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#India – Whose budget is it anyway?

 

INADEQUATE ALLOCATION: Reduced plan expenditure directly hits funds for sectors which require a big increase in allocation, such as drinking water and sanitation.

PTI INADEQUATE ALLOCATION: Reduced plan expenditure directly hits funds for sectors which require a big increase in allocation, such as drinking water and sanitation.

The presented by is a continuation from where P. Chidambaram left off, both in its fundamental policy thrust and in its skewed priority in allocations

Modi Sarkar’s first budget offered the Prime Minister the opportunity to spell out his government’s priorities and take steps towards delivering the promises he made during his election campaign. But it was clear from Narendra Modi’s ‘Congress-free India’ slogan during the budget that he was interested only in the removal of individuals, not in a reversal of the economic policies followed by his predecessor.

Fiscal fundamentalism

This budget makes a mockery of the slogan sab ka saath sab ka vikas (with everyone, for everyone). Finance Minister Arun Jaitley said as much when he decried “populism”, which in the dictionary of the corporate world means any scheme which directs national resources towards fulfilling the needs of the poor. The budget presented by Mr. Jaitley is a continuation from where former Finance Minister P. Chidambaram left off, both in its fundamental policy thrust and in its skewed priority in allocations.

Mr. Chidambaram had also adopted the deceitful practice of not spending even the inadequate allocations he made. The gap between allocation and actual expenditure became an instrument to control deficit, while permitting the announcement of grandiose schemes. To illustrate, a sum of Rs.1,000 crore had been allocated for the Nirbhaya fund, but there was zero expenditure. Mr. Jaitley has conveniently used the lower revised estimates to conceal his own woefully inadequate allocations. It is to be seen whether even this lowered amount allocated is actually spent at the end of this fiscal.

This feature of fiscal fundamentalism adopted by the United Progressive Alliance government remains the cornerstone of National Democratic Alliance’s policy. Translated into the everyday experience of people, this basically means that the government will not expand its expenditure to meet their needs because it claims it cannot spend more than its revenue. However, it does not want to take the logical step of increasing its revenue by raising the tax rates for the rich, therefore trapping the country in its circular argument.

The total plan expenditure in this budget is Rs.5.75 lakh crore compared to the budget estimate of 2013-14 of Rs.5.55 lakh crore. Factoring in an inflation rate of seven per cent, this constitutes a cut of four per cent in real terms.

There are two aspects to the impact of reduced plan expenditure. The first is that it directly hits funds for rural housing, provision of drinking water and sanitation — sectors which require a big increase in allocation. It is unbelievable but true that the Rs.15,266.85 crore allocation made by Mr. Jaitley for provision of drinking water and sanitation has increased only marginally since the 2013-2014 budget. Obviously drinking water and sanitation are less of a priority than the statue of Sardar Patel for which the Finance Minister has generously allotted Rs.200 crore.

Equally disturbing is the denial of any increased expenditure for the MGNREGA programme. The budget has reduced the funds available in real terms. With a drought being predicted, a huge expansion of the programme to provide drought relief to the 60 per cent agriculture-dependent working population of our country was essential. But the Rs.33,000 crore allocation made by Mr. Chidambaram — which itself was a reduced allocation — has been essentially repeated by this budget. This means that instead of creating jobs, we are destroying them.

The government is also the largest employer of women. Today more than Rs.50 lakh scheme workers, mainly women, fulfil responsibilities equal to those of government employees, but for a pittance. Shamefully, the budget does not have anything for them. How can you have a slogan of beti bachao, beti padhao (save your daughter, educate your daughter) when the basic unit responsible for looking after the girl child in the under-five age group, the anganwadi centre, is being starved of funds?

The Finance Minister received loud applause when he stated his aim to fulfil the Prime Minister’s dream of developing infrastructure, especially road connectivity throughout the country. He announced Rs.37,880 crore for the National Highway Authority of India and State Roads, including Rs.3,000 crore for the Northeast. A closer look at the figures reveals that far from an improvement, these represent a cut in allocations from earlier.

The second aspect is that fiscal policies, obsessed with maintaining an arbitrarily decided lakshman rekha for deficit, in this case the Chidambaram-determined 4.1 per cent, will deprive the economy to be kick-started through massive public investment for employment-led growth. The approach to resource mobilisation is to open up every sector — from defence to highways to real estate — to foreign investors and domestic corporates. The plan to push FDI in insurance to 49 per cent from the present 26 per cent will actualise the Indo-U.S. Forum demand, which was resisted by vast sections of the working people.

The pro-business bias has to be seen in conjunction with the stated moves to dilute the already weak Land Acquisition Act to make takeover of land easier for industry. The emphasis on expanding industrial corridors, many of which will go through tribal and Fifth Schedule areas to benefit mining companies, will lead to large-scale displacement and elimination of tribal rights. These are the hidden costs of the budget.

No change in direction

The other big promise was to control prices but the budget will actually increase them. The cuts in fuel subsidies by about Rs.22,000 crore means that the prices of petrol and diesel will increase, leading to a cascading impact on other essential commodities. At the same time, the allocations for the food subsidy are not adequate to cover implementation of the new food security law.

There was an alternative but that would have meant a radical change in direction. That path lay in raising taxes of the corporates and the rich. But Mr. Modi has not raised tax on their profits at all. The revenue from direct taxes is slated to decrease by Rs.22,000 crore. This at a time when India has one of the lowest tax-GDP ratios of 10.6 per cent among the G20 countries.

Instead, for revenue mobilisation, Mr. Jaitley also targets disinvestment in PSUs at Rs.55,000 crore. The target for Mr. Chidambaram’s disinvestment was around Rs.40,000 crore, of which he could collect about Rs.21,000 crore because the corporates wanted the price of the shares they were buying in the PSUs to be even lower. These policies are disastrous for the economy.

The Prime Minister has described the budget as new hope for the poor. If producing a budget that is based on liberalisation and privatisation provides hope for the poor in Mr. Modi’s understanding, then the question clearly is: have burre din (bad days) arrived?

(Brinda Karat is a CPI(M) Polit Bureau member and former member of the Rajya Sabha.)

 

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Comment (1)

  1. Communal Award

    Income = 100
    Expenses = 158

    How can Modi regime cover this 58% deficit?
    More taxes/more loans/sell off more assets/steal your money/confiscate your cash in banks/print more rupees.

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