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OPINION | PM Modi Ticked All Right Boxes in his I-Day Speech. The Devil, However, Lies in Details

The biggest announcement PM Modi made during his Independence Day speech was the launch of Pradhan Mantri Arogya Abhiyan. He said India wants to offer health insurance for free to 50 crore people under ‘Ayushman Bharat’.

Sindhu Bhattacharya |

Updated:August 15, 2018, 3:18 PM IST
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OPINION | PM Modi Ticked All Right Boxes in his I-Day Speech. The Devil, However, Lies in Details
PM Narendra Modi after delivering the Independence day address from the Red Fort in New Delhi on Aug 15, 2018.
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In a speech peppered with social themes and universal healthcare, where space missions took pride of place alongside the farmers and bountiful produce, Prime Minister Narendra Modi spent a considerable time this morning listing out his government’s achievements in the last four years.

There were the usual key words: kisan, jawan, women, garib, bhrashtachar. There were also numerous examples of how his governance has boosted our economic prowess, with particular reference to the International Monetary Fund’s recent statement: “India’s economy is an elephant which has started to run.”

Perhaps the biggest announcement Modi made during his long Independence Day speech was the launch of Pradhan Mantri Arogya Abhiyan. He said India wants to offer health insurance for free to 50 crore people under ‘Ayushman Bharat’. The universe for this health insurance scheme is equivalent to the combined population of the USA, Canada and Mexico. Also called ModiCare, the technological tests for rolling out what is perhaps the world’s largest health insurance scheme will start from today. The scheme itself should start from September 25.

“The scheme will provide a cover of Rs 5 lakh per year to 50 crore individuals across income groups. However wealthy the family may be, a perennial illness dents financial stability of the family forever. In order to prevent that from happening, we will be holding experiments in this sector for the next 6-7 weeks after which we will officially roll out the scheme,” said Modi.

Ayushman Bharat is indeed an ambitious healthcare scheme but like most other government lead endeavors, it is currently plagued with problems. To begin with, there are just not enough hospitals, nor anywhere near enough doctors, to cater to India’s sick and the scheme’s implementation could falter as it places increased burden on an already weak healthcare infrastructure. Then, some states do not see any merit in joining hands with the Centre for this scheme, which is closely linked with Modi’s name and does not earn their respective political leadership any political gains.

Besides, even in states which have come on board, the scheme may be initially implemented in only government run hospitals since private hospitals have many reservations about package rates being offered under the scheme. All in all, Ayushman Bharat is an ambitious scheme where implementation and augmentation of medical infrastructure would be key milestones to watch out for.

Some other economic milestones Modi mentioned in his speech today:

GST

The PM spoke of the success of the biggest tax reform in Independent India, the Goods and Services Tax (GST) and the manifold increase in the taxpayer base: From just 4 crore direct tax payers in 2013 we now have 6.75 crore. And the number of indirect tax payees has jumped from 70 lakh to 1.7 crore. Modi made a special mention of small and medium enterprises which faced difficulties due to GST but still complied with the new tax regime.

But all is not well with GST and revenue collections. The net revenue loss on account of reduction of tax on goods and services under GST has been about Rs 70,000 crore till now. And since state governments have been guaranteed a 14% increase over their pre-GST revenues for the first five years, this burden has entirely been borne from the share of the Centre. Is it any wonder then that the Centre is now seeking a pause in further reduction in GST rates? GST was implemented in July last year with multiple rate slabs and since then, there have been several rationalisations of these slabs, according to demands from industry and citizens. The pause now on further cuts comes even as the shortfall each month, between target and actual collections under GST, has begun narrowing since the beginning of fiscal 2019.

As per data presented in Lok Sabha last month, the provisional collections in the first quarter of this fiscal under GST stood at Rs 2.92 lakh crore against a monthly target of Rs 1-1.2 lakh crore. That works out to a shortfall of close to Rs 40,000 crore in three months or close to Rs 13,000 crore each month.

Between August 2017 and March this year, the total collections stood at Rs 7,19,078 crore or an average of Rs 89,885 crore. Amid all this, the small and medium enterprise sector has been the worst hit.

Mudra Loans

The PM also made a mention of beneficiaries under the Pradhan Mantri Mudra Loan (PMML) scheme where he said 13 crore people have availed loans. Of these, four crore people have taken any loan for the first time for self employment initiatives. Brokerage Elara Securities said in a recent note that until August 2018, 92% of total borrowers under the Mudra scheme were under the category of Shishu (ticket size of loans up to Rs 50,000). However, in terms of lending amount, Shishu accounted for 48% of total cumulative lending. Tarun, the highest ticket size loan (Rs 10 lakh) accounted for a mere 1.3% of total loan accounts, but has a 22.6% of total lending. In other words, an overwhelming number of loan takers under Mudra scheme got Rs 50,000 or less to start their own ventures. In fact, the average size of Shishu loan was Rs 22,985 in FY17, less than half the ceiling of Rs 50,000.

The Mudra yojana has been projected as one of key policy measures by the government to boost self-employment in the country. The share of new entrepreneurs in MUDRA lending stood at 36% in FY16 and 25% in FY17. This could be considered as a proxy for new employment generation in the country but is it enough for the government to deflect the constant criticism over dismal job creation? Besides, the MUDRA loans have a gross NPA of 5%, according to Elara. It is important that the size of bad loans in this category is contained, lest new concerns build up for the PSU banking sector, instead of helping the government fight low job creation allegations.

Farmers’ income

The PM made a mention of the increase in MSPs for the Kharif crops that this government has announced recently and also reiterated his earlier promise of doubling farmers’ incomes by 2022. Last month, the government hiked the minimum support price (MSP) for paddy by a record Rs 200 per quintal besides announcing generous MSP hikes for most other Kharif crops as well. The bill for this largesse could be anywhere over Rs 15,000 crore.

The Modi government had promised to give farmers a price of 1.5 times of cost when it came to power in 2014 but this has been implemented only in the last year of tenure. And now, it is stoking fears of inflation. A report by brokerage IDFC had said after the MSP hikes in July there was no doubt of its inflationary impact, while also speaking of the criticality of the way in which these hikes were implemented, especially since for most of the crops (including pulses), the current ruling market prices are lower than the MSP.

To fulfil his promise of doubling farmers’ incomes, the PM must ensure that there is enough procurement of MSP crops by states and some sort of compensation to farmers if procurement is below the MSP. So in essence, the dream of doubling farm incomes remains distant for now while the MSP decision also holds potential to stoke inflation.

(The author is a senior journalist. Views are personal.)
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