Volume 7, No. 4, April. 2006


Union Budget Favouring Comprador and Rich with Lip Service to Poor
- Siddharth

On The Union Budget 2006-07 presented by the Finance Minister before the Parliament on February 28, 2006 is a document favouring the comprador and rich with lip service to the poor. It has broadly maintained the continuity of its comprador features and contents in conformity with earlier budgets since 1991. Contents of the budgets have been consistent in pursuing greater intensity of liberalization, privatization and globalization and restructuring the Indian economy in favour of the market and private players, irrespective of the political parties in power. The Finance Minister has tried to strike an intelligent illusory balance between so-called political compulsions and so-called fundamentals of economics. Political compulsions are mentioned as the politics of coalition government - pressure to adhere to the national common minimum programme, to consider the interests of the common man and also in view of the coming assembly elections in the states. Fundamentals of economics have placed a series of challenges – increasing unemployment, poverty, undependable and slow agricultural growth, crop failures, insufficient institutional credit support, farmers suicides, on the one hand and widening trade deficits, pressure of finance capital to ‘rationalize’ custom and excise duties, reduction of subsidies, disinvestments to get rid of public expenditure on public enterprises, etc., on the other.
Hence, in order to minimize protests and smoothen the sanction of the finance bill many important issues have been left to be decided through off-budget policy decisions for the furtherance of the mandate of economic reforms, which will no doubt take place after the elections.
The Finance Minister has introduced various new initiatives to accelerate the pace of economic reforms towards further intensifying privatization and restructuring the Indian economy in favour of the market and private players. Economic reforms with a human face have also got space for creating illusions for public consumption to contain the resentment of the people. Food, fertilizer and petroleum subsidies shall engage certain unpopular space of the off-budget decisions after the assembly elections. Infrastructure, social develop-ment, farm credit, minority, gender, and weaker sections have got focused for lip service in this budget. Economic reforms with substantial reduction in custom and excise duties for import and production have given scope for cheaper import and production to please big industries.  Custom duties have been reduced from 15 to 12 per cent which will help the imperialists dump even more of their products here. Excise duties for most of the items have been reduced from 16 to 8 per cent in order to promote sales and boost profits of these manufacturers. Soft drinks, condensed milk and milk products, fish, plastic products, inorganic chemicals, life saving drugs, Naphtha, leather and foot wear ranging from Rs.250 to 750, man made fibre, small cars, LPG stoves, writing and printing paper, etc., will be cheaper as a result of reduction in excise duties. Of course the bulk of the benefit will be taken by the manufacturer — so, for example we have not seen Coca Cola prices drop after the budget. No mention is found for any concessions to the common man from the lowest rung of society as on food items, salt, water. etc.
Thanks to a good monsoon, better agricultural performance is expected in the current financial year. But we have seen production gradually declining — between 1999/2000 and 2004/05 rice production fell from 90mt to 87.8 mt; wheat from 76 mt to 73 mt; and cereals from 196.4 mt to 192.7 mt. It appears that realization is growing in favour of agriculture. But moving towards corporate agriculture may prove disastrous as alienation of small and marginal farmers from the growth process will bring devastating adverse results for their liveli-hood and employment and crises in agriculture may deepen further. Mindless market led diversification for value added production without proper regulation at the cost of food insecurity will lead to the question of food sovereignty, which needs to be addressed carefully (massive imports of wheat have already begun). Money-lenders still rule the credit market and nothing has been proposed in this budget to curb their exploitative usury practices. Revamping of the agricultural credit market and ensured wider coverage of institutional credit support, together with debt relief (NPAs written off by banks to big business goes into thousands of crores but they are not prepared to spare a paisa from the farmer) is the foremost need of the hour to rescue farmers from the debt trap leading to suicides. In addition most of the cotton growers have been the victims of crop failure because of failure of seeds and pesticides. However, MNCs have been left scot-free and nothing has been mentioned on this count. Small Scale Industries have difficult days ahead added with further de-reservation of 180 items. This sector has been pushed to compete with the big manufacturing sectors. Introduction of FDI in the retailing sector has already been in place. Small micro enterprises will have to compete with both big domestic and foreign capital retailers. A large number will get wiped out. It has definite implications on the employment front also. It is unfortunate that concession on import duties to big industries and foreign capital will leave no room for survival of the SMEs in the market. Even the rail budget with comfortable finances does not stop to give concessions to the rich and for private sector participation.
The Employment situation has been extremely disappointing. Even in the organized public and private sectors it has declined significantly. Total employment was to the tune of 282.45 lakh person in 1997-98 which has declined to 270 lakh persons in 2003-04. Altogether loss of employment was 12.45 lakh persons during 1997-98 to 2003-04. Much more would have been added in the last two years but there is no further estimate provided for the said years in the Economic Survey brought out by the Government of India. In the public sector alone job loss during 1997-8 to 2003-04 was about 10 lakh persons. There is no significant move for employment generation in the rural areas other than the much touted employment generation through the NREGS. Rural unemployment is supposed to be addressed through NREGS that too for 100 days only through consolidation of the schemes of the government already in existence. But the number of districts has not been increased. Implementation is another dimension, which never takes place. The fate of this scheme is bound to meet the same destination as was with other poverty alleviation programmes full of leakages to lumpen/political/elite elements of society.
The reduction in custom and other duties since 1991 has been making the state exchequer poorer in subsequent years and yet they talk of reducing the fiscal deficit. The Fiscal Responsibility and Budgetary Management Act and Twelfth Finance Commission’s recommendations for increasing tax-GDP ratio, lowering fiscal and revenue deficits and the debt GDP ratio and the Rangrajan Committee’s recommen-dations for squeezing out subsidies on petroleum, etc. are all aimed to widen the tax net to meet World Bank stipulations on the fiscal deficit. In essence it means giving benefits to the rich (and not taxing them additionally) while extracting the bulk of the increased tax revenue from the poor and middle classes. Although the annual average gross primary deficit has been reduced from 5 per cent to 2.65 per cent, average revenue deficit has escalated from 1.88 per cent in the 1980s to 4.9 per cent in between 1991-92 to 2004-05. It suggests that there is a substantial flow out in the form of debt servicing. Because of the spiraling government debt the interest payments in this financial year is expected to be to the tune of Rs.1.34 lakh crore. This implies that if India can avoid such a wasteful flow of funds it could be used for constructing more than one crore houses costing one lakh each for the homeless or thousands of school can be built to address the issues of human resource development.
The Human Development Report 2006 suggests that growth of the Indian economy does not correspond to improve-ment in the Human Development Index. It implies that growth does not address problems of literacy, health and income generation. This explains the contradictory existence of growth and inequality in India. Moreover, mere allocation of funds does not translate into implementation. This year’s Economic Survey shows to what a limited extent social welfare fund have actually been used in the last year.
In a just and equitable system the poor will not be taxed while the rest will face a graded tax system with the wealthy being taxed the most. What exists is exactly the opposite. In addition, the budgets since 1990s that government has been aggressively in the interests of finance capital and the rich (See Box), which is necessarily antagonistic to the interests of the poor. Unless growth is reoriented towards distributive and social justice, achieving the goal of poverty eradication will remain an academic exercise on paper. Poverty eradication needs sustainable development efforts in the interest of the direct producers in the primary, secondary and tertiary sectors, particularly the primary sector. Direct producers need to be ensured control over the means of production, exchange, distribution and consumptions. Undoubtedly the present ruling comprador/feudal classes will not allow this reorientation. This is an uphill task organising a pro poor radical revolutionary movement against the state through militant mobilization of masses in the interest of the poor people of the country.



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