People's Democracy

Sitaram Yechury

THE euphoria centering round the current budget is neither new nor unnatural. Similar euphoria was seen at the time of the "dream budget" of Mr. P. Chidambaram in 1997-98. Through these columns, we had then warned that the euphoria was misplaced since the diagnosis for kick-starting the economy was actually missing the wood for the trees. Instead of tackling the basic problem of contracting domestic demand, concessions to the corporate sector was provided as a means to revive the economy. The net result was that by the end of the year, new investment by the corporate sector declined, the manufacturing sector grew by a measly 2.5 per cent and GDP growth slumped to 4.8 per cent. Simply put, tax cuts and bonanzas for the corporate sector, and depending instead on revenue collections through raising indirect taxes, thus, putting the burden on common people, only lead to a further contraction of aggregate demand in the economy, compounding the recessionary trend.

The first time round, such a strategy ended in tragedy. The second time around, it is bound to end as a farce. Its tragic consequences for the Indian economy and the people would be unprecedented. The current euphoria in the media and the corporate sector is only natural, as stated in these columns last week, given that the present budget is of the corporate sector, by the corporate sector, for the corporate sector. A bonanza of Rs. 5,500 crore through tax cuts, a reduction in the interest rates at the expense of the small savers, promises of a `hire and fire’ labour policy and the assurance of handing over the public sector `for a song’, are definitely causes for celebration for the corporate sector and the media which is increasingly becoming its pliant dependency.

This is nothing but subsidising the rich. There are two types of subsidies. One, where the government spends from its income to provide succour to the deprived sections. The other, where the government chooses not to collect revenues. Tax cuts and concessions fall in to this latter category. While subsidies are being curtailed, tax cuts and concessions are being increased. Reduce subsidies for the poor and increase subsidies for the rich. The class character of the budget could not have been more explicit.

These concessions to the rich have been granted by a brazen intensification of exploitation of the vast mass of the people. The dismantling of the Public Distribution System and the virtual abolition of the minimum support price for procurement of foodgrains from the peasantry, constitute a massive attack on agriculture and the millions dependent on it. It is a fraud to suggest that the PDS has only been decentralised. Apart from excluding large sections of the population by categorising them as above the Poverty Line (APL) (consider that less than one per cent of households in Asia’s largest slum, Dharavi in Mumbai, are registered as Below Poverty Line (BPL), the budget proposes to give only cash support to state governments for the BPL population. The already starved state governments are now told that they must procure their own foodgrains from distant markets and bear the cost their transportation. A surest guarantee for dismantling the PDS.

These measures are being proposed at a time when large parts of the country are in the grip of drought, suicides by peasants are on the rise, and imports are leading to price crashes ruining millions. They also come at a time when, for the second year running, agricultural production has declined and the rate of growth of foodgrain production for the first time has fallen below the rate of population growth. The bonanza for the rich in this budget is, therefore, being provided by jeopardising the food security of our country.

As pointed out earlier, the suggested increases in customs duties to ‘protect’ prices as a result of freeing imports, is only an eyewash. For instance, the landed cost of copra, even after paying the increased import duty will be Rs 17,600 per tonne, while the present market price is Rs. 21,500 per tonne. Therefore, imported coconut oil will still cost less than the existing market price.

By dereserving crucial (a total of 14), items like leather goods and toys the budget has virtually demolished the small-scale sector. Next to agriculture the small scale sector is the largest employer in the country.

In the name of downsizing the bureaucracy, 66,000 jobs are to be cut every year for the next five years. The ban on recruitment continues and recruitment boards for nationalised banks have been abolished.

The proposed changes in the labour laws are meant to facilitate large-scale retrenchment and layoffs. Employment opportunities are, thus, set to decline further. This comes at a time when even the Economic Survey has to admit employment has been sharply declining with a zero per cent growth in the public sector in 1999 and a 0.11 per cent growth in the private sector.

A very dubious logic is employed to justify such reduction in employment. Downsizing, retrenchment and layoffs we are told, economic growth, can be promoted. Economic growth, in turn, is necessary to generate employment. Therefore, in order to generate employment in the future, we have to create unemployment today! It is time someone told the Emperor of liberalisation that he is "walking around without any clothes"!

What of those who are lucky enough to remain? They too, unevitably will find their living conditions sharply deteriorating. This is because the bulk of the revenue collection proposed in the budget come from indirect taxes, namely excise duties. Thus, while duties on urban consumption goods like motor cars and soft drinks decline, a host of mass consumption articles like sugar, postage, match boxes, tea, coffee, tooth brushes, bulbs, biscuits, etc will become more expensive. So, while the rich get The tax cuts and price declines, it is the mass of the Indian people who will finance the budget revenues.

Added to this is the hike in the duty on diesel which will have a cascading effect on prices. Seen alongwith the cut in the interest rates in small savings, these measures will leave less purchasing power in the hands of the vast majority of the salaried classes. Even the upper middle class will find, to their dismay a contraction of their disposable incomes. For those with an annual income of Rs. 5 lakh, the tax cuts give a benefit of Rs. 18,600. But with `perks’ now counted alongwith salaries, the additional tax would be Rs. 89,129 (Economic Times, 2 March 2001)! Hence, even here the net result will be a further contraction of domestic demand, compounding the recessionary trends.

This is the classic unfolding of the ideology of liberalisation; less government for the people, more government for Capital. While systematically the government abdicates its responsibility towards providing the basic facilities for the welfare of the people, it increasingly plays a pro-active role in facilitating the generation of super-profits for Capital. Thus the allocations for health, education, food security, social and economic infrastructure have constantly declined. Between 1993-94 and 2000-01, developmental outlays have declined from 18.7 per cent to 17.8 per cent of the GDP. What is worse is that during this period, the provision for capital formation in the economy has declined from 5.8 per cent of the GDP to 3.9 per cent. At current GDP rates, one per cent amounts to roughly Rs. 20,000 crores! These calculations are based on budgetary estimates for 2000-01. If we were to wait for the budget’s actual figures, which will come only some time later, the decline will be sharper.

In other words, it is not only the naked intensification of exploitation of the people but the systematic destruction of capital formation, crucial for the future economic growth and health of the country, that is taking place to facilitate greater profits for capital., Even in nominal terms, this budget actually reduces central plan allocations in crucial sectors. In real terms, discounting for inflation, the reductions will be found much sharper. This is true for sectors such as agriculture and allied activities and rural development. In nominal terms, the reduction for industry and minerals is as much as Rs. 1,307 crores or 14 per cent.

Thus we find that much of the bombastic claims expressing concern for infrastructural development is not matched by the figures in the budget’s fine print. For instance, the FM’s speech gives the impression of according priority to higher education with the provision of loans to students. In reality, the outlay for university and higher education has declined by Rs. 948.4 crores from the revised estimates of last budget, ie, a decline of 36.6 per cent!

Seen in the context of the repressive arm of the government, the obverse of less government for the people, more government for Capital is seen in a reverse direction. Popular protests against these economic policies are mercilessly attacked. The rights of the working people are systematically demolished. The firing on anti-power tariff hike protestors in Andhra Pradesh last year is a telling illustration. On the other hand, the government moves with alacrity to hand over public assets "for a song" (privatisation of the public sector) and permits unlawful avenues (like the Mauritius route for foreign and domestic capital to evade taxes) facilitating super-profit making.

The liberalisation agenda nakedly favours the takeover of Indian economic assets and facilitates the access of India’s resources and markets by foreign capital. This budget proposes to garner an extra revenue of Rs. 4,677 crores through excise duties which raises domestic prices while through customs duties, it entails a loss of Rs. 2,182 crores. Thus shift away from customs to excise duties amounts to taxing the domestic producers more heavily than foreign producers. Apart from having a deindustrialisation effect accentuating the current recession , this only permits and facilitates greater control of India’s economy by foreign capital. The systematic undermining of Indian agriculture, likewise, permits the highly subsidised US and European Union agricultural produce to take over India’s agricultural economy.

By pursuing such an agenda, this Vajpayee government is sending a clear signal to foreign capital and Indian big business that it is their best agent. In return, it seeks their support to continue to remain in office. As far as the people are concerned, any protests against the consequent ruination of their lives will be ruthlessly suppressed. Simultaneously, communal passions will be whipped up in order to divert people’s attention away from struggles to improve their livelihood. The unprecedented economic offensive against the people will be matched by a rising crescendo of communal polarisation. This aims, apart from the disastrous consequences to our secular democratic foundations, to disrupt the growing resistance to liberalisation. The efforts to achieve such a merger of the liberalisation agenda with the communal agenda of the RSS/BJP is the political economy of this budget.