Is trickle-down economics real. Economists’ comments on the budget help explain the state of the Indian economy. They also reflect ideological divides about how an economy’s health should be judged and what should be done to enhance it. The prudence of the finance minister has been praised: There are no “populist handouts,” and income and wealth taxes have not been raised. Physical infrastructure expenditures, it is agreed, will boost the economy in the long term and the short run by producing more jobs. However, there is concern that the Centre’s use of the funds may further weaken states when they must shoulder the majority of the burden of public welfare. There is also dismay that health and social security budgets remain woefully inadequate.
“No effort, no welfare, only wealth,” former Finance Minister P Chidambaram summarised the budget. Large “wealth producers” are given carte blanche to create riches for themselves, ostensibly for the benefit of the masses. The economic policy model of raising the total size of the pie by lowering taxes at the top and then “redistributing” the money has not given advantages to people, according to evidence from throughout the world. With laws to make it easier for investors to perform their business of creating more riches for themselves, trickle-down has dried up while gushing up has expanded. Gandhiji had stated that he was not opposed to those who develop means. He praised the creation of wealth. It must not, however, come at the expense of workers’ rights and welfare. Wealth creators must be trustees, not sole owners, of the wealth they create.
The Indian economy has a long-standing “demand-side” problem exacerbated by faulty economic policies. Young people who have received more education than in the past and who have even learned vocational skills are unable to find work. They are abandoning the employment market because they see no future in it. According to the CMIE, the number of working-age people in Uttar Pradesh has declined from 43% to 33% in the previous five years; in Punjab, it has decreased from 49% to 30%; in Goa, it has reduced from 49% to 32%; and in Uttarakhand, it has reduced from 40% to 30%. Demand will not expand if people do not earn, and corporate investments will be less appealing—furthermore, dissatisfied youth act as tinderboxes for societal instability.
The financial globalization of the last 30 years has sparked reactions worldwide. “The time has come for the better-off sections of our society to understand the need to make our growth process more inclusive; to eschew conspicuous consumption; to care for those who are less privileged,” then Prime Minister Manmohan Singh warned leaders of the Confederation of Indian Industry (CII) in a speech to the CII in May 2007. “Be a participant in creating ours a more humane and just society,” he said, inviting business leaders to join him. Businesses feared he would return India to “socialism,” a boogey for neoliberal economists and their “Washington Consensus” of “less government,” “ease of doing business,” and lower corporation and wealth taxes.