People's Democracy

EDITORIAL

Sops For Buying Votes

HAVING pushed the country into early general elections, the BJP-led NDA government has been most brazen in trying to buy electoral support through concessions to various sections on the economic front. In these days when, for the liberalisers, the market is the most omnipotent God, superseding all other Gods, the finance minister and the BJP have embarked on an "advance booking" of the votes through the market. 

The so-called `mini-budget' announced by the finance minister on two consecutive days last week contains mega concessions in certain sectors.  If these are aimed at stimulating growth, as the finance minister declares, then why weren't they announced earlier and why only on the eve of the elections?  The answer is obvious.

Before we discuss the merits of some of the measures, it is necessary to consider certain related important issues.   This so-called `mini-budget' takes major decisions concerning revenue to be collected by the government. Normally, such decisions are taken in the budget which makes a balance sheet of the economy evaluating both the revenues and expenditures of the government.  It is normally on the basis of the total picture that concessions  are doled out.  Without undertaking such an exercise and lured by the  objective of buying votes, the finance minister leaves himself and this government unaccountable for the potential revenue loss.  Some day, this loss will have to be made up, which means that on a later day, i.e., after the elections, greater burdens will be imposed on the people. Hence, it is not merely the violation of constitutional propriety by this government, but it is also the reckless and irresponsible act that does not consider the over all macro economic situation.

Further, these announcements have come when the government itself has made its intentions clear of having an early election.  Thus, it is an extra smart way of bypassing the electoral code of conduct. It would, however, be too much to expect this government to adhere to elementary norms of political morality. 

Let us now turn to the concrete proposals. One set of proposals are clearly aimed at providing benefits to the rich and the well-to-do.  The reduction of duties on laptop computers, lowering of excise duty on aviation fuel, thus, reducing costs of air travel, the abolition of foreign travel tax etc are clearly aimed at  appeasing the well-to-do.  The other set of measures, the across the board reduction on customs duties from 25 per cent to 20 per cent and the abolition of the special additional duty and the reduction of customs duty on project imports from 25 per cent to 10 per cent are aimed at making imports cheaper to benefit, once again, high expenditure sections. 

There, however, is a catch.  First, often the benefits of lower customs duties are not transferred to the consumer. It is the intermediate trading community – the BJP's support backbone – that reaps super profits.  Secondly, cheaper imports have a negative impact on domestic production of the same commodities.  Already the high growth (52 per cent in the first half of this fiscal year) of imports of palm oil, edible oil, cotton, vegetables, automobiles, rubber and small-scale industrial products are posing interminable problems for domestic units.

The liberalisation pundits would, however, argue that it is time for domestic producers to face up to international competition. They often forget or deliberately ignore that the import of agricultural items comes from countries which super-heavily subsidise their domestic agriculture.  The consequent  closure of domestic  units may not lead to shortage of commodities since they would be imported. But it, surely, would lead to drastically reduced domestic employment potential.  The biggest problem facing the Indian people as a result of this government's five year rule, is the dangerously high levels of unemployment.

In the passing, it is also necessary to note the illusory benefit for people earning less than Rs 1,50,000  per annum.  They no longer require to file their tax returns.  But they, nevertheless, will continue to pay the taxes. By doing away the filing of returns, such tax payers also forego the benefit of tax refunds.  This  is so because as tax is deducted at source, bank deposits of these sections are taxed by the banks.    Depending on the quantum of savings, whether the concerned individual has paid more tax than required can be determined only when the return is filed. Hence, by abolishing the need to file returns, the government also forecloses the refunds it makes to these sections, which in an individual's case can be substantial at these salary levels. 

The second set of announcements are impractical, to say the least. The announcement of the Rs 50,000 crore infrastructure and  manufacturing fund, the agricultural infrastructure fund of Rs 50,000 crores and the small and medium industry fund entail the net outgo of a mere Rs 2,200 crore  in a full fiscal year  by the government.  This means that the government has made these bombastic proposals without any resource commitment! 

For instance, the agricultural infrastructure fund is based on the government's direction to NABARD to ensure credit flows of Rs 50,000 crores for the next three years. This is being done at a time when the annual credit disbursement of NABARD has been only between Rs 3,000 to Rs 5,000 crores in recent years. In other words, this announcement is nothing but an electoral gimmick with no realistic backing of resources. 

Consider the  Rs 50,000 crore infrastructure and manufacturing fund.  There is no commitment of funds from the central exchequer.  The finance minister talks of catalysing investment.  But, such a framework, already exists with public financial institutions created, in the first place, to cater to the long term credit needs of infrastructure and manufacturing enterprises.  In case of infrastructural development, the IDFC is already functioning with equity contributions from public financial institutions.  Hence, even this announcement  is hollow.

There are, of course, the familiar gimmicks such as the "dada dadi" bonds with higher interest rates for senior citizens etc. But the moot point here is that the concessions and benefits being doled out now are not aimed at sections that require urgent relief. The looming spectre of unemployment, particularly savage in the rural areas, is pushing crores of people into insecurity and despair. 

Despite a good monsoon this year, starvation deaths and distress suicides by the farmers continue to be  reported.    If the government's motivation were to genuinely give relief to the Indian people, then these are the sections that should have been targeted. But, instead, its target groups are precisely those sections that are willing to echo the government's "feel good factor" when nothing like that actually exists.

In sum, these are irresponsible, improper and impractical measures that brazenly seek to buy votes rather than set the economy in order. One thing is for sure. As a consequence of such announcements, the people will have to be prepared to face more heavier burdens on a later day.