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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