People's Democracy

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


No. 07

February 17, 2008



Budget 2008-09:

Rise To Occasion, At Least Now

THE budget session of the parliament has been convened on February 25. President Pratibha Patil will deliver her first address to the joint session. Undoubtedly, she will focus on the priorities laid down by "her government." Hopefully, this should break the reluctance of the UPA government, displayed so far, in addressing the concerns of the 'Aam Admi' by implementing the pro-people assurances mode in the Common Minimum Programme (CMP). Further, this should also, again, hopefully, ally the widespread apprehensions concerning India's pursuit of an independent foreign policy and the defence of our sovereignty.

Be that as it may, this is the last opportunity that this UPA government has to effect a mid- course correction to redeem its own pro-people pledges in the CMP. This is the fifth and final budget of this UPA government.

An important feature of such a course correction must necessarily be radical measures to address the continuing agrarian distress. The CMP promised to substantially increase public investment in agriculture. This has not happened to the desired levels. To arrest the continuing distress suicides, it is necessary to liberate the farmers from the caprices of private money lenders and their usurious interest rates. This required the flow of institutional credit to the farmers to increase substantially. Yes, under the UPA government, institutional credit to the agricultural sector has more than doubled. Yet, nearly two-thirds of our farmers still need to depend, by force, on the private moneylender. Further, loans to farmers were to be given at the minimum interest rate. Yes. This was reduced from 11 percent to 7 percent by the UPA government, but not to 4 percent as recommended by the M S Swaminathan commission. Debt burden is universally acknowledged as the main reason for farmers' distress suicides. Unless the access to credit is drastically increased, at the minimum interest rates, the continuing agrarian distress cannot be addressed, leave alone arrested. This would require a radical expansion and restructuring of the rural banking system. Unfortunately, the UPA government has been moving in the contrary direction of further restricting and weakening the rural banks. This needs to be reversed.

Further, relief to the farmers would also require a rise in the minimum support price (MSP) that is assured for their produce. Under pressure from the Left, which highlighted the fact that the government was paying anyway between 12 to 16 hundred rupees per quintal for wheat we are now importing while paying only Rs. 850 to the Punjab farmers, the government has now reluctantly raised it to Rs 1,000. However, in the case of paddy, it is still dithering. The MSP must be increased and the list of products assured of this support must be expanded. These measures are imperative to arrest this continuing agrarian distress.

Reversing this agrarian distress is only a humanitarian question of saving our farmers. This of course is most important. But reversing this is absolutely imperative to release the potential of agrarian productive forces to rejuvenate Indian agriculture, which today, at best, is stagnating. Not doing so will continue to depress the overall growth rate of the economy while posing real challenges to our food security.

In addition to tackling the agrarian distress, the CMP had promised increased public expenditures in various social sectors. Expenditure on education was to increase to 6 percent of our GDP and on public health to 3 percent, at least. Neither has happened.

This is, indeed, unfortunate since the `lack of resources' argument no longer applies. The last four budgets have seen, on an average, governmental revenues growing at at least 20 percent more than the projected targets. This year, pre-budget estimates indicate that this target could well exceed by a whopping 40 percent. The UPA government, hence, had resources at its disposal to massively expand public investment. This would have given relief to the vast majority of our people by providing employment and through the expansion of public services. This would also have expanded our economy impelling a higher growth, in multiple ways. There would have been the much needed expansion of our economic and social infrastructure, while, expanded employment would have led to boosting aggregate domestic demand giving the much needed impetus to the growth of the manufacturing sector, whose current growth rates are on a relative decline today.

Last year, through these columns, we had expressed our deep disappointment at the criminal waste of the opportunity to expand public investment that this situation had afforded. The reason why this happened, and unfortunately may happen again this year, is because of the neo-liberal mindset of our ruling classes. Instead of utilising the surpluses accruing through higher tax returns to finance public investment, the preoccupation is to reward the corporate sector with further tax concessions in return for the higher revenues that they have contributed. As a result, the effective tax rate for the corporate sector is substantially less than the declared tax rate.

Two things happen as a result of this mindset. First, through tax concessions, benefits of higher revenues are returned to the rich instead of using them for improving the welfare of the poor. Secondly, to the extent of tax concessions, potential future tax revenues are foregone. On both counts, the divide between the `shining' and `suffering' India is bound to widen.

It is the same mindset that delayed the implementation of the NREGA by nearly three years. Similarly, the tribal land rights will has now become operational, after four years of this government, due to the delay in notifying the relevant rules.

It is indeed unfortunate that the neo-liberal mindset prevents the shift of the focus of economic reforms from being solely preoccupied with bolstering corporate profit towards improving people's welfare. This was a major thrust of the CMP that continues to be undermined.

This year's budget gives one final opportunity for the UPA government to sheer a change in direction. This issue of the paper also carries the text of the Left parties' memorandum to the government on what we expect from this budget. These, hence, are not repeated.

Finally, one big hope that people have from this budget is relief from the current relentless price rise. The two most important measures to achieve this is to prohibit all essential commodities from speculative forward/futures markets and to strengthen the PDS by bringing all essential commodities to be sold through PDS outlets.

The government is refusing to take these steps. Under pressure, however, rice, wheat and pulses have been removed from the speculative markets. This, however, is not enough. On the PDS front, it is moving in the opposite direction. The release of foodgrains is increasingly being reduced. This will have disastrous implications for food security and people's welfare. For example, in Kerala, for the 49.4 lakh APL ration cardholders, the centre used to release 1,13,420 tonnes of rice. This has now been drastically cut to 21,334 tonnes, ie, by nearly 90 percent. Kerala gives 35 kg per month of rice to each APL cardholder. This would require 1,72,900 tonnes. Instead, a little over 20,000 is being released by the centre. This is the surest way to dismantle the PDS further jeopardising food security. Further, this is bound to put pressures on the price front as well.

This trend will have to be reversed. If not, the UPA government must be prepared to face broader and mightier struggles of the people against its policies.