Budget 2011:Concessions for Corporates, Cuts for the People
With Assembly elections approaching in several key states and the government having lost all credibility for its complete failure to check prices and curb corruption, the Budget this year was widely expected to be a desperate ‘balancing act’. A ‘balancing act’ it has been, but the end result is once again more of the same: a crushing burden on the common people, bountiful largesse for the corporate biggies. Despite unprecedented inflation, the government slashed food, fuel and fertilizer subsidies by more than Rs. 20,000 crore and signalled further cuts in the coming days. Contrast this to signals to the corporate sector: reduction in surcharge on corporate tax from 7.5% to 5%, and no curtailment in stimulus package, and there can be absolutely no doubt as to who the budget is meant for.
Continuing Neglect of Agriculture
The budget and the economic survey have seemed to create an impression that agriculture has bounced back. The rise in last year’s agricultural growth rate reflected no real increase but only a recovery from the impact of the previous year’s drought. In his budget speech the Finance Minister prayed for the blessings of Lord Indra (for a good monsoon), but made no effort to increase public investment in irrigation and agriculture. The renewed spurt in farmers’ suicides has not bothered the Finance Minister – he has remained busy building castles of second green revolution in air.
The total expenditure on “agriculture and allied activities” has been slashed by Rs.5,422 crore, i.e. a sharp decline of 4.3 per cent over the budgetary allocations of 2010-11. Within this allocations for “crop husbandry” and “food, storage and warehousing” have been slashed by Rs. 4,471 cr and Rs.1,453 crore over last year. These whopping cuts are a clear indicator of govt’s unwillingness either to boost production or retain its existing supply management despite massive food inflation. Add to it the drastic cut in fertiliser subsidy by Rs.4,978 cr. This reluctance to allocate funds for re-energising crop production and agricultural growth is sought to be covered up by the newfound slogan of “more and easier credit”. Easy credit is of course important to farmers but it is no substitute for public investment in rural and agricultural infrastructure. Further, the promise that public sector banks would increase rural credit from Rs.3,75,000 crore to Rs.4,75,000 crore too is fraught with a hidden catch that tends to favour corporates in agribusiness rather than the small and middle farmers. Experts have already pointed how the very definition of rural credit has been “broadened” in recent years whereby loans above Rs. 2 lakh category have come to constitute above 56 percent of total rural credit indicating clearly that bulk of the “rural credit” is being diverted away from the poor needy farmers. Thus both in terms of budgetary allocations and policy priorities, agribusiness has nearly replaced agriculture. There are enough indications that the government is moving in the direction of complete privatization of agricultural trade. There can be no food security for the ordinary Indian people if the reins of agricultural marketing are left in private hands.
Whither Aam Aadmi
Even as the UPA decides to increase the already phenomenal expenditure on defence - the defence budget has now reached a staggering magnitude of more than Rs. 1.64 trillion - the farce of the so-called 'human face' of the Congress was further exposed by the drastic cuts in social sector spending (See box).
|Compared to last year, in the Union Budget 2011- subsidies for fertilizers have been reduced from Rs 54976.682 cr. to Rs. 49997.87 cr.; subsidies on food have been reduced from Rs. 60,599.53 cr. to Rs 60,572.98 cr.; subsidies on petroleum have been reduced from Rs 38,386 cr. to Rs 23,640cr.; waivers on farmers’ loan schemes have been reduced from Rs 12000 cr. to Rs 6000 cr.; allocation to the UPA's ‘flagship’ NREGA scheme has been cut from Rs 40100 cr. to Rs 40000 cr.; allocation to the Indira Awas Yojana has been reduced from Rs 9333.50 cr. to Rs 8996 cr.; allocation for rural roads and bridges construction has been reduced from Rs 19,886 cr. to Rs 18, 217 cr. There is a minimal increase in total child welfare program from Rs 8996.64 cr to Rs 10404.68 cr. In the face of a sweeping inflation which has become the order of the day, such cuts in nominal terms are bound to make a mockery of whatever remained of these social sector schemes trumpeted in the name of poor.|
In the face of the present inflation in food articles touching 16%, another aam admi rhetoric of the UPA’s of implementing the National Food Security Bill would require an additional allocation of Rs. 50,000-Rs.80, 000 cr in food subsidy. But the budgetary allocation for food subsidy has actually been slashed from Rs.60, 600 crore to Rs.60,573 crore. So much for the government’s sincerity about its food security legislation!
Further, given the predictions that international crude oil prices are going to rise further in the coming months, the massively reduced petroleum subsidy from Rs.38, 386 cr. in 2010-11 to Rs. 23,640 cr. in 2011-12 is bound to fuel inflation and further burden the aam admi.
This cut in subsidy for the basic necessities is sought to be camouflaged by new big ticket announcements and schemes. Finance Minister’s big new idea in the Budget speech was the announcement to speedily shift from the scheme of subsidized delivery of kerosene and fertilizers to cash transfers. Isn’t the slashed subsidy an indicator that coverage and quantity of essential food and fuel for the poor under the cash transfer regime is meant to hit a nose dive? At any rate, the critical question remains to what extent the cash coupons will be sufficient to buy the needed quantity in the face of runaway inflation and deregulated market prices?
To cover up the fact that social spending has in fact been drastically cut at a time when the poor are reeling under inflation, the FM struck a populist pose and drew applause in the House with two announcements: one, of the doubling of the honorarium paid to anganwadi workers and the promise to index MNREGA wage rates to the Consumer Price Index for Agricultural Labour so as to ensure a real wage of Rs. 100 per day. Both these announcements are actually quite hollow and misleading. The anganwadi workers are the backbone of the ICDS programme, and even this doubled honorarium – Rs. 1500 and Rs. 3,000 per month – makes a complete mockery of any notion of minimum wages for women workers who are playing such a key role in rural healthcare. Equally dubious is the promise made on MNREGA wages. How will a real wage of Rs.100 per day be ensured when the truth is that the Budget has in fact slashed the total outlay on MGNREGS from Rs 40100 cr. to Rs 40000 cr.?
Sops for Corporates, Regressive Taxes
While the government would like to highlight the increase in overall outlay, a look at the government’s tax and excise duty proposals makes it clear that medicines, diagnostic tests and various education-related items like textbooks, notebooks and other accessories are all going to cost more!
Clearly the present budget is yet another reinvigorated statement of neo-liberal orthodoxy couched in terms of fiscal consolidation – a euphemism for reduced public spending for infrastructural and social needs – and expansion of bounties for big corporates and private players through budgetary allocations. While effecting massive cuts in food, fertilizer and fuel subsidies, in social sector spending across the board, and in agricultural and rural infrastructural investment, central plan outlays are being exponentially raised in those sectors which are being steadily thrown open for the big corporates. In particular, central plan outlay for the increasingly privatized energy sector is being raised from Rs.1, 14,308 cr. in 2009-10 to Rs.1,26,225.24 cr. in 2010-11 and now to Rs.1,55,495cr. in 2011-12. Similarly for industry and minerals, the central plan outlay is being raised from Rs.30, 690cr. in 2009-10 to Rs.38,852 cr. in 2010-11 and now to Rs. 45,214 cr. respectively!
The tax proposals made in the budget point to an increasingly regressive tax regime with the government relying much more on indirect taxes borne by the rich and the poor alike than on direct taxes, corporate or personal. While the government hands out massive tax exemptions to the corporate sector, in the name of revenue generation it resorts to disinvestment, and increased excise duty on necessary articles of mass consumption. The budget this year expects disinvestment proceeds to contribute Rs. 40,000 crore while corporate tax exemptions (described as “subsidy payment to preferred taxpayers” in the budget) in 2010-11 stood at a staggering Rs. 88,263 crore! It may be noted that the total quantum of revenues forgone is rapidly increasing – it was about Rs. 2.4 lakh crore in 2006-07 and Rs 5.7 lakh crore in 2010-11! The proportion of revenues forgone to revenues collected is also rising fast – from about 50% in 2006-07, it reached 80% last year.
The budget contains many new concessions for foreign capital, the most significant being the entry of foreign capital in the mutual funds market. Foreign Institutional Investors can now invest $40 bn in Indian corporate bonds against the $20bn available earlier. The Economic Survey has mooted phased opening of foreign direct investment in multi-brand retail – while the budget has not yet made any specific commitment in this regard, the Finance Minister has talked of further liberalization of the government’s policy regarding foreign direct investment. While throwing open the Indian capital market to foreign players, the government has announced no concrete measures to check the illicit outflow of Indian wealth to foreign banks. A study made by the Global Financial Integrity has estimated the illicit outflow to be of the order of Rs. 240 crore every single day.
The Economic Survey released before the budget has mooted several measures towards greater economic liberalization and privatization and some of them have already been echoed in this year’s budget. Some of the key proposals include banking licences for microfinance institutions and business houses – a clear move towards privatization of the banking sector; “streamlining land acquisition and environmental clearance” for infrastructure projects – a euphemism for accelerated corporate plunder of land, minerals, forests and other natural resources; and privatization of state-run SEZs set up before the 2005 Act. To increase investment in infrastructure the Economic Survey emphasized not only the much-touted PPP model but also “exclusive private investment wherever possible”.
If the country was expecting any respite from the pressing problems of inflation, black money, agrarian crisis, industrial slowdown and the growing exclusion of the aam aadmi from the basic necessities of life, then the budget has completely betrayed this expectation. But then budgets in neoliberal economics are hardly meant to address the concerns of the people, their only business is to appease ‘the sentiments of the market’. The rhetorical references to the aam aadmi, inclusive growth and responsive governance have never made the UPA budgets any different. Budget 2011 has proved to be no exception.