People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)

Vol. XXX

No. 10

March 05, 2006

Common Man Has Nothing To Cheer About: CITU


The CITU secretariat issued the following statement on February 28, 2006

TODAY’S budget speech of the finance minister conforms to the pattern evolved by him since last year of keeping the budget a low-key affair and pursuing the reforms agenda through intermittent executive fiats throughout the year. The Economic Survey preceding the budget presentation has laid out an ominous road map for such reforms. It advocates a shift from the existing Minimum Support Price (MSP) and Public Procurement System for the agricultural produce to developing alternative product market; prescribes pursuit of pension reforms, an euphemism for privatisation of social security; favours further liberalisation of FDI regime and speeding up privatisation exercise in the mining sector; regrets floundering of the movement towards market determined prices particularly regarding LPG and Kerosene subsidies; cautions against deterioration of central and state finances while constituting sixth pay commission and the like. The budget has thrown hints of removing 184 items from the list of items reserved for the small-scale sector and seeks to redefine ‘captive mining’ moving towards privatisation of coal mining; indicates measures to promote private control (both domestic and foreign) in strategic infrastructure areas like sea-ports, airports, highways and also in petroleum exploration and refining, electricity etc. By seeking a consensus on targeting (eliminating) subsidies on essential commodities and inputs and laying stress on quality of social sector spending, the budget makes clear the real intention of the government, which is to cut down on government spending for the poor and common man.

Though there is no imposition of new taxes or hike in tax-rates, there is no relief to common man either. The popular demand for relief from tax-burden on welfare and housing facilities, in the name of perquisites, went unheeded. On the other hand, there has been no effort to augment the revenues of the government by taxing the rich and affluent, who have practically cornered the gains of GDP growth. This creates serious apprehensions on implementation of the pro-people promises in the Common Minimum Programme, including those for the workers of in the unorganised and agricultural sectors. On the other hand, the increase in the cess on domestic crude will impact adversely the oil sector PSUs, producing crude.


The finance minister has derived consolation that tax revenue as a per cent to the GDP is inching forward from 9.2 per cent in 2003-04 to 10.5 in 2005-06, hiding the fact that this figure is related to current market prices whereas the GDP growth is derived at constant prices. There is no word on recovery of huge backlog of tax-arrears and bank loan defaults of the corporates.

The Economic Survey referred to the unemployment scenario haunting the economy, though in an attempt to advocate a drive towards labour market deregulation. But the budget reveals no employment friendly measure worth its name, except indicating allocations for the National Rural Employment Guarantee Programme, which is at best a relief. Tangible efforts are needed to create durable employment in the economy.

There is some apparent increase in allocations for some segments. But on the whole, the allocation proposed to the flagship programmes of the much-acclaimed Bharat Nirman itself is a mere Rs 50,015 crore in the total budgeted expenditure of Rs 5,63,991 crore i.e. less than 8 per cent. There is no mention of the revenue losses on account of the steep reductions in the custom duty. The reduction of duty on alloy steel and minerals will create obstacles for the indigenous steel and mining industry.

The finance minister boasted about the growth in the domestic savings rate to 29.1 per cent. But in reality, as highlighted by the Economic Survey, the household savings have actually declined, which is the direct result of the lowering of the administered rate of interest and the move to subject the various savings instruments to taxation at the terminal stage. The budget only opens up the avenues for the mutual funds to hike overseas investment up to $2 billion with relaxing the reciprocal share holding stipulation even. The attempt is to make the corporate lobby and overseas debt markets the beneficiaries of the surge in domestic savings, with ominous portents of encouraging resource outflows and making the economy vulnerable to external shocks.

In fine, the budget 2006-07 yet another phase in carrying forward the disastrous economic reforms and hides more than what it presents. The common man has nothing to cheer.