By Bhagirathi Panda
The Union budget 2015 was presented in the parliament by the finance minister Arun Jaitley on 28th February 2015. Indications on the expected broad contours of the budget were very much available in the Economic Survey presented in the parliament a day before and the stated rationale for creation of ‘NITI AYOG’ few months earlier. Although budgeting in India essentially happens to be an accounting exercise, over the decades it has been a practice to see through the prevailing economic thinking and economic policy of the Government of the day from its budgetary exercises. With this prelude in mind let us scan the budget 2015. This budget, at the macro level, primarily emphasises on (i) economic growth and creation of more jobs through growth, (ii) improvement in infrastructure and (iii) creating and leveraging institutions for better economic outcome and (iv) expanding the skill status of Indian youth. To achieve all these, the budget mainly believes in ‘easing out difficulties in doing business’ and ‘creating an enabling environment for industry and business to grow’. In keeping up its stated belief in ‘less government and more governance’, it has proposed measures and reforms for increased penetration of the forces of market in to development space. Many of these measures for macro economy of India look positive, although in some critical areas like infrastructure the mechanism of PPP has not been clearly spelt out. However, as this write up is all about the implications of the union budget for the North East, an endeavour is made here to confine the analysis to its chosen theme.
Some of the general proposals in the budget that can benefit the North East are: (a) the provision of supporting soil health card, organic farming, unified agricultural market and micro irrigation. Organic farming has been in practice in the hills of the North East for thousands of years and most of the farmers are not aware of the fact that their products can fetch them 20-25 % more returns in national and international markets. With this explicit provision in the budget to help organic farming, the farmers in the North East are going to benefit more compared to farmers in other parts of the country. The stipulation of creation of a unified national agricultural market will also help the farmers in the North East as they are the worst sufferers in this region in the hands of the middle men. One of the most important infrastructure in which the North East has regressed against the country as a whole during the past 60 years happens to be irrigation. The emphasis on micro-irrigation and watershed development in this budget has the potential to ameliorate this situation. With a sum of rupees 5300 crore allotted to micro-irrigation, watershed development and the Pradhanmantri Krishi Sinchai Yojana, the North East can benefit significantly from it, (b) Increased Allocation in MGNREGA.The enhancement of allocation in MGNREGA to Rs. 34699 crore plus conditional 5000 crore(subject to the economy doing well) and making it more oriented towards creation of quality assets and increase in agricultural productivity will also help the North East to recast it rural economy in terms of demand and jobs, (c) MUDRA Bank. Lack of access to formal sector credit has been one of the glaring grievances of informal entrepreneurs in the North East. The announcement of establishing the Micro Units Development Refinance Agency(MUDRA) Bank with a corpus of 20000 crore and credit guarantee corpus of 3000 crore and the provision of giving priority to ST/SC entrepreneurs in its lending arrangement, may prove to be a boon for the young and educated perspective entrepreneurs of this region, (d) Subsidy Rationalisation. The proposal in the budget to rationalise subsidy and make it more efficient through the JAM platform has also the potential to benefit the poor and the needy in this part of the country. Although the Adhar platform is not ready in some of the North Eastern States, the JM i.e. Jandhan and Mobile platform can very well be used to better target LPG subsidy, scholarship disbursement, and payments in schemes like MGNREGA, and finally (e) Skill Development. The proposed launching of the National Mission through Skill Development and Entrepreneurship Ministry can be beneficial to the youth of this part of the country to expand their skill and capability base. This measure along with the MUDRA arrangement can go a long way to make the youths of North East employable and entrepreneurs in their own rights.
In addition to the above, budget 2015-16 has also outlined some North East specific measures like setting up of (i) manufacturing hubs in Southeast Asian countries of Cambodia, Myanmar, Laos and Vietnam through separate special purpose vehicles to catalyse investments from the Indian private sector and expand trade and commerce between the land locked North East India and Southeast India, (ii) All India Institute of Medical Sciences(AIIMS) in Assam , an Indian Institute of Science Education and Research(IISER) in Nagaland and a Centre for Film Production, Animation and Gaming in Arunachal Pradesh
Now let us discuss where the budget fails the North East. First of all, this maiden full-fledged union budget of the new Government is totally silent on the status of the special category states of the region. If we go by the recommendations of the 14th Finance Commission, there is no provision for special category states. Since, the current budget draws heavily from the 14th Finance Commission, the NITI Ayog etc., the whole funding pattern of the North Eastern states has become uncertain. What is then the new chapter in ‘cooperative and competitive federalism’ in the front of finance and development so far as the North East is concerned? Secondly, this budget lays emphasis on creating an enabling environment for the market forces to foster development and promote efficiency. This has also been extended to sectors like health, infrastructure and education. Market can give us an efficient solution where there exists a level playing field and majority of the people have adequate access to product, labour , credit and insurance markets. As it stands today, neither the level playing field nor adequate access to these markets exists in the North East. Majority of the population in the region do not have access to these markets. On the other hand, over the past 7-8 years this region has been experiencing highest casualisation of women’s employment among all the regions of the country. Against this background, most of the stated noble expectations of the budget through market reliance may remain non-starter for this region. Again, the budget makes provision to realise increased infrastructure through new PPP model. The newness in this model has not been spelt out. In no other region of the country the PPP model has failed as miserably as it has in this part of the country. As we all understand today, the underdevelopment of this region is more embedded in its institutional arrangements including poor governance rather than paucity of capital. When, the budget has given so much importance on institutional reforms for development, it should have outlined a contextualised institutional framework for the North East. This has not been done. Here, specifying this kind of a framework and making efforts to leverage the same for economic development of the region would have made the exercise of budgeting for this region meaningful. The finance minister in his budget speech mentioned about mainstreaming the North East in the country’s development process. The budget explicitly does not mention much as far as this envisaged processes of mainstreaming is concerned. Additionally, as it stands today, it has apparently made the process and practice of economic development in the region somewhat uncertain. The sooner this uncertainty is removed through other non-budgetary exercises, interventions and announcements, the better for the region and the country.
(The author is a professor, in the department of economics, NEHU)