People's Democracy

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


No. 10

March  06, 2011


On Union Budget


The Polit Bureau of the Communist Party of India (Marxist) issued the following statement on February 28, 2011.


THE Union Budget 2011-12 fails to address the serious problems affecting the people and the economy. The budget comes at a time when people are suffering due to high inflation and relentless rise of food and fuel prices. In this backdrop, the massive Rs 20,000 crore cut in major subsidies for 2011-12 on fuel, fertiliser and food, from what was spent in 2010-11 (Revised Estimates), come as a rude shock. The cut in food subsidy by Rs 27 crore clearly exposes the government's lack of willingness to enact a meaningful food security legislation. The finance minister's stubborn refusal to reduce excise and customs duties on petro products and obduracy in moving away from the ad valorem duty structure, coupled with the cut on fuel subsidy by Rs 15,000 crore, indicates massive increases in fuel prices in the days to come. This exposes the anti-people character of the government.


The direct cash transfer programme announced for implementation from next year is a smokescreen for this subsidy cut. The current BPL lists exclude large sections of the country's poor. Direct cash transfers to a small section of beneficiaries cannot substitute for the subsidised provision of essential commodities like food and fuel. The rise in kerosene prices will immediately affect the poor.


The budget has provided relief of Rs 11,500 crore in direct taxes, while proposing to mobilise an additional Rs 11,300 crore through indirect taxes, which will inevitably be passed on to the consumers. This is a regressive taxation regime, which enriches the rich while burdening the ordinary citizens. As per the Statement of Revenue Foregone, total tax concessions reached over Rs 5 lakh crore in 2010-11, with corporate tax exemptions totalling over Rs 88,000 crore. The tax-GDP ratio, which had reached almost 12 per cent in 2007-08, has declined since then to around 10 per cent in the current budget. At a time when income inequalities are rising fast, a decline in tax-GDP ratio shows the waning commitment towards redistributive policies and a throwback to the trickle-down economics.


No concrete steps to unearth the huge sums of black money stashed in offshore tax havens were announced. The DTAA (Double Taxation Avoidance Agreement) with Mauritius, through which 42 per cent of FDI inflows into India is routed, is the biggest conduit of tax evasion by the MNCs and Indian corporates. Rather than plugging such channels, the finance minister is signing more tax avoidance treaties with other countries. 


With resource mobilisation taking a back seat, plan expenditure as percentage of GDP in 2011-12 will decrease from what was spent last year. The budget support for the central plan in 2011-12 has increased by only 12 per cent over 2010-11, while nominal GDP has increased by 14 per cent. Such squeezes in real expenditure mark all the major developmental heads. The flagship schemes of the social sector have been neglected in the budget and social sector spending is slated to fall in real per capita terms. The allocation for NREGS has fallen by Rs 100 crore, despite a claimed increase in the wages. The provisions for ICDS are far below the estimates for full universalisation as directed by the Supreme Court.


Agricultural growth has been below 3 per cent on average in the first four years of the Eleventh Five Year Plan, despite a target of 4 per cent. It is shocking in this backdrop that the budget provision for the Agriculture Department has been cut from last year. The allocations for the welfare of women, minorities, dalits and tribals are thoroughly inadequate. Capital expenditure is projected to fall from 1.7 per cent of GDP to only 1.2 per cent, which will affect basic infrastructure for the people.


The announcement of impending legislations directed at liberalising the sensitive financial sectors like insurance, banking and pension funds is meant to appease foreign finance capital. Further liberalisation of rules for Indian mutual funds accessing foreign investors would also facilitate the flow of speculative finance into the economy. Greater inflows of such speculative finance at a time when India's current account deficit is widening, does not augur well for the health of India's economy.


Overall, the budget reflects the abandoning of the aam admi agenda by the UPA-II government and its pursuit of an aggressive neo-liberal agenda. The Polit Bureau of the CPI(M) calls upon the people to strengthen resistance against these neo-liberal policies.