People's Democracy(Weekly Organ of the Communist Party of India (Marxist)
March 05, 2006
THE UNION BUDGET 2006-07
The Polit Bureau of Communist Party of India (Marxist) issued the following statement on February 28.
Union Budget 2006-07 has failed to address many of the vital problems of the
common people, particularly the peasantry and the unemployed.
While the budget has provided for an increase by 20.4 percent in the
Budget Support for the plan, the proposed outlays for agriculture, health,
education and employment generation are low and inadequate for meeting the
National Common Minimum Programme (NCMP) goals. In view of the fact that the
actual central plan outlays in all sectors except rural development and
communications were short of the budget provisions last year, the current
year’s meagre increases are a cause for concern.
particular, the two central problems of the economy, agrarian crisis and
unemployment, have not been adequately addressed in the budget. The reduction in
the short-run interest rate for farmers and the proposed increase in farm credit
are welcome measures, but these are limited in relation to the scale of the
problem. Most of the recommendations of the National Commission for Farmers have
been ignored, such as the creation of a price stabilisation fund for
agricultural commodities and extension of crop insurance to all farmers and
crops. No additional protection from imports has been provided for cultivators
of raw cotton.
from extending the coverage of the Public Distribution System for food in the
context of growing evidence of food insecurity and hunger deaths across the
country, the finance minister has actually reduced the budgetary allocation for
the food subsidy.
projected increases in health and education spending are disappointing. The
small increase in spending for the crucial Integrated Child Development Scheme (ICDS)
programme will not be enough even
to meet the Supreme Court order to universalise the system. The UPA government
has promised to increase expenditure on education to 6 per cent of GDP; instead,
the projected expenditure will still leave the total
below 4 per cent of GDP. Health expenditure levels are far below those
required to fulfil the promises of the National Rural Health Mission.
the fiscal front, the increases in tax revenue in the current year (including
through the collection of arrears) are a matter of satisfaction. However, the
additional resource mobilisation through new fiscal initiatives is meagre
despite the immense potential for
this at present. The increase in the securities transaction tax by 25 per cent
is from a very small base of 0.02 per cent. The failure to impose a long-term
capital gains tax on share transactions in the equity market is glaring and
extremely unfortunate. The
reduction in customs duties on a wide range of goods will hurt small producers
and cause job losses for workers.
announcement of various financial liberalisation measures is a cause for serious
concern. Allowing banks to divest government securities and increasing FIIs
access to such securities provides a bonanza to foreign speculators. This makes
government finances vulnerable to the state of the speculative market. Allowing
Indian mutual funds to invest abroad creates the potential for financial
volatility and allows domestic savings to flow out of the country at a time when
the government claims that huge amounts of foreign savings are required for
though the increase in the cess on petroleum products will not impinge on
consumers immediately, it will nonetheless take resources away from the public
sector oil companies, at a time when they are already under financial strain.
This would add to the pressure to raise consumer prices of oil products, which
is likely to lead to an inflationary spiral.
the increase in revenue collection,
the budget fails to utilise the opportunity to fulfil the major NCMP
commitments. This reflects the
government’s refusal to make a break from the neo-liberal policy framework.