Volume 6, No. 4, April 2005


CPM-backed UPA’s Budget:

Aggressively Anti-people; Servilely pro-Big Business



This Budget is nothing but the continuation of the anti-people and pro-imperialist/big-business policies of the UPA government ever since it came to power last year. The speed at which it is pushing through the WTO/World Bank/IMF agenda, not withstanding its dependence on the ‘Left’, is no different from that of the BJP-led NDA government. In fact the speed of introducing anti-people ‘economic reforms’ is probably greater than that of the BJP. This is reflected in not only in its two central budgets, but also in the policies being followed by the various Congress state governments.

The brutality with which the Congress government in Maharashtra has bull-dozed the slums of Mumbai displacing over 3 lakh people is only one example. The bulldozers of the Congress not only destroyed the houses/huts of the already poverty stricken people, but crushed all their belongings as well. What comes to mind are the days of the Emergency in Delhi. And as far as the Sheila Dixit government at Delhi goes it is busy selling off the entire city to big business and multinationals; the latest being the surreptitious steps taken to sell off the Dehli Jal Board. And as for the Andhra Pradesh Congress government, not only have they reversed their free electricity policies, they have also outpaced the earlier TDP in the level of brutality against the naxalites. Over the last month the media reports killings nearly every second day, the latest being the butchery of 10 in Nizamabad while they were asleep. This included senior leaders like the district committee sectratary, another district committee member of the CPI(Maoist) and three comrades.

But ofcourse, the Congress is experienced in packaging its policies in progressive sounding rhetoric. Duplicity, treachery, hypocrisy, and scheming back-stabbing are all the trade-marks of Congressism from its very birth. The Surjeets, Basus, Buddhas, Yechuris, etc are now good pupils in Congressism, given their long and close association. Chidambaram, with his non-stop slippery smile, actually has a dagger drawn into the hearts of the masses with the blood of the people dripping from the sharp blade of the budget. The CPM, who has hailed this budget, are experts at ‘dialectical’ sophistry and are ideal props for the Congress to further help dupe the masses. The CPM helps coat the sharp blade with pink cotton. This was clearly evident in the last budget as well, where a pittance was given for the Common Minimum Programme, while the bulk of the benefits went to the moneybags, particularly the imperialists, yet it was also hailed by the revisionists in power.

This budget (and pre-budget exercise) goes even one step beyond what the last budget and the NDA have been doing to push ‘economic reforms’. It has sought important structural changes in taxation and other polices that will facilitate greater speed in bringing through the imperialist-dictated ‘reforms’. They are vigorously pushing through VAT (see article in this issue) at the state level and have introduced structural changes in taxation policy which primarily affects the workers, employees, middle classes and small businessmen. On the very day of the budget the RBI announced a roadmap to, defacto, sell the PSU banks to the multinationals. The budget has taken further steps towards drastically amending all labour laws for massive exploitation of the working class. It has presented a plan for the total penetration of foreign capital into mining, insurance, pensions and retail trading. Earlier the Patent Act was amended and a new Seed Act was passed at the behest of Pharmaceutical giants and international seed companies like Monsanto which will drastically affect Indian agriculture and health conditions. Finally, through the recent measures taken in the budget and elsewhere, they are seeking to reverse even the existing nominal federal structure of the Constitution through a process of centralising all fiscal powers in the hands of the Central government — done through not only pushing VAT, but also through implementing the recommendations of the Twelfth Finance Commission (TFC), released just three days before the budget.

The basic framework for many of the structural changes in this budget has been incorporated in the recommendations of the Kelkar Task Force (on tax reforms) and the Fiscal Responsibility Budget Management (FRBM) Act, 2003 (to curb the budget deficits); both passed during the BJP/NDA regime on the instructions of the imperi-alists and compradors big business. The actual implementation of the BJP-passed legislations/recommendations is only now beginning to be implemented by the CPI/CPM-backed Congress government!!!

Ironical, but true. And then we are asked to choose between such parties with the dog-fights going on in Jharkhand, Bihar, Goa and even Haryana (for CMship). What difference will it make to the masses as to which of these canines win? Will they change the nature of these anti-people budgets and policies? Will any even dare to reverse a single step being pushed by the imperialists? Forget even ordinary bourgeois parliamentary ethics, the scum comprise the mafia, criminals, and hoodlums. Take for example that great ‘dalit’ leader, Paswan, an expert at switching parties and alliances. He pawns dalit votes to upper caste mafia candidates to become the leader of the LJP (there are only 5 dalit MLAs from his party, not one Muslim and the bulk are Bumihars and Brahmins, most with links to criminals). While the budget was introduced in the midst of the declaration of the election results not a single party was interested, and the Lok Sabha spent its time squabbling over the power games in the three states and Goa. This is quite natural — as all are united on basic policies, their only difference is as to who should get the perks of power.

Now let us look at some of the salient features of this budget:

Continued Neglect of the Rural Economy:

Due to continued neglect of agriculture the last year there was once again a drop of 3% in foodgrain production. According to the Economic Survey for 2004-05 the shortfall in the monsoon that year was as high as 13% and the overall growth in agriculture and allied activities was a mere 1%. But, because agriculture has become so unimportant to the economy the GDP growth rate was put at still over 6%. In fact over the last few years (since 2001-02) the share of agriculture in GDP has fallen another 3.5% to become just 21% of the total GDP, though 70% of the population live off it. Besides, today the per capita foodgrain availability is the same as on the eve of World War II. In the 1980s it was 178 kgs per year; today it is 155 kgs.

The worst affected by last year’s drop in foodgrain production will be the poor as coarse grain production fell by a huge 6 million tones and pulses by 2 mt. In spite of this the government has reduced the food subsidy by Rs.3,000 crores. On the other hand it has raised the fertilizer subsidy by a huge Rs.4,000 crores to compensate big business for the high cost of imported inputs — in other words people’s money is used to pay the imperialists for their hiked up charges on raw materials exported to the fertilizer industries.

While the budget is strong on rhetoric regarding rural development and employment guarantee, little funds have been allocated for it. Though he has announced with much fanfare the Bharat Nirman Vision to generate 100 lakh rural jobs, he has not given one paisa to it. What concrete allocations are there, are only to help the rich farmers and promotion of agri-business. All the tall talk of "Bharat Nirman" of : bringing an additional one crore hectares under irrigation, 74,000 habitations drinking water, electrification of 1.25 lakh villages and 2.3 crore households during the next 4 years, etc are a hoax as little funds have been allocated for all this. And regarding the nightmare of rural employm-ent and the EGS scheme, all the FM said was "when fully rolled out, this will provide livelihood for millions of poor families, and I promise to find money for the progr-amme". So, we get only promices, no actual funds. He also suggested so-called rationa-lizing of the MSP (Minimum Support Price) rates with the aim to remove MSP totally.

On the other hand concrete funds have been allocated for road development to every village with a population of 1,000 (500 for tribal villages). This primarily is to facilitate counter-insurgency operations and also to create the infrastructure for greater imperialist penetration of the rural economy. The budget has also pushed in a big way imperialist-sponsored NGOs through promotion of the World Bank micro-finance scheme — he said that "about 2½ lakhs self-help groups would be linked to banks in the next fiscal year". This too is no doubt part of the government’s Low Intensity Conflict plans against the growing agrarian revolutionary movements in the country. Yet another plan in this direction is the massive Rs.1,200 crores allocated for building up the telecommunication network in the rural areas. Besides servicing the elite and agri-business this is an essential necessity for quick troop/police movements.

But the main focus in this budget was agri-business in the name of "stressing the need for diversification and the roadmap for it". The focus would be on fruits, vegetables, flowers, dairy, poultry, fisheries, pulses and oilseeds. A National Horticultural Mission has been set up and a huge Rs.630 crores allocated for it. Rs.50 crores has been allocated for research into agricultural diversification to bring in new varities by the seed TNCs. And in the most Tuglakian scheme of all Rs.100 crores has been allocated to spread info-tech to rural areas to set up "Rural Knowledge Centres in every village by 2007". In addition Rs.200 crores has been gifted to the powerful sugar mills by allowing interest payments at 2% below the bank rate.

Beside these the new Patent and Seed Acts will have a disastrous impact on Indian agriculture. Both have been pushed through by the WTO. Together they will aim at replacing farmers saved seeds with those from the international seed industry and denying farmers the right to use and exchange seeds. No doubt a "seed police" will come up to further harass the farmers.

So the much hyped propaganda of the CPM and others of implementation of the Common Minimum Programme is a big hoax when we look carefully at what is aimed at in the Budget for the rural economy. It will only lead to all-round distress, while giving a bonanza for a small rural elite that gains from linking up with agri-business. Not surprisingly, just three days after the budget the government gave the go-ahead for planting genetic engineered Bt cotton even though there has been massive failures of these seeds in Andhra Pradesh causing great distress to AP farmers.

Robbing the Masses to Fund the Rich

Again much of the tall talk of the CPI/CPM of sticking to the CMP on welfare is another big hoax. The total subsidy bill has been raised by a mere 2% (Rs.918 crores); which in real terms means a reduction of a minimum of 3 to 5%, because of inflation. This also includes the subsidy doled out to the rich and business. Besides, though the official rate of inflation was over 5% the actual rate for the masses was much more, so the real value of the subsidy bill is a big drop. The Economic Survey 2004-05 itself says that potato, tea, sugar salt, bajra, gur, coal, etc witnessed double digit inflation. Sugar prices rose some 25% in just the last few months. The rise in prices of basic necessities has hit the poor the worst. Today kerosene is available in the black market (in cities most are off the ration system since the division into APL and BPL) at Rs.30 a litre.

So while the price of basic necessities continue to rise the major cuts on excise duty has been on items of luxury. So, for example excise duty on air-conditioners has been reduced from 24% to 16% and on cars from 15% to 10%. While duty on aviation fuel has been decreased giving the Airline companies a gift of over Rs.150 crores each, the budget has increased the road tax on diesel and petrol by Rs.0.5 per litre. This will take a massive Rs.8,000 crores out of the pocket of the poor and middle classes. Diesel is primarily used for public transport and by the farmers to run their pumps. The former will result in a general rise in costs while the latter will particularly hit the already squeezed agriculturist hard.

The rise in income tax relief for the middle classes has been given as a sop but this is balanced by big cuts elsewhere. The tax-free income has been increased to Rs.1 lakh from the earlier Rs.50,000. Also the tax rate on those earning upto 2 ½ lakhs per year has been reduced by 10%. This will give some money to the middle classes. But, now the earlier standard deductions available on certain PSU saving schemes have been removed and replaced by a general tax-free allowance for investing upto Rs.1 lakh in any notified saving scheme. This change in the saving scheme will not make much difference to the investor but the new clause will only give a massive bonanza for the huge TNC-collaborated Mutual Funds/Insurance/Banks that have entered the country in a big way, which will now be able to attract savings that were earlier going into PSU tax exempt schemes. This clause is in fact linked to the another announcement of allowing 74% FDI into private banks. Besides the biggest advantage from all this will go to the very rich as now the tax exemptions on savings will be available to all, while earlier it was available to only those earning under Rs.5 lakhs. Besides, the newly introduced complicated savings schemes will hit the senior citizens, as they now lose the Rs. 20,000 tax rebate (refund) that was earlier available. Thier overall income will drop.

In addition the budget has introduced a huge 30% (the highest rate existing) on "fringe benefits" given to employees. In this every single employee’s welfare scheme has been included and encompasses the big companies as well as the individual proprietorships. This will amount to a massive attack on the welfare and earnings of all employees as the items included in "fringe benefits" are: medical care, transport and travel, health clubs, sports facilities, entertainment, etc. If it is a group scheme the company is to pay the tax, while if it is for an employee he/she must pay the tax. With a high rate of 30% tax on these "fringe benefits", most companies will cut down on their welfare schemes or seek to recover the amount from the employee. In both ways the employee suffers. Interestingly the massive "fringe benefits" to Ministers, MPs, MLAs, etc have not been touched. On the contrary, the allocation for the PMO (includes the National Advisory Council headed by Sonia) has been increased by 12% to a huge Rs.16.13 crores — i.e. Rs. 45 lakhs per day!!!

The biggest outright gift is to big busi-ness, including the TNCs. The reduction of both corporation tax and customs duties by 5% each will give big business a mass-ive gift of Rs.14,350 crores in just one year. It is no wonder that all chiefs of busin-ess houses have been praising this budget and offer bouquets to Chidamabaram.

The reduction in corporate tax from 35% to 30% will give corporate houses a full Rs.5,150 crores. It is made out as though the reduction in the rate on depreciation will neutralize this gain. This is not true as though the general rate has been reduced the initial depreciation rate in the first year has been hiked from 15% to 35%.

The peak customs duty has been reduced from 20% to 15% (it was over 120% in 1991 an has been continuously brought down in each budget). On textile machinery it has been brought down from 20% to 10%; import duty on 217 info-tech items and materials for hardware have been abolished and on fuels and petroleum products it has been reduced from 15/20% to just 10%. The overall gain to big business from these duty cuts is a gigantic Rs.9,200 crores in the coming year. Just one company, Reliance, stands to gain a huge Rs.1,700 crores from these duty cuts.

Biggest Gains for TNC-Comprador Combine

Besides the bonanza mentioned above there are other major gains for the TNC-Comprador Combine.

The major focus has been on handing over the banks to the foreign financial sharks. On the very day of the budget the Reserve Bank of India (RBI) released a roadmap for the presence of foreign banks in India and guidelines for ownership and governance in private banks selected by the RBI. Simultaneously in the budget the FM allowed foreign banks to acquire 74% stake in Indian private banks selected by the RBI. Besides, to fill their coffers the Budget has set in motion a reform process (i.e. privatization) of the Provident Fund and Pension Fund sectors. Not surprisingly within a week of the budget the gladiators of international finance, the big investment banks, announced a major offensive on the country. The Economic Times of March 7th reported under the heading "Merrill, Goldman look for big-bank blast in India" that "the big names in financial services are looking for space in Indian banking". Already the Development Credit Bank will become the first private sector bank to see a foreign promoter holding an equity stake of over 49%.

Foreign Institutional Investments (FIIs) continue to enjoy massive tax reliefs. Not only do the bulk of these continue to operate from the Mauritius tax-haven (their huge profits are not taxed) but also the budget announced the continuation of not taxing the gigantic speculative trading in derivatives (i.e. futures, options, etc on the stock market). It also announced to continue the policy not to tax the interest on NRI deposits. With such big conce-ssions to foreign capital it is no wonder that massive FII funds have been entering the country pushing up the stock exchange index (artificially) to dizzying heights. In the two weeks before the budget the FIIs, in anticipation, pushed in an unbelievable $5.5 billion (Rs.2.4 lakh crores) into the country’s stock exchange. This is 35% more than the budgeted Central Plan expenditure for entire 2005-06!!! In 2004-05 the total FII flows into the country was a huge $15.4 billion — an increase of over 40% over the previous year. The splurge of FII funds continued after the budget.

Another major sphere of planned imperialist penetration into the country is Research & Development to utilize the new Patent regime and the cheap facilities and high scientific knowledge base in the country. Major TNCs and countries are using India for this purpose. To facilitate this process the budget has granted: Rs.100 crores to the Monsanto-collaborated Indian Institute of Science, Bangalore; Rs. 150 crores to Pharma companies for their R & D; and continue with the big grants for bio-technology research and other such schemes hidden in the budget under different heads.

Yet another sphere proposed by the budget to be opened out to imperialist penetration in a big way is the gigantic retail market. Also on the eve of the budget construction and real estate were opened up to foreign investment. This is not surprising as there are plans of massive investments into malls and the highways project in the coming year. 93 malls are going to come up in 2005-06. The plan for malls in India are expected to see investments of Rs.2,500 crore in the next two years and Rs.20,000 crores by 2010. In addition, while the government says it has no funds for the subsidy schemes for the poor it has hiked up its allocation to the National Highway Development Programme by 33% to gigantic figure of Rs.9,320 crores and also increased allocation to promote tourism abroad by a phenomenal 58% to Rs. 758 crores. Such a massive sum is to be merely spent on advertising Indian tourism. The bulk of these contracts go to imperialist collaborated companies.

And, last but not least, the budget has lunched a big attack on small scale industries through the de-reservation of 108 items, of which over 30 are in hosiery and garments line. This is to allow big business and foreign capital into these sectors. Already labour, much of it female, in the garments sector are exploited ruthlessly. To increase this even further the FM announced that within a few days they are going to announce two major changes in the labour laws for the textile sector — increasing the working week to beyond the existing 60-hour week, and removing the ban on night shifts for women. Ironically neither of these two suggestions was opposed by the ‘left’ CPI and CPM!!!

All these concession are being given to big business when they have already been making gigantic profits over the last years due to changes in economic policies in their favour. According to an Economic Times survey of the top 2,500 companies profits after tax increased by 64% in 2002, 62% in 2003 and 36% in 2004. Such huge increases in profits is unimaginable, given that sales has not increased proportionately, and was only possible due to the massive doles by the government and a quantum jump in the level of exploitation of the working class. The FM also announced that the government planned not only to change the labour laws in the textile sector but change the Industrial Disputes Act entirely introducing the hire-and-fire policy throughout. So, further doles and tightening labour laws will give even bigger profits (in fact super profits) to the TNC-comprador combine. Should the masses of the country, whose burden is increasing daily, tolerate this?

Budget Promoting Fascism

In his introductory address to the budget session of Parliament the president of the country stated that the main threat to the internal security of the country now comes from "left-wing extremism". This has infact become the main theme of the home ministry, police chiefs and of the top military brass. No longer is it the bogey of the ISI, Kashmir, Muslim terrorists alone. In essence, this so-called "left-wing extremism" is nothing but the most militant and radical pole of the rising discontent of the masses against the present policies of the ruling classes. This budget gives the polices of growing fascism more teeth. To curb the rising discontent of the masses.

This is reflected in two ways: First, gigantic leaps in expenditure on the army and police. Second, a greater unitary structure by even further centralization of fiscal resources in the country in the hands of the Centre, depriving the States. Let us take a look at both.

Regarding the military and the police the government never seems to have a shortage of funds. The defence outlay has been hiked by over 8% from Rs.77,000 crores last year to Rs.84,000 crores this year. If one includes a lot of the hidden expenditure (as on pensions, military/space research, on intelligence, on the para-military forces, etc) THIS FIGURE WOULD BE WELL OVER Rs 1 lakh crores ($23 billion). The bulk of the military is being used for counter-insurgency — i.e. to suppress the people of the country. A major increase has been in the gigantic amounts spent on military purchases. In the last year Rs.33,472 crores was spent; this year the FM has allocated Rs.34,472 crores for purchases of military hardware. Compare this huge sum to the measly amount of Rs.11,000 crores allocated for the rural employment programme!!! Besides the budget it has hiked up the expenditure on the central police forces from Rs.10,756 last year to Rs.12,552 this year with an additional amount of Rs.1,250 crores for modernization. Yet again, for counter-insurgency purposes in the North East Rs.450 crores have been allocated for road-building and another Rs.9,308 crores for development (much of which will be linked to the GOI’s low intensity conflict policies).

There has been a big attack in this budget on the States ability to raise resources. As most welfare measures are run by the States this will severely impact on the poorer people of the various States. Besides, a greater unitary structure allows for greater autocratic rule. Besides, the introduction of VAT, which will seriously infringe on the State’s rights to raise resources, many steps have been taken to crush the State’s fiscal powers. The FRBM Act has been used by the Twelfth Finance Commission (TFC) to whip the States into cutting their expenditure. The FRBM Act has been brought in, to force governments to abide by one of the IMF’s major conditionalities — to reduce the budget deficits. And the TFC’s recommendations, presented just two days before the budget, has demanded that the Centre stop lending to the states and force States to abide by FRBM stipulations. So in the budget the FM announced that the Centre will no longer lend to the States and that the States must borrow from the market Rs.29,000 crores for financing their Plans. The Centre has also brought a massive cut in its plans provisions for the States from Rs.55,209 crores last year to Rs.30,454 crores in the current year — a drop of over 45%. In addition the budget has also cut scheme-specific grants to the States of Rs.7,750 crores and used these for central schemes. Finally, the TFC has recommended that the interest on the state loans to the Centre be reduced to 7.5% (from the present rate of 13%, which continues to be high as bank rate have been reduced so low) only if the State enacts the FRBM and abides by the so-called fiscal responsibility legislation. Inspite of this onslaught on State’s finances all the earlier shouters about more equitable Centre-State relations, like the CPM, Akali, etc, are today totally silent.

Need for People’s Tax Policy

Chidambaram, saying that the Rs10 tax on every Rs.10,000 cash withdrawn from banks is to curtail black money is a joke. This is nothing but a method to harass the middle classes and extract the maximum out of them and monitor their every small expenditure under the growing fascist eye of the state machinery. The Black money, which envelopes over 40% of the economy is in crores and not 10,000s. It is mostly not with the middle classes but with big business, big traders, top bureaucrats and primarily with Chidamabam’s own clan — the politicians. None of these will be affected by this tax. This harassment tax is being applied not only to cash withdrawals but all cash encashments — fixed deposits, traveler’s cheques, etc. The joke is that today there are only one lakh people filing tax returns having an income of over Rs.10 lakhs; and a mere one million people (10 lakhs) filing tax returns with an annual income of over Rs.3 lakhs. Even according to Sujit Bhalla’s studies the people with an income of Rs.3 to 10 lakhs is more near 55 lakhs. It is this that needs to be tapped. Besides, by looking at the expenditures today by the elite at least one million (in fact much more, let alone the mere one lakh reported) would have an annual income of over Rs.10 lakhs (including all the politic-ians). Why is all this being ignored and the middle classes only targeted for raising tax revenues and increasing the tax net?

The answer to this lies in the very imperialist sponsored development policies of the successive governments. They seek to extract the maximum from the poor and middle classes while giving the maximum benefits to the top elite of the country. Then, industrial growth and expansion of the market is achieved not by raising the general purchasing power of the population but by expanding the money with the top 5% of the population, and more particularly the top 1%; and also by developing the export markets in the interests of the imperialists. So the consistent approach of the governments in power is not to raise resources by further taxation of the rich; on the contrary it is to give them relief after relief so that they may spend more while always seeking to raise tax through enhancing the tax on the poor and middle classes and widening the tax net.

In any equitable system the policy will be its exact opposite. Tax reliefs and subsidies will be given to the poor while the middle and rich will face a graded tax system, with the top bracket and business profits being taxed the maximum. This will affect the whole course of development as, with greater purchasing power being of the masses, the focus on industrial growth will be on necessities and not items of luxury. And with the rich being taxed heavily less will be available for luxury items. Also with greater purchasing power boosting industrial production, capital and producer good will also get a boost.

Such must be the charter of growth for any really independent country. But, this will not be allowed by the powerful ruling elite. And any attempt to enforce this pattern of growth will been seen as subversive. They will act to crush any such assertion, throwing around phrases of terrorism, anarchism, etc etc. The police and army will be called out to ensure ‘stability’. Then, what answer do the people have, except to revolt?




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