India budget facing backlash over deep cuts to flagship social security programmes

India’s federal budget has attracted sharp criticism from opposition parties and civil society groups over spending cuts to key social security programmes feeding and employing the poor, as the country battles rising inequality.

Finance minister Nirmala Sitharaman on Wednesday presented the last full budget of prime minister Narendra Modi’s second term ahead of general elections next year, setting total spending at Rs 45 trillion (£454bn).

With this expenditure 7.5 per cent higher than in the current financial year, the government aims to boost economic growth and thereby reduce the fiscal deficit to 5.9 per cent of GDP, compared to 6.4 per cent for this year.

The deficit plan will be aided by a significant drop in the funds allocated to the flagship federal food security policy that feeds 800 million people in the country.

That is not the only social security programme seeing a sharp budget slash. Spending will also be cut in the rural jobs guarantee programme, which provides a minimum of 100 days of employment to more than 150 million Indians.

The food subsidy, provided through a targeted public distribution system, will see its budget slashed by 32 per cent as the government proposes reducing spending from an estimated Rs 2.87 trillion this year to Rs 1.97 trillion in the new fiscal year starting 1 April.

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The budget for the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) has been cut by 30 per cent. The finance minister proposes reducing funding from Rs 8.95 trillion to Rs 6 trillion – the lowest in more than five years.

While Modi’s ruling Bharatiya Janata Party (BJP) hailed the budget as an important step towards all-inclusive growth, activists and opposition politicians said it failed to address the needs of the poor and rising unemployment in the country.

“It is a miserable budget in terms of equitable growth,” says social activist Nikhil Dey. “While growth in India has been better than most countries in the world, we have also increased our numbers of poor enormously,” he tells The Independent.

“We have the largest number of poor in the world and the largest number of poor were added to our ranks,” he says in reference to the impacts of Covid. “The policy measures that helped the segment at the bottom during the Covid-19 pandemic are MGNREGA and food subsidies.”

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According to the activist group People’s Action for Employment Guarantee (PAEG), despite already being underfunded the programme played a crucial role in compensating income losses during the pandemic, which averaged up to 80 per cent in some regions.

But there were still many gaps, the group said, with survey results indicating up to 39 per cent of eligible households did not get a single day of work under the scheme, highlighting the need for higher budget allocation.

The rural employment programme is being “squeezed from all sides”, says Congress spokesperson Pawan Khera. “According to [MGNREGA], 100 days of work is guaranteed, but under the Modi government people are only getting an average 42 days of work. And even if they get that work, states are not being paid the pending wages on time.

“This is not a budget for the poor, it is a document to make rich people, richer.”

There has been global concern about the rising inequality in India, as highlighted by Oxfam in its report last month. It found that India’s top 1 per cent owned more than 40.5 per cent of the country’s total wealth in 2021, while the poorest people were “unable to afford even basic necessities to survive”.

It found that the poor and middle classes were taxed more than the rich, with about 64 per cent of the total goods and services tax collected from the bottom 50 per cent of earners, while only 4 per cent came from the top 10 per cent.

It advocated for progressive tax measures such as a wealth tax, saying that a 2 per cent wealth tax on the country’s billionaires would support the nutritional needs of the malnourished population for the next three years, the group said.

Despite the significant cuts to its funding, the finance minister hailed the government’s food distribution scheme during Wednesday’s budget.

“During the Covid-19 pandemic, we ensured that no one went to bed hungry with a scheme to supply free food grains to over 80 crore (800 million) people for 28 months,” Sitharaman said.

Sitharaman said that a scheme named Pradhan Mantri Garib Kalyan Anna Yojana providing free food grains to the poorest households was being implemented at a cost of Rs 2 bn from 1 January onwards, “continuing our commitment to provide food and nutritional security”.

But activists said that in reality this scheme was already in place as a pandemic-era measure to double the amount of food aid given to low-income families. Economist Jean Dreze says the programme benefited poorer families already entitled to 5kg of food grains under the 2013 National Food Security Act, but was in fact discontinued in December and has not been resumed.

“As a result, from January onwards, they were receiving only 5kg ration under the separate national food security programme, instead of a total of 10kg that they were receiving for the past 28 months,” he says.

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“And what’s most distressing is that [the government] are pretending as if it’s still continuing the Pradhan Mantri Gareeb Kalyan Yojana,” says Dey. “But the truth is that they discontinued it this year at a time when prices in the market of wheat have reached Rs 40 per kg. So you are hitting people at that level where even their food security is going to be threatened.

“Clearly the truth is that they are trying to fool everyone else. The ones who are going to get less rations can’t be fooled, when they realise that it is going to be halved from 10kg to 5kg. But others will feel that the government is doing something for the poor.”

The Independent has reached out to the BJP for comment on this apparent discrepancy as well as the other issues raised by activists and opposition parties, but had not received a response by the time of publication.

Another measure that has drawn concern from civil society groups is the non-revision of pension schemes. With India’s inflation rate averaging at 6 per cent for the past decade, it means pensioners have been hit by a sizeable real-terms loss in that period. “The central government contribution to old-age pensions has stagnated at Rs 200 per month since 2006,” Dey says. “What can a person do with that?

“So while this budget has maybe given some special concessions to the middle class, to the large numbers of working poor, we are pushing them further towards poverty and destitution.”