connected and a closer India.

For the rural economy, the budget contains a slew of announcements. 8 crore poor women will get new LPG connections. Under the Prime Minister’s SaubhagyaYojana, it is estimated that 4 crore poor people will get power connection. A total spending estimate for this scheme is Rs 16,000 crore. Under the Swach Bharat Mission, the Government plans to construct 2 crore toilets in the next fiscal year. The government has set an ambitious target to provide a house for all by 2022. A total of 1 crore houses are to be built under Pradhan MantriAwasYojana in the rural areas. The Government will expand the PM Jan DhanYojana. All 16 crore accounts will be included under micro insurance and pension schemes for better returns and social outreach.

To formalize the economy, the Employees Provident Fund Act will be amended to reduce the contribution of women to 8 percent from 12 percent for first three years, with no change in employer’s contribution. The government will contribute 12 per cent of wages of new employees in EPF for all sectors for the next 3 years. The target for loan disbursement under Mudra scheme has been set at Rs 3 lakh crore for next fiscal.

The Bad

The government has extended Corporate Tax of 25% to companies with turnover up to Rs 250 cr in the financial year 2016-17. For a party always under a perception of being a corporate front, this will not go down well in the eyes of the media and the party will have a wild time dousing the flames. Also, 100% tax deduction is allowed to co-operative societies, the majority of whom have cooked books and shady members.

The long-term capital gains will now be taxed at a rate of 10% if exceeding Rs 1 lakh. The Education cess increased to 4% from 3% to collect additional Rs 11,000 crore but in turn, has put an additional burden on the tax paying middle class. The government’s decision to impose long-term capital gains tax on equity investments may dent investor sentiment for financial services companies, life insurers and providers of mutual fund products.

The Indian Defense Budget, while increased contains no clear roadmap to make India a manufacturing powerhouse and increase our armament production. Barely spending money is not good and while the outlays are increasing continuously, it is no secret that our outlay is minuscule in comparison to our GDP. Furthermore, most of the current budget is spent on personnel and maintenance costs, leaving very little for capital acquisition.  There is a serious need to quantify the defense budget and earmark separate funds for the capital acquisition.

The Ugly

Apart from a few scraps here and there like Rs 40,000 standard deduction, Mr. Modi has completely ignored the honest Indian Direct Taxpayer. A resentment is now brewing in this segment which has honestly been paying to tax and has time and again got pinched by every budget. In a nation where barely, 1.9% of the populations pays any tax, the honest Indian Taxpayer has become a minority of sorts, exploited and with no one to raise a voice for it. Hopefully, Modi can mollify this before the General Elections or all hell will break loose.

Conclusion

To conclude, the Indian Budget is prudent, not populist. The Indian Government deserves full credit for bringing out such a balanced budget so close to the General Elections. The fiscal prudence of this government has been lauded by international agencies and the recent budget is in line with the attempt of the government’s fiscal consolidation path. The Finance minister has set the fiscal deficit for 2019/19 (April-March) at 3.3 percent of the gross domestic product, slightly higher than expectations for 3.2 percent. Altogether, the budget has focused more “investments” than one-time hangouts. However, the devil lies in the details. There is a pertinent need for faster and smoother implementation.  The infrastructure projects will generate more jobs and ultimately, more usable projects on completion. R&D will generate more output for this nation. The government is ably trying to focus on both the “Ease of Doing Business” and the “Ease of Living”. Elections are upon the present dispensation and the Government must now focus on the implementation. If the 2014 election was about Ache Din, 2019 (or 2018) will be about the poor. The buildup initiated with the Jan Dhan and theUjwala Yojana, continued with the PAHAL andSaubhagyaYojana and now the AyushmanYojana and this Budget. The ingredients are all there. It now up to the chef Modi to cook his broth. But will his broth taste like sweet victory or a bitter-sweet defeat. This only time, and the Indian Rural Voter will tell.

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South Asia

Questioning the Novelty of India’s New Normal

Haris Bilal Malik

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In recent years Indian notions of Pre-emption and so-called surgical strikes have been referred to as the ‘new normal’ by many in India. These have contributed to further affecting the security, stability and strategic equilibrium in the South Asian region. This is evident in how the top-brass within the Indian military has repeatedly asserted that India reserves the right to punish Pakistan with such notions of preemptive strikes across the Line of Control (LoC) under its limited war doctrines, which themselves belie a desire to wage a low-intensity conflict across the border. At the doctrinal level, India has been planning for this for quite some time as evident from its 2004 Cold Start Doctrine (CSD)as well as its more recently released doctrines such as the 2017 Joint Doctrine of the Indian Armed Forces (JDIAF) and the 2018 Land Warfare Doctrine (LWD). These doctrines are all based upon proactive strategies and indirect threats of preemptive strikes against Pakistan. Based on the current patterns of Indian aggression these ideas hold immense significance when considering the latest rounds of tensions over the disputed territory of Kashmir as witnessed in the short-lived military engagement between the two countries in February 2019

Inspired by such notions and in typical fashion, the new Army Chief of India Gen. Manoj Mukund Naravane wasted little time in blaming Pakistan for sponsoring terrorism in India. The same day he took charge of his new appointment he claimed that India reserves the right to respond in the same way it had previously done through its so-called ‘surgical strikes.’ Moreover, he openly asserted to physically taking control of Azad Jammu and Kashmir (AJK) if his government ordered him to do so.

However, such assertions from the Indian political and military leadership are simply repetitions of the same statements that have been made by Prime Minister Modi, Mr. Rajnath Singh, and former Army Chief Gen. (R) Bipin Rawat in the recent past. Representing the same aggressive and jingoistic posturing, there is not much novelty in these statements. In fact, even in this so-called ‘new normal’ which these leaders have repeatedly described over the last few years, there is nothing new at all.

Even the oft-quoted notion of a preemptive ‘splendid first strike‘ is not new for Pakistan as it had already formed a key part of the discourse surrounding the Indian and international strategic community since the years 2016-2017. According to this, if in India’s assessment, Pakistan was found to be deploying nuclear weapons, as a contingency, India would likely resort to such a splendid first strike which it has always hinted as being a nuclear strike. As such all this does is prove Pakistan’s pre-existing doubts over India’s long-debated ‘No First Use’ (NFU) Policy. Yet, what’s worth noting here is that this overt shift towards declaring a more offensive doctrinal posture from India represents a more focused attempt at undermining the deterrent value of Pakistan’s own nuclear posture, thus ultimately destabilizing the South Asian region.

Instead, the only thing new to come out from all these assertions from Indian leaders is the prevailing fascist mindset within India that is being fueled by a false sense of racial superiority and hatred against Muslims. This was clearly stated by Prime Minister Imran Khan in his tweet when he attributed the cause of such provocations to the RSS’s extremist ideology. Hence, Pakistan perceives the recent statements from India’s top military brass as also being wholly politically inspired and as a routine attempt to divert attention away from the rampant domestic socio-economic issues currently plaguing India. The fact remains that Pakistan’s response to this Indian self-proclaimed ‘new normal’ which was on full display during the Balakot crisis itself set a clear example of its full spectrum deterrence. Contrary to the notion that a conventional asymmetry of sorts exists between the two countries, Pakistan had responded conventionally and more befittingly while holding its own toe to toe. In other words, Pakistan proved that it can also restore deterrence via conventional means despite the quantitative edge of India’s conventional forces and military hardware.

It is also worth noting that while India is spending billions of dollars on its military modernization program both in terms of its conventional and unconventional acquisitions; allocating billions for defence spending does not necessarily guarantee military supremacy. Especially if the adversary is determined to thwart any such attempts right from the outset. India’s actual capabilities still differentiate widely from what its political and military leadership inspires and projects itself to be. In fact, there is a huge gap between the Indian leadership’s expectations and what its military can actually deliver. As apparent not only in the absurdity of Gen. Naravane’s statement but also in Prime Minister Modi’s and others, the credibility of such threats already remains highly questionable.

Hence at the present, it seems that India is more keen on simply projecting military supremacy vis-à-vis Pakistan as opposed to actually attaining it, as reflected in the statements of its political and military top brass. Its favored notions of preemption at the doctrinal and strategic levels are evidence of such aspirations. As such the increasingly provocative posturing against Pakistan in the form of this so-called ‘new normal’ seems to represent simply a jingoistic approach to manipulate Indian public sentiment in the ruling government’s favor. However, the fact remains that Pakistan has already nullified such notions of preemption in the recent past and has proved it time and again. As such India’s aggressive posturing seems to be collapsing on itself with its self-proclaimed ‘new normal’ unlikely to pose any serious challenges to Pakistan’s strategic posture at least for the time being.

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From Scapegoat Back to Key Ally: Pakistan and the Perils of US Maximalism

M Waqas Jan

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In the two years since President Trump accused Pakistan of giving nothing but deceit and lies, relations between both countries seem to have undergone a dramatic turnaround. This is evident not only in the official narrative being put forth by both countries with respect to one another, but also in how this growing sense of cordiality has culminated into a series of high-level visits and meetings between key representatives. For instance, the icy indifference with which US Secretary of State Mike Pompeo was greeted with in Islamabad back in September 2018 now stands in stark contrast to the frank more amicable meetings that have been held between Prime Minister Khan and President Trump thrice since then. Not to mention the back to back visits from Alice Wells, the current US government’s focal representative for South Asia, that have further accompanied a steady yet gradual thawing of tensions.

Signs of this turnaround are further evident in how last month’s resumption of military education and training programs for Pakistani Officers marks one of the first steps towards renewed strategic cooperation. This represents an important milestone since President Trump had announced the cancellation of all forms of US military aid to Pakistan in early 2018. Similarly, acknowledgments of the progress made as per the requirements of the FATF review, as well as the ‘concern’ expressed over India’s recent actions in Kashmir are all signs aimed at placating some of Pakistan’s most pressing interests. Thus, hinting at what more cordial relations with the US could look like for Pakistan, while just stopping short of making any concrete commitments.

Yet, to say that Pak-US ties have begun to ‘normalize’ or ‘revert’ towards a mutually beneficial status quo would be ignoring the age-old complexity that has characterized relations between both countries. Especially for a relationship that has been long described as blowing hot and cold, on and off, as a rollercoaster ride, or simply a love-hate one. History has borne witness to the fact that US foreign policy towards Pakistan has more than often been based on a ruthless pragmatism and maximalism. This all or nothing approach has brought immense amounts of aid and funds for Pakistan which have been always cut off just as abruptly as they were initiated. Often without any long-term assessment or appreciation of what such actions are likely to lead to beyond the US’s more immediate goals.

None of this has been more evident than in US expectations from Pakistan regarding Afghanistan and the Taliban. It’s no secret that the very inception of the Taliban came from US funds and training during the waning stages of the Cold War for which Pakistan played the role of an indispensable intermediary. Yet following the 9/11 attacks, US policy towards the Taliban changed overnight when the US in lumping the Taliban together with Al-Qaeda brought down its military might on the entire Afghan State. What’s more it forced Pakistan to join its War on Terror almost at gunpoint. The infamous statement attributed to then US deputy secretary of state Richard Armitage where he allegedly threated ‘to bomb Pakistan back to the stone age’ stands as a stark reminder of how even labeling this relationship as ‘complex’ is simply an understatement.

This aspect is further reinforced in the damning revelations of the Afghanistan Papers that were released just last month. Representing a cache of candid interviews of key officials responsible for formulating and implementing the US’s Afghanistan policy, these interviews have been used to piece together crucial mistakes at the strategic and policy levels made by successive US governments over the last two decades.  One of these mistakes has been highlighted as ‘trusting Pakistan as a friend’ where Pakistan has been repeatedly accused of providing sanctuary and support to certain militant groups. Hence, accusations of Pakistan playing a double game, as well as the confusing distinctions between good and bad Taliban all contributed to a narrative that Pakistan was doing more to upend US progress than support it. This had caused much of the resentment and mutual distrust specifically during the Obama years which starting from calls to ‘do more’ resulted in the US unilaterally and covertly taking out Osama Bin Laden deep inside Pakistani territory. As ties worsened, the advent of the Trump presidency brought with them an overt sense of finality in the form of his new year tweet that was referred to in the beginning of this article.

Yet, even now as both countries come full circle with the US asking for help in bringing the Taliban to the negotiating table, one fears that the US may still not have learnt anything from its adventurist debacles. As the Afghanistan Papers themselves testify, Pakistani officials have remained quite  candid in their desire to hedge their bets against the US by maintaining limited ties with the Taliban. This was made clear to Ambassador Ryan Crocker who had served as the US ambassador in Islamabad from 2004-2007. In one of his interviews in the Afghanistan Papers, the former ambassador directly quotes a conversation he had with Gen Ashfaq Kayani who was then the DG ISI.As Mr. Crocker himself recounts, the general had quite explicitly made clear his reservations against an abrupt US withdrawal that would force Pakistan to once again pick up the pieces while having made the Taliban a mortal enemy. Hence justifying the reasons behind Pakistan’s so-called duplicity.

But considering how it is in fact the US now that is pressing Pakistan to use those same ties to help extricate itself out of the Afghan quagmire, Pakistan’s strategy against the Taliban seems to have stood wholly vindicated. In fact, it appears downright visionary considering how in hindsight, Pakistan had repeatedly called on the US to consider negotiating with the Taliban – especially when the US had the upper hand following its initial successes back in the early 2000s.However,the US after squandering its own reputation and credibility and already having missed multiple chances to engage with the Taliban are now ironically banking on Pakistan to help secure an exit. A kind of exit that not only allows the US to perhaps save face at the international level, but also offer something palatable to the American people during an election year. Thus, once again reeking of the reactionary maximalism that has so often brought into question the US’s reliability and trustworthiness as an ally. Not to mention President Trump’s own ‘America First’ policy, which already risks squandering whatever little credibility the US has been left with in the first place.

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South Asia

India’s Modi: Messiah or Menace

Dr. Arshad M. Khan

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When the Hindu sages developed their way of life, they divided people into four castes:  Brahmins, the thinkers, scholars and priests at the top for they were the guides; Kshatriyas, the soldiers including the king second for they protected and governed society; Vaishyas the merchants third with their commerce facilitating daily living; and Shudras who were the laborers and service workers at the bottom.

Well, the world has changed as it should but perhaps they had a point as there is a Vaish — not one at the top of the class but a tea-seller from a shop that would be at the other end of the spectrum from those charming English tea shops in Devon — now running the country.  Of dubious education that has been challenged and a beginning in the ultra-nationalist RSS (once outlawed by India’s founding prime minister and known also for producing Gandhi’s assassin) Narendra Modi is at India’s helm.  His BJP party’s rise is linked to stoking up tensions between Hindus and minority Muslims, whose suffering has been well documented.  Police powers have been increased and Muslim Kashmir is now under direct rule from Delhi, while new laws are disqualifying Muslims from citizenship.  So reports The Economist in its special issue, The State of the World in 2020 (p. 53).

Better known is the pogrom of Muslims in Modi’s Gujarat when he headed the provincial government there, and his party’s role in the destruction of a 500-year old mosque built by Babur so that the fictitious birthplace of Ram would be holy to both religions.  Having overthrown the Muslim Lodi dynasty and with a tenuous hold, Babur was seeking friends among Hindu Rajas who generally owed fealty to the Delhi sultans.  The Mughal Emperors also started the custom of marrying Hindu royalty to cement relationships and ensure loyalty.  And this Mughal openness to other religions reached its apex under Emperor Akbar who founded a new religion, Din-i-Ilahi, attempting to incorporate the best from all faiths but which, lacking roots, died with him.

After the Indian rebellion against British rule, the British saw advantage in fostering division among communities in the infamous divide-and-rule maxim, now changed by Modi into suppress-and-rule, as the left-over Muslim community is poor and weak after the emigration of many to Pakistan following partition and independence in 1947.

Gandhi and founding prime minister Nehru’s vision of a secular India is enshrined in its constitution, which Modi and the BJP’s Hindu nationalist agenda subverts.  Its Hindutva, a Nazi-like ideology holding Hinduism supreme, wants India to be an exclusively Hindu nation noting that Hindu and Muslim cultures are different, without regard to the similarities.  As a video demonstrating the new ideology in practice points out, it is safer to be a cow than a Muslim in Modi’s India.

It is what one can expect when an ill-educated, charismatic tea-seller takes over the world’s largest democracy offering cultural superiority and its false pride, hare brained schemes like a deadline  declaring old high denomination banknotes illegal causing chaos at banks.  Poorly managed plans like toilets and gas cookers for the poor are touted as successes.  But the toilets are not used because the plans did not include maintenance, and gas cooker distribution is riddled with corruption.  Meanwhile, the economy suffers and the country ranks 102 out 117 on the Global Hunger Index (between Sierra Leone and Niger) and far behind Bangladesh.  So much for the hype.

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