The BJP-led NDA government has taken limited measures to tackle the fundamental supply-side factors contributing to food inflation. Rather than addressing the root causes, the focus has primarily been on implementing sporadic export bans. While initiatives like PM-Kisan and the distribution of free food-grains offer essential income support to impoverished households, they fall short in enhancing agricultural productivity and modernising storage and marketing practices for crucial food items like vegetables, pulses, and cereals—whose escalating prices are fueling food inflation.
The NDA’s approach to these challenges centred on promoting a wholesale corporate transformation of India’s food and agricultural sector. This vision led to the enactment of three controversial farm laws in September 2020. However, faced with year-long protests by farmers from northern India, these laws were eventually rescinded. Subsequently, the NDA-II government finds itself grappling with the same lack of clarity and direction in addressing food inflation and agricultural issues as the UPA-II government did in the past.
The UPA’s growth narrative faced a second challenge as rapid export growth was overshadowed by an even faster increase in imports. This was exacerbated by the surge in global crude prices, leading to a deteriorating current account balance and heightened external vulnerability. In contrast, the NDA era witnessed a decline in both export and import growth, negatively impacting economic expansion but positively influencing the external trade balance. Additionally, the NDA decade saw an uptick in net Foreign Direct Investment (FDI) as a percentage of GDP, while remittance inflows, although consistently higher than net FDI inflows, experienced a decline compared to the UPA decade. The outcome has been a mixed bag of results.
While India’s foreign exchange reserves experienced a decline in NDA-I, NDA-II managed to reverse this trend. However, despite this positive development, the Indian rupee has persistently depreciated against the US dollar. Under the UPA government, the rupee-dollar exchange rate dropped from Rs 43 to Rs 60 per dollar, and during the NDA’s tenure, it further declined to Rs 83. The ongoing devaluation of the rupee has significant implications, especially considering the surge in global inflation post-pandemic. This depreciation has effectively imported inflationary pressures into the domestic economy.
During the UPA’s era of higher growth and increased private investment, a significant challenge emerged in the form of mounting big-ticket corporate defaults. Initially veiled through debt restructuring, these defaults eventually resulted in a substantial accumulation of Non-Performing Assets (NPAs) within the banking system.
The current administration led by Modi claims credit for restoring the health of Public Sector Banks (PSBs) by notably reducing the Gross Non-Performing Assets (GNPA) stock. However, it’s noteworthy that while the cumulative NPA reduction under the NDA rule, incorporating various recovery channels such as the Insolvency and Bankruptcy Code, amounted to approximately Rs 10.8 lakh crore until March 2023, the period also saw NPA write-offs surpassing Rs 14.8 lakh crore.
The burden of Non-Performing Assets (NPAs) write-offs exceeding Rs 10.65 lakh crore weighed heavily on Public Sector Banks (PSBs), leading to substantial losses attributed to NPA provisioning during the period between 2017-18 and 2019-20. To mitigate the impact, a significant infusion of capital was directed towards PSBs, along with financial institutions like the EXIM Bank, Industrial Development Bank of India (IDBI), and India Infrastructure Finance Company Limited (IIFCL) from 2017-18. This capital injection aimed to bail out these entities. The disclosed data in Receipt Budgets reveals that the Centre’s total debt obligation due to recapitalisation bonds had surged to Rs 2.90 lakh crore by 2023-24.
Addressing the annual interest expense of over Rs 19,000 crore, the central government’s revenue expenditure has been utilised since 2019-20. Notably, the recapitalisation of banks during the UPA rule, although of a smaller scale, underwent scrutiny by the Comptroller and Auditor General of India (CAG) covering the period from 2008-09 to 2016-17. However, the bank recapitalisation under the NDA rule has yet to undergo a similar audit by the CAG. This audit becomes crucial to assess the substantial NPA write-offs by PSBs and determine whether public funds have effectively subsidised private sector debt defaults.
Assessing the effectiveness of Union Budgets requires a focus on their impact on the everyday lives of the people. The Finance Minister, in the Budget speech, asserted that under NDA rule, individuals are experiencing an improved quality of life, enhanced earnings, and harboring greater aspirations for the future, citing a notable 50 per cent increase in the average real income.
However, scrutiny of official data unveils a more nuanced picture. The inflation-adjusted Net National Income (NNI) indicates that during the ten years of UPA rule, real per capita income in India exhibited a robust growth of 50.3 per cent (as per Table 2). In contrast, the NDA’s ten-year tenure saw a growth of 43.6 per cent, signifying a deceleration in inflation-adjusted income expansion across the country.
The NDA government frequently references the annual Periodic Labour Force Survey (PLFS) to assert a decrease in the unemployment rate from 2017-18 to 2022-23. However, contrasting data from the NSS 68th round on Employment and Unemployment Situation in India paints a different picture. According to this data, unemployment rates, measured by both current weekly status and adjusted usual status, witnessed a substantial increase from 2011-12 to 2017-18 (refer to Table 3).
Although there was a decline in unemployment rates from 2017-18 to 2022-23, the open unemployment rates for 2022-2023 remained elevated, surpassing not only the levels recorded in the NSS 68th round of 2011-12 but also exceeding figures from all eight previous NSS rounds conducted since 1972-73. This marks an unprecedented high in open unemployment rates over the last 50 years in India.
Specifically, high unemployment rates were notable among urban youth aged 15 to 29 years and individuals with a secondary education level and above. Among the employed, the proportion of casual workers exhibited a declining trend in both rural and urban areas, while self-employed individuals saw a progressive increase.
In 2022-23, self-employed workers and those assisting in their own account enterprises constituted 63 per cent of the rural labour force and nearly 40 per cent of the urban labour force. The distribution of regular wage/salaried workers shifted, with a decline in rural areas and an increase in urban areas between 2017-18 and 2022-23. It’s noteworthy that the proportion of salaried workers lacking social security benefits increased within this category.
While agriculture’s contribution to Gross Value Added (GVA) has diminished to 14.4 per cent in 2023-24, there is a notable rise in the proportion of workers involved in agriculture from 2017-18 to 2022-23. Concurrently, the share of individuals engaged in informal non-agricultural enterprises has witnessed an upward trajectory since 2011-12. Contrary to official assertions of enhanced formalisation, the trends in employment status derived from PLFS data suggest a discernible trend towards the increasing informalisation of the labour force.
Despite the Finance Minister’s assertion in the Budget speech about the success of the government’s “Skill India Mission,” revealing that 1.4 crore youth have been trained and 54 lakh youth up-skilled and reskilled, a closer look at the official PM Kaushal Vikas Yojana site’s dashboard presents a different narrative. Out of 1.10 crore certified candidates, only 24.51 lakh, approximately 22 per cent, have been reported as placed. This surplus of skilled workers in the job market, coupled with the increasing trend of informalisation, acts as a deterrent to wage and earnings growth.
PLFS data provides additional insights, indicating that the average earnings for casual labor in non-public work amounted to Rs 8,547 in 2022-23, self-employed workers earned Rs 13,347, and regular wage/salaried workers earned Rs 20,039. Over the five years since 2017-18, average earnings for casual labourers increased by approximately 49 per cent, regular wage/salaried workers by 19 per cent, while self-employed workers experienced a modest 8.5 per cent rise in earnings. Considering an average annual retail inflation rate of 6 per cent during NDA-II’s tenure, the less than 2 per cent annual growth in average earnings for the self-employed suggests a decline in their real earnings.
This scenario is particularly challenging for the 57 per cent of India’s labour force engaged in self-employment, contradicting the notion that they are “living better and earning better,” as portrayed by the Finance Minister. It becomes evident that their hopes and aspirations are not aligning with the reality they face.
(The writer can be reached at dipaknewslive@gmail.com)
