 Hello and welcome to NewsClick. Today we are joined by Surajit Majumdar and Vikas Ravel, both economists from JNU and we are going to discuss the union budget 2018 that has been presented today by Arun Jaitley, the Finance Minister. Welcome to NewsClick, both of you. So let's start with the budget first, with you first. How do you see the budget, the grand announcements that Arun Jaitley has made? Well actually the announcements were more grand than in the statement than in substance. I think that this budget particularly has reinforces or let's say establishes or proves how entrenched what we call fiscal conservatism has become in India. That this is the last budget of this government, full budget before it goes into an election next year. The same thing happened with the UPA in the run up to the elections in 2014. But even in a situation where you are facing an election where normally you expect governments to become literally a little bit more populist and spend money, the emphasis in this budget is primarily on compressing expenditure rather than on that priority is to reduce the fiscal deficit in the coming year to 3.2 percent having failed to achieve what was the target for the current financial year. So the target is to come reduce the fiscal deficit and you are trying to reduce the fiscal deficit in a situation where you do not want to mobilize additional revenues through taxing the wealthy, the rich, the corporate sector. So essentially you have to rely on compressing expenditures and therefore the claims that were made in the speech of the Finance Minister were not really matched by the expenditure commitments that were there in the budget itself. Because let us come to you now when we are talking about the agriculture sector and since demonetization in GST it has been one among the worst hit sectors. How do you see the budget in that context? I think in the context of agriculture this problem is the most clear that you know there is the speech was high on rhetoric and nothing to offer. The two major issues on which farmers have been agitating are the fact that they do not receive remunerated prices for their crops and the whole problem of burden of debt on farmers. Now the Finance Minister actually blatantly lied when he said that the prices that they have fixed for the ruby crops this year are already 1.5 times the cost of production that is not true at all. In fact and the budgetary allocations that you see show nothing there that would actually be even remotely sufficient if government was to actually ensure that all farmers are able to sell their produce at 1.5 times the cost of production. On the question of debt waiver again he had nothing to offer at all. He made some announcement about increasing the provision of institutional credit for agriculture that really has nothing to do with the budget because it is something that is done by the banks. He has not made any budgetary provisions for it. So you know one is that he has not addressed the major demands that farmers have been making and you know there are a whole range a number of other things that he has mentioned which are actually peripheral and have really not taken off. For example this whole thing of Enum that the government has been you know going about is something that has really not taken off. They have been connecting Mondays to Enum platform but there are no sales happening on Enum. When nobody is able to access it nobody is able to use it. Logistics have not been worked out and so on. So you know these are not really skills that actually benefit the farmers at all. So also when it comes to other such things social services like health education what where does the budget take these sectors to because they are propagating this entire health program which will cover apparently 10 crore people 10 crore families. So what is the truth about it? That's another one where he made this announcement this grand announcement that they are going to provide insurance cover to 10 crore families up to 5 lakh rupees a year. Now one is that underlying this is first a shift away from working in strengthening on strengthening of the public health system. So instead of providing health services you are moving increasingly towards provision of medical insurance and provision of medical services through private providers. But even here there is no financial commitment in the budget if you see now. You know even if you think of an annual premium of something like 15,000 rupees a family you are going to be talking of something like 150 you know 1.5 lakh crore rupees of allocations just to run a scheme of this kind that's about three times the total health expenditure of the government of India. Now where is this money coming from? There is no allocation at all for this massive grand announcement that he made. So you know it's really high on rhetoric and nothing also the education expenditure on education has been slashed expenditure on education as a percent of GDP has fallen as has a lot of you know social sector spending. So you know I mean there is a real problem here you know in a year in which people were expecting some relief on you know given the widespread distress this budget really has nothing to offer. The government has also been talking about recapitalization of banks while there is no discussion about NPS though they are saying that they tax corporate how do you see that? Well you see the I mean of course there is a the question of capitalization of banks and all of that is really not a issue of the budget except to the extent that you make some financial allocation for that purpose. But what is the fundamental problem? One problem is that you have of course in various ways tried to benefit certain kind of corporate interest in by giving loans which were not really going to be repaid. So that's one part of the problem. The other part of the problem is that you have an economic context in which the conditions are not such as to facilitate or induce high levels of investment and investment doesn't seem to be paying off and to that extent if banks are going to be lending to entities which they want to invest then the the if the returns don't come they are obviously not going to be able to repay and then the banks also run into a problem. But the issue today actually is that the demand for that credit from banks itself is very low and has been falling for a period of time because the ones to whom banks want to lend are not at the moment wanting to borrow and invest. There are others who need credit who for various commercial considerations banks are not interested in lending to them. So the real problem is it's not that you can solve the problem of the in the banks their NPS the balance sheets and the thing economy will take off. The problem is that the economic conditions that exist today in which large majority of the people are simply not in a position to generate any demand in the economy. That's the root of the problem and this budget actually reinforces that process by emphasizing cutting expenditures rather than expanding them. So the final comments if what could have government done to correct the things that you're talking about whether be it agriculture, be it health or be it demand that you're talking about. Well the first thing to do is of course that you can enlarge the spending ability of the government by taxing those who have the means to pay taxes. In fact that taxing is important for another reason which is that you have had a growth process in which whose distribution of those benefits has been extremely skewed. So partially to redress that itself you should be taxing those who have the means to pay. The expenditure of the those second thing that you can do is to forget about this mindless preoccupation with achieving a fiscal deficit target okay that it has to be 3.2 percent, 3 percent or whatever it is. None of those figures have any meaning. So you should abandon that. Once you have created both at the level of thought as well as the means the ability to spend then there are several sect areas in the economy like agriculture, like the social sector, like education, like health in which you can expand expenditure and that expenditure serves two purposes. A, it eliminates or reduces the deficits that you have in your economy. There are certain gaps, deficits that you have which you are filling. You don't have enough education services, enough health services, enough investment in agriculture. So you fill those deficits with that expenditure. The effects of that expenditure then generate demand on the basis of which other sectors of the economy particularly the industrial sector where you have capacity to produce but not enough demand to make use of it can also then grow and expand. So it's these imbalances in the economy in the distribution of income in the way different sectors of the economy are linked to each other. Those imbalances if they have to be addressed fiscal policy of the government where you tax from and where you spend becomes a very important instrument and the emphasis on simply keeping the taxes low, keeping the deficit low has meant that governments have become incapable of using this instrument. You find coming because on the same thing. Well I think this was a this was a moment in which the government should have sought to increase spending, increase spending on as well as it was saying on a whole range of services, on a whole range of basic sector, agriculture, employment, NREJ for example has seen no rise of spending then in fact you have a huge problem of areas of payment for NREJ and those are the things in which government should have sought to should have tried to expand its spending and should have used this movement to also raise taxes on on the rich increasing complex collections rate taxes and that was the way to go. Thank you both of you. Thank you for watching NewsClick will be following budget incoming days also. Thanks a lot. Keep following our website and see our Facebook page.