The Budget will soon be presented in Parliament and a key socioeconomic issue it needs to address urgently is the tackling of various forms of rising inequality in the system, exacerbated at all levels by the ongoing pandemic. Lockdowns and intermittent restrictions on public mobility have affected incomes disproportionately for a large number of Indian households. The health crisis has turned into an economic crisis, hitting the poorest the hardest. Smaller firms in the unorganized sector, which have a large impact on local employment, have been the worst affected. Economic prospects have moved in favour of more capital-intensive large firms, thus enhancing overall inequality. A recent report by Oxfam India noted that 84% of Indian households suffered income losses in 2021, while the wealth of the richest segment of the population increased. To contain the spread of such trends, the government needs to make the right interventions in the forthcoming Budget.
The Omicron variant, responsible for the third wave currently sweeping the country, is highly transmissible but appears to be relatively mild in terms of fatalities. However, it has reduced mobility and led to increased restrictions on public activities, thus dampening economic growth. It is clearly those with precarious livelihoods and a hand-to-mouth existence who have suffered the most by it. The incomplete nature of India’s social support system has been clearly exposed by Covid, and this is a chance for the Budget to set it right through affirmative action including massive investment in public healthcare infrastructure and telemedicine.
The long-term solution to India's socioeconomic discontent is reliable employment. We cannot afford to have any more of jobless growth. India’s employment rate (which is 43% according to the World Bank) is much lower than global standards (55-58%), and budgetary policy will have a vital role to play in sustainably reviving it. One problem is that jobs are perceived to be either so difficult to find or so unattractive that too few youth across the country are sufficiently motivated to search seriously for them. In the interests of national economic growth, this perception should be changed at the earliest. Covid has also led to a lot of unemployment and the upskilling of individual workers so that they are able to access more and better jobs needs to be high on the priorities of the Budget.
The government needs to reexamine its portfolio of short-term incentives including cash payouts, free grain supply, the expanded rural employment guarantee scheme, financial relief to MSMEs etc. Many of them are well intentioned, but the financial strain they impose on the exchequer also needs careful examination. There is no alternative to rapidly putting in place the infrastructure required for our growth objectives. That is not going to be easy, but the Budget cannot shy away from addressing it.
Wealth and income concentration invariably has implications for socioeconomic stability, and so, needs deft management at the highest policy levels. The K-shaped medium-term economic recovery from the pandemic may not be sustainable for a large section of our population, and it could necessitate government interventions at multiple levels. The Budget is an appropriate place to begin.