Article by Com.Sitaram Yechury, Polit Bureau Member CPI(M) and Member, Rajya Sabha
The Finance Minister presented the first full budget of
the Modi government with an air of “illusions of grandeur”. Preparing
for the celebrations of the 75th anniversary of our independence in
2022, he listed “targets” that will be achieved by then. This list is a
mere reiteration of what is contained in our Constitution’s Directive
Principles of State Policy that should have been attained by 1960!
Clearly, he has presumed the Modi government’s return in the 2019
general election. The Modi anti-incumbency wave in Delhi election has,
thus, become a victim of the BJP’s “selective amnesia”.
Shorn
of all its rhetoric, what does the budget mean for the people? Instead
of expanding public expenditures to stimulate growth, employment and
people’s livelihood, the budget sees a contraction. In 2014-15, total
government expenditure will be 7 per cent lower than the last budgeted
figure, i.e., Rs.1.14 crore less. For 2015-16, the estimated gross tax
revenue stands at 10.3 per cent of GDP which is less than last year’s
budget figure of 10.8 per cent.
Social sector spending
Instead
of stimulating domestic demand by targeting larger expenditures in
social sectors, the budget proposals do the opposite to contain the
fiscal deficit at 3.9 per cent. The allocations for MGNREGA and food
subsidy have almost stagnated, in real terms, showing scant concern for
food security, generating employment and improving people’s livelihood.
Total subsidy as percentage of GDP has come down from 2.1 per cent to
1.7 per cent (Rs.2.60 lakh crore to Rs.2.44 lakh crore). The allocation
for health and family welfare has come down from Rs.35,163 crore last
year to Rs.29,653 crore. The total budgeted figure for housing and urban
poverty alleviation has come down from Rs.6,008 crore to Rs. 5,634
crore. Similarly, there is a huge shortfall in allocations for the
Tribal Sub-Plan (less by Rs.5,000 crore compared to last year), for the
SC Sub-Plan (less by Rs.12,000 crore). The Gender Budget cut by 20 per
cent (less by Rs.20,000 crore). The ICDS programme has been halved, from
over Rs.16,000 crore to Rs.8,000 crore.
Instead,
India’s rich and both foreign and domestic corporates have hugely
benefited. The budget proposals will reduce direct taxes by Rs.8,315
crore benefiting the rich and increase the burden on people through
indirect tax hikes of Rs.23,383 crore. In addition to direct tax
benefit, for India’s rich, wealth tax has been abolished, corporate tax
planned to reduce from 30 to 25 per cent, greater concessions and access
to FDI, and FIIs absolved of capital gains tax and minimum alternate
tax (MAT).
Further, the reduction in the tax
concessions given by the Central government to the rich (subsidies to
the rich called “tax incentives”) results in a revenue loss which is
more than the actual fiscal deficit (i.e., Rs.5,89,285.2 crore for
2014-15 as against the budget estimate of fiscal deficit of Rs.5,55,649
crore). Hence, our economy is suffering from a deficit burden primarily
due to such subsidies to the rich, not due to subsidies for the poor.
Under these circumstances, to bolster governmental revenues, the budget
has announced an aggressive disinvestment of the public sector to the
tune of Rs.70,000 crore, i.e., selling “family silver” to meet current
expenditure.
Mirrors UPA reforms
The Modi
government’s budget this time is, thus, a more aggressive variant of Dr.
Manmohan Singh’s reforms. They follow the same logic that our economic
development is only possible by attracting larger quantum of investments
through big concessions to foreign and domestic Capital. However, this
alone cannot automatically lead to higher employment and growth. This
can only happen if the purchasing power of our people grows to be able
to purchase any increased production. With global commerce shrinking due
to continued economic slowdown, our exports will remain low. People’s
purchasing power will now further contract this budget.
Instead
of expanding concessions amounting to lakhs of crores of rupees for
attracting investments, which, in any case, cannot result in growth and
improve people’s welfare, if these amounts were utilised for
substantially increasing public investment to build our much needed
economic and social infrastructure, both greater growth and equity could
have been achieved.
However, by doing this, the Modi
government could not have redeemed its “payback time” promises to those
who heavily financed its election campaign. The Finance Minister was
confident that the time has come for India to fly. With this budget, the
rich may soar but the poor will have to prepare themselves for a
disastrous crash landing.
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