For all her firebrand right-wing credentials as the most powerful woman in the government, not many know that Nirmala Sitharaman spent many formative years in that cradle of radical leftism — Jawaharlal Nehru University, where she honed her economics skills, doing a master’s degree, followed by M.Phil.
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As she gets up in Parliament Saturday morning to present her ninth union budget in a row— a record of sorts (Thank you, interim budgets and out-of-turn post-election ones!), a nation of billion plus will be curious to follow which side she will lean to, this time around. Continue on the ‘right-is-right’ strategy of spending big capital and hoping for a trickle-down effect, or put into practice a left-of-centre deviation to deal with the apparent slowdown that’s making its presence felt through lower consumption and even GDP rate.
In other words, will Nirmala Sitharaman listen to her head or heart?
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The head will tell her to stick to the policy she and the Modi government set in motion a few years ago — a firmly capital-focused economy where the government spends big, which will naturally crowd in private investment, leading to a virtuous cycle where massive business generation will lead to jobs, spending power for the masses and overall catalysis of economic growth.
Of course, that a lot happened between the cup and lip is another matter. Sitharaman’s best laid plans have gone more than a wee bit awry, with private sector not playing ball and playing a wait-and-watch game, arguing that low consumer demand did not warrant additional capital investment. Coupled with the emergence of the new economy where skilled workforce were at a premium, this saw a K-shaped divergence in the economy — entrepreneurs and professionals at a certain level and above laughed all the way to the bank, while a major chunk of the populace faced a scenario of uncertainty and stagnant incomes.
Or will it be the heart that rules the head this time around? Sitharaman, for all her ‘capital first’ fundas, has been mighty proactive on the welfare part of government. Right from the initial days of the Covid lockdowns when she declared that no one shall go hungry as migrants walked long distances home without food or transport, she has been instrumental in taking the Modi government’s policy for expanding free rations (even if prompted by covid and post-covid realities) to as much as more than 80 crore citizens. That’s more than half of India’s population, even if you count it latest at 145 crore.
Yet, five years after the pandemic, the Modi-Sitharaman combine is at a crossroad — their ‘New Deal’ is yet to bear fruits; on the contrary, GDP has been declining for over a year, showing its true colours at a shocking 5.4% in the last quarter. Almost all authorities on the subject, including the usually ebullient RBI and Economic Survey have been forced to temper their cheerleader format to peg it down to 6.4% at best.
Worse, the middle classes are seething with anger. Not at teflon-coated Modi, but at hapless Nirmala tai as the sole reason for all their tax woes. While GST has always been complex with its multiple slabs and additional cess, anger has been building up at what even well-off entrepreneurs scoffed at as “first world tax rates at one-tenth of those salaries.” The K-divergence and uncertainty in a fast-mutating world only made it stark.
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Then, the big question — does that mean the finance minister will follow her heart and bite the bullet of tax cuts, going in for cutting personal income tax rates, putting more money in the middle-class pocket? Even expert consultants and business bodies have been calling for it, as they bill it a sure-fire way to kickstart consumer spending.
From employment-linked incentives (announced in the July budget but yet to be implemented) to even radical measures like direct transfer of money instead of giving free rice and wheat, the suggestions are many.
From satiating the trade pressures from a belligerent Trump to a nation wanting to make its mark its the technologies of the future by getting self-sufficient in electronics and manufacturing in general, and AI and semiconductor chips in particular, not to mention its push towards a green economy, the matters are many, but the heart and mind, only one. Which way will she swing?
