SINCE even the highest bourgeois oracle, the IMF, has cast doubts on the veracity of India’s GDP estimates, the precise budget figures based on the assumptions of a certain level, and growth rate, in nominal GDP, mean very little; in fact, the current budget, while announcing several tax measures, has not even bothered to give estimates of how much revenue loss or gain they would cause. Nonetheless, from the budget figures one can get a sense of the strategic direction of the budget; and, this, not surprisingly, is a totally perverse one in the context of the current state of the Indian economy.

The most pressing problems of the Indian economy at present are: the phenomenal rise in economic inequality, whose magnitude now is higher than at any time during the last one hundred years; the massive increase in absolute poverty as initially defined by the Planning Commission by taking into account a daily calorie-intake norm; and the enormous increase in unemployment which now even afflicts a vast chunk of the country’s educated youth. The one common solution to these problems is to put large amounts of purchasing power in the hands of the common people, which, if the fiscal deficit percentage in the GDP is not to increase, can be achieved only through a significant tax-mobilisation  effort at the expense on the rich. This would raise the level of aggregate demand in the economy via a rise in consumption demand, and that too for more employment-intensive commodities, leading to greater output and employment and also to an amelioration of poverty; it would also reduce income inequality since the share of post-tax incomes of the rich would be lower than otherwise.

The perversity of the budgetary strategy however lies in its taking a direction that is exactly the opposite of this. The total tax revenue as a percentage of GDP, far from showing any increase, shows a marginal decline from 11.5 in 2023-24 and 2024-25 and 11.4 in 2025-26 (RE) to 11.2 in 2026-27. And this is supposed to be accompanied by a reduction in the fiscal deficit from 4.8 percent in 2024-25 and 4.4 percent in 2025-26 (RE) to 4.3 percent. Within the total expenditure that is so constrained, by the government’s refusal to either levy heavier taxes on the rich or to raise the fiscal deficit, there is a rise in capital expenditure whose percentage in GDP has gone up from 4.0 in 2024-25 and 3.9 in 2025-26 (RE) to 4.4 in 2026-27.

Even this rise in capital expenditure however is illusory. The central government’s own capital expenditure which was 3.2 percent of GDP in 2023-24 and 2024-25 and fell marginally to 3.1 percent in 2025-26 (RE) is supposed to remain at 3.1 percent in 2026-27; what is supposed to increase is Grant-in-Aid for the Creation of Capital Assets, from 0.8 percent in 2024-25 and 0.9 percent in 2025-26 (RE) to 1.3 percent in 2026-27. But this last item includes allocation under the MGNREGS, whose funding has now to be shared between the central and state governments on a 60:40 basis, instead of the 90:10 earlier; this means that if the state governments which are starved of funds cannot raise the required resources, which would be difficult for them, then the centre will not have to spend the amount it had originally earmarked. It will then not have to undertake the expenditure that it shows in the budget and will at the same time shift the blame conveniently on to the state governments for the collapse of the programme, even though the state governments were not a party to the 60:40 decision in the first place; this decision was unilaterally and entirely arbitrarily taken by the centre and simply imposed upon them.

This indeed is what the pretentious term “cooperative federalism” has come to mean. The centre unilaterally decides on the resources of the state governments and their responsibilities, and uses this fact to play favourites among states, being partial, needless to say, to the BJP-ruled ones, squeezing the non-BJP-ruled ones, and blaming the latter for their alleged “non-performance”. The 14^th Finance Commission chaired by Y. V. Reddy had recommended that the share of state governments in the divisible pool should be raised from 32 to 42 percent by 2020. But the central government resorted to cesses and surcharges, which are not shared with the states, rather than to taxes proper, which are shared, in order to ensure that the share of states in total tax revenue (including cesses and surcharges) is no more than 34 percent; this is an illicit act of effectively centralising resources.

Even with such duplicity however the central government’s expenditure is slated to remain constant (if Aid for Creating Capital Assets remains lower than budgeted for reasons already mentioned), or rise somewhat, as a share of GDP. This however is totally incapable of overcoming the three immediate crises of the Indian economy mentioned earlier. In fact, on the whole, capital expenditure by the Centre is less employment-generating than transfers to the people. This is because the wage component in infrastructure expenditure, which is at the core of capital expenditure, is just a fraction of the total, while the entire amount of the transfer to the people is analogous in its effect to a de facto wage payment; and of course if the resources devoted to infrastructure investment are spent instead on employing teachers in schools, colleges and universities, which are currently grossly under-staffed, or in increasing the staff of government healthcare facilities, then the direct effect on employment and the second round multiplier effects because of the demand created by those newly-employed, would be far more significant.

The budget therefore not only does nothing to reverse the trend towards increasing unemployment and poverty, but it actually does the very opposite: by providing tax concessions to the private sector (including to multinationals in order to attract direct foreign investment) on the one hand, and raising further the weight of infrastructure expenditure at the expense of directly employment-generating expenditure (such as teachers’ salaries) and transfers to the people.

The simple fact that the government appears unaware of is that private investment occurs only in response to growing demand. No amount of tax concessions will induce capitalists to invest if the capacity created by such investment is likely to remain unutilized. This incidentally is why despite all previous tax concessions, including even such massive ones like the lowering of the corporate tax rate in 2019, private investment continues to remain sluggish. Likewise, in a period in which the world economy has slowed down, and with it investment in general, to expect that direct foreign investment will flow into the Indian economy if only the multinationals have to pay lower taxes is absurd; and to believe this when Trump is raising tariffs to prevent investment outflow from the U.S. is even more so.

Matters are going to become worse for the people for two additional reasons: the first is the coming to an end of the 5 kg. of foodgrains per person per month in 2027. This has been a life-support in rural India and its end will bring great misery. The second is the trade agreements being signed, including now even with the U.S. This latter agreement, if reports are to be believed, will allow the U.S. to impose 18 percent tariffs on Indian goods while India allows duty-free imports to American goods; such an “unequal treaty” will cause great hardship to Indian agriculture, especially the dairy sector. But a fascistic government is more concerned with projecting an image of benignity to the people than with actually improving their condition.

The difference between 1930s fascism and the current fascistic governments is underscored by this budget. In the 1930s, there was a massive increase in fiscal deficit in the fascist countries to boost military expenditure, which increased greatly the level of aggregate demand and got those countries out of the Great Depression; in addition, this increase in government spending was not confined to infrastructure investment such as building autobahns and purchasing military hardware, but also encompassed an increase in the size of the armed forces, which directly increased employment. Contemporary fascistic governments like our BJP-led one, neither can enlarge the fiscal deficit to increase aggregate demand, nor have any appetite for increasing direct recruitment of people, or making transfers to them, as distinct from merely spending more on infrastructure.  They fail on both counts as far as enlarging employment is concerned. Their resort to “hatred-mongering” therefore is likely to increase many-fold in the months to come.