People's Democracy

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


No. 13

March  20, 2011



'Budget Favours

Rich and Corporates'


Below we publish excerpts from the speech delivered by CPI(M) Polit Bureau member and MP, Brinda Karat, in Rajya Sabha on March 10, 2011 while participating in the discussion on union budget-2011.


I STAND in opposition to the general direction and the intent of this budget which is to further the neo liberal agenda set out in the Economic Survey. And it is regretful that this government seems to have learnt no lessons at all from the global events of the last three years.


This budget and the Economic Survey present a blueprint to further deregulate the Indian economy, to further open up crucial sectors of the Indian economy such as agriculture and the entire retail sector for FDI and the big corporates. We believe that the direction of this budget is going to intensify the world of inequalities.


It is striking that in the entire budget speech the word ‘poverty’ does not exist. This is not a question of semantics. It reflects the understanding of the government that poverty is no longer a problem for the people of this country; it is not poverty, which is a problem, but it is probably the poor which are a problem, because according to this government’s arguments they are eating more or consuming more.


This budget favours the rich, the corporates and their interests as opposed to the interests of the mass of people in this country at a time when the people are facing the unlegislated tax of price rise which has picked the people’s pockets for the last three years, particularly food inflation, alongwith increasing unemployment, increasing under employment and low purchasing power. There are 43 crore people in the unorganised sector with fluctuating incomes. The budget cannot be a magic wand to solve all the problems of this country. But, certainly, it has a redistributive role. And in that, I believe this budget has failed the country and it marks the distance from the hut of Kalavati, the homes and lives of dalits, the adivasis, the minorities, and the women of this country and the UPA-II government. I, therefore, oppose this budget.




Some of the untenable arguments for price rise given in the Economic Survey have been referred to by my colleague. If you understand the reason for price rise wrongly, then, naturally the prescription you are going to give is going to be equally wrong. And one of the arguments given is – learn to live with inflation because we are committed to growth and when there is growth, there is bound to be inflation; so, learn to live with it. The recent IMF report shows conclusively that growth and inflation need not necessarily move in the same direction. But, I just want to quote from the Economic Survey itself. On page 2, it shows that in 2007-08, whereas growth rate was 9.3 per cent, the average inflation was 6.2 per cent; in 2008-09, the growth rate was 6.8 per cent but the inflation rate had gone up to 9.1 per cent; in 2009-10, the growth rate was lower than that of 2007-08 at 8 per cent but the inflation rate was higher at 12.4 per cent. Therefore, this argument will not hold.


The second argument that they give is, it is the social sector policies of this government which have given more purchasing power to the people; so, consumption has increased and, therefore, demand has outstripped supply. The MGNREGA has been cited to make this argument. What kind of an argument is this? At a time when India is home to the largest malnourished population of the world, you are talking about MGNREGA. We are committed to MGNREGA. We have fought for MGNREGA. Unfortunately, it is not working as well as it should. Today, even if you go by official calculations and take an average of 48 work days a year for a household and put the wage at Rs 100 per day, which it is not, what do you get? The households’ income has gone up by a princely sum of Rs 13.15 a day on average. Can this lead to a huge increase in consumption?


Therefore I would request the finance minister to kindly look at the inequalities which exist in the consumption patterns of India and not to blame the poor for eating more. This is Bush’s language. We can understand Bush saying it, but we do not expect the Indian government’s spokespersons to speak in that language.


The actual reason for price rise is the obdurate refusal of the government to reverse its present policies; refusal to put a ban on future trading in essential commodities; refusal to universalise the public distribution system, refusal to stop the manipulation of imports and exports that deliberately cause shortages as we have seen in wheat, sugar, onions, etc  and which help the big traders. Change those policies and then, you will find a difference in the rate of inflation in this country.




The actual strategy behind this budget is the discredited trickle down theory – follow a policy to make the rich richer and ultimately it is going to help the poor. And, that actually is what this whole slogan of inclusive growth means. There are five important aspects of this budget which form part of this trickle down theory. The first is, the strategy adopted in this budget in the name of fiscal consolidation. In actual fact, in the name of fiscal consolidation and controlling the deficit, what we have seen in this budget is a compression in expenditures. You boast of 8 per cent GDP growth rate but your increase in total expenditure despite that growth rate is just 3 per cent. As a proportion of GDP, total expenditure has actually fallen. When we talk about ‘inclusive growth’, we talk about expenditures, particularly for the social sectors, and also because we believe that public expenditures are essential for the generation of employment. It is absolutely essential in the context of unemployment in this country. There, we see, as far as total expenditures are concerned, as a proportion of GDP, it is to fall from 15.4 per cent in 2010-11 to 14 per cent in 2011-12.

The second point is that this budget shifts the burden of resource mobilisation from the profits of the corporates to the frayed pockets of the working people and the poor in this country. Thirdly, it cuts subsidies in the most important commodities which are essential for the common people, in fuel, in food, in fertilizers. Fourthly, instead of public expenditures, it depends on investments by the corporates, both Indian and foreign. How do you want to attract them? By offering them a slew of concessions in infrastructure, in agriculture, and in other sectors. As far as the volatility of the stock market is concerned, we have not learnt any lessons. Even mutual funds are going to be opened up for the FIIs to come, to allow more hot money to come and to further make the Indian economy vulnerable to speculative practices. Fifthly, it seeks to raise resources through disinvestment to the extent of Rs 40,000 crore in profit-making public sector units, including the financial and oil sector.


The finance minister said that the Indian economy has withstood the economic tsunami of the last three years. I would once again like to reiterate and remind him that it was the robust stability provided by the public sector institutions - the public sector banks and the insurance companies which gave that stability to the Indian economy at that time, which prevented the kind of big impact that we saw in other countries. Now, what are you doing? There was a speech being made by Pranab Mukherjee himself, in this very House, in 2003, when he moved a resolution against the disinvestment of public sector companies…He had said, “Owing to your own inefficiency, your own incompetence, your own inability to control the deficit, don’t sell the profit-making public sector companies. It will not be in the national interest.” Sir, I repeat those words and I would request Pranab Mukherjee and the government to look at the same issues that you had raised when you were in the opposition.




To go into some of the details, even if you accept the false assumption that the main issue of bringing stability to the Indian economy is to, somehow, control the deficit, which way are you going to do it? How are you going to deal with it? This is where, the class bias of this government, as far as resource mobilisation is concerned, becomes absolutely apparent. Just look at the way they are mobilising resources. As we all know, direct taxes are levied on those who can afford to pay on their incomes; indirect taxes are taken from the pockets of the people by making goods more expensive. If you look at this whole aspect in this budget, the additional resource mobilisation is through indirect taxes while direct tax concessions have been provided. When we look at the Indian economy today, we see a huge concentration of wealth. This concentration of wealth is being created by the taxation policies which the government is following. An amount of Rs 5,00,000 crore in tax has been foregone last year. You please look at the budget receipts and you will find those figures. Out of that, Rs 88,263 crore is just for corporates! The surcharge on corporate tax has been reduced from 7.5 per cent to 5 per cent.


The tax-GDP ratio at 10.4 per cent is lower than the 12 per cent tax-GDP ratio attained three years ago. When your tax-GDP ratio is coming down at a time when the concentration of wealth is increasing, you are certainly not following a policy of inclusive growth. On the other hand, there are increases in indirect taxes. What are these taxes? I don’t mind if air-conditioned liquor bars are taxed. I don’t mind if high-end hotel stays are taxed. I don’t mind if big cars and SUVs are taxed. I would support that tax. I would support that kind of tax on articles of luxury. I believe the rich, if they want, can pay for it. We want to curb ostentatious expenditure. I don’t mind that. But your indirect tax regime is taxing school children’s exercise books, stationery, etc. I am from West Bengal. We eat muri a lot. Even jhal muri will become much more expensive. Then there is the health tax. It can be called “aswasthata kar”. That is, under the UPA-II government, don’t dare to fall sick because even your sickness is going to lead to a tax. Suppose I am a diabetic patient or I am a heart patient or I have got some other problems which need diagnostic test. Even in these cases I have to pay five per cent service tax at a time when we are absolutely incapable of strengthening our health infrastructure to ensure free health services to our people. This is very cruel. I hope that because of the outrage which this particular “aswasthata kar” has invoked throughout the country, the finance minister is going to withdraw this.


A 10 per cent excise duty has been imposed on ready-made branded garments. This word “branded” is really misleading. When I first heard about it, I also thought that if the rich was going to pay for the branded garments why we should bother about it. But when I went into it in a little detail, I found that our West Bengal chief minister had also written a letter to the finance minister soon after the budget seeking repeal of this tax. What does it mean? It means that any small garment manufacturing company which has a label to its garment has to pay 10 per cent excise duty. This is an industry which is providing employment to lakhs of people. Therefore, please differentiate between the small and the big manufacturers as far as “branded” garments are concerned. You have FTAs with SAARC countries. What is going to happen? All the big manufacturers will go across the border, manufacture garments there and bring them back. You have no import duty on these ready-made garments. So, the Indian small manufacturers are going to suffer and those who can afford it are going to bring it cheaper through the SAARC ‘no duty’ route, and it is going to affect the Indian market and shirts, lungis, vests, hosieries and other things are going to cost more. Therefore, I would ask the minister to reconsider it.


The other aspect which I want to raise is the reduction of import duty on raw silk. Why I say this is because there is a misconception that this is really going to help the handloom sector. It is not so. Handlooms are not using imported raw silk. So, there should be no misconception on that. Yes, it will help certain powerloom units in Tamilnadu and, to a certain extent, in Uttar Pradesh. I have no objection to that. But what about the sericulture farmers? What is going to happen to them? In Karnataka, there is a big sericulture industry. In West Bengal, there are so many small farmers involved in sericulture. It is going to wipe them out. Chinese silk is going to come in a big way, and our own farmers are going to suffer. Therefore, I would request the government to relook at that.


(To be continued)