P. Chidambaram, the Union Finance Minister of the UPA Government, placed the general budget for the financial year 2005-06 to the Lok Sabha on February 28 last. Annual budget is not merely an exercise in balancing revenues and government expenditure, but an effective system for bringing about changes in the direction of economic activities of a country, an economic tool in the hands of the government to pursue its economic policies. Naturally, an oncoming budget arouses expectations among different sections of people, that there might be some amelioration to their growing plight and economic destitution.
This budget has been presented at a time when common toiling people of the country are reeling under ruthless capitalist exploitation further accentuated by the policies of capitalist globalization-liberalization-privatization. Life of the 80% rural population is in total shambles. There is concentration of land in the hands of a few rural rich, incidentally enjoying total exemption from paying any tax despite their having amassed huge wealth by depriving poor peasants of their dues. There is no remunerative price for the agricultural produces either, as a result of which even many middle peasants often face huge losses, even ruination. The number of landless peasants is increasing by leaps and bounds. Agricultural workers have no or little work for the year. Eviction of peasants from the land is on the rise. The evicted rural poor throng the cities as beggars. Starvation deaths, malnutrition, life threatening diseases are what these people have as their sole possession. Suicide reports are on the rise. So-called promise of guaranteeing hundred days’ work that the Congress-led CPI (M)-supported Central Government announced with so much fanfare has already proved to be a hoax in view of the flaws inherent in the prescription itself. Subsidies and subventions provided for fertilizers or as bank loans or the like are usurped by the land-owning rural capitalists and now even the corporates, making forays into the agricultural sector.
The scene is equally grim in the cities. Acute insurmountable stagnation and recession haunt industry and capitalist economy of the country. Unemployment is spiraling upwards. Everyday hundreds of factories declare lock-out throwing thousands out of job. Layoff, retrenchment have become everyday affair. Existing vacancies are not filled up. On the other hand, merger, downsizing, job freeze, wage freeze, VRS, forced retirement are what stalk the employment scenario. The government itself is abolishing posts, reducing workforce and resorting even to contract labour system. Though the present Finance Minister says that he has “rejected the idea of jobless growth”, the fact is that labour-intensive industries are on the wane and capital-intensive industries like information technology are being emphasized upon. Notwithstanding the tall claim of the government of containing inflation and arresting price line, prices of essential items continue to soar with purchasing power of the people falling at rapid pace; even subsistence level livelihood is eluding millions. In other words, the entire burden of capitalism is being thrust on people.
In this backdrop, let us see what this budget has in store for us and what has been the policy directive reflected in it.
Bounties showered on the rich
While introducing the budget last year, Chidambaram indicated to launch “an assault on poverty and unemployment.” This year also he has highlighted the same phrase. Yet the monopolists, industrialists, MNCs and the monopoly-controlled media have jubilantly welcomed the budget proposals, even the policy directions reflected in the budget. This no doubt, indicates to a great extent the character of the budget.
Let us begin with corporate tax. It has been cut to 30% from 35%; with 10% surcharge, the effective tax rate is reduced to 33.7%. Straightaway, hundred top companies will save Rs.1616 crores. Even Gurudas Dasgupta, a CPI MP, an ally of the government said that the budget has granted a tax benefit to the tune of Rs.45,000 crores to the owning class. Similarly, there is a plethora of excise and customs duty cuts that make big business to rejoice, because they will directly enjoy less tax liability and hence more profit though the people remain deprived. Also, the import duty of oil crude has been reduced from 10% to 5%. Such reduction on motor spirit and diesel ( HSD) has been from the current level of 20 or 15% to 10%, while it will be ‘nil’ in case of kerosene and LPG. But there is an increase of cess by Re.0.50 per litre on petrol and diesel obviously to be borne by the consumers. The Finance Minister himself declares that the oil companies will enjoy the margin in the form of swelling profit. Import duty cut would enable them to reduce procurement cost of oil from abroad but help usurp higher profit as the retail price the common consumers have to bear, will not come done. Yet the minister says that he has been “assured there will be no increase in the retail prices of these products as a result of the changes in duty structure.”
Next comes the question of subsidies and subventions to the monopolists and big business. Of each rupee that the government spends, 22 paise go towards debt servicing as interest. During the BJP regime, the subsidy to essential items progressively came down to 10 paise per rupee spent. This Congress-led CPI (M) supported UPA government has further brought it to 7 paise. Yet the powers that be, raise a hue and cry that the government is squeezed beyond limit to meet the subsidy obligation. Every time there is an inflated allocation of funds towards public utility services in the budget only to be curtailed later under the pretext of shortfall in revenue collection. But there is no cut in military budget or in the huge expenditure incurred by the government on its bureaucracy, ministers, MPs and MLAs. Subsidy, as we know it, is mainly provided to food, fertilizer and oil. This year the subsidy amount is raised by Rs.2998 crore to make the total allocation to Rs.46, 514 crore. Of this, 16,254 crore is for fertilizer and 26,200 crore is for food. But while the increase is 6.8%, the inflation, according to government, is over 5%, neutralizing the effect. Moreover, there is a hike of Rs.6000 crore in military budget which is more than the double the amount of subsidy. We also know that despite this subsidy, the prices of fertilizer have not come down which means that the entire benefit is being usurped by the rural capitalists while the poor peasants bear the brunt. Yet we are to accept the Finance Minister’s claim that this “will bring the greatest good to the greatest number” and “the government holds, it is its sacred duty to empower the poor and eliminate the scourge of poverty !”
Now take the issue of deficit. Last year the Finance Minister said that in 2005-06, revenue deficit would be pegged down to 1.8% of GDP, while fiscal deficit would be 4.6% of GDP. But the projected revenue deficit of Rs.95,312 crore is 2.7% of GDP and the fiscal deficit of Rs.l,51,144 crore is 4.3% of GDP. Cunningly, the Finance Minister has not included in his fiscal deficit figure the sum of Rs.30,000 crore, which he says the state governments will raise as loans to finance plan expenditure. So the actual fiscal deficit is 5.1% of GDP, which corroborates our earlier contention that capital account has once again been sacrificed to feed monstrous government expenditure. For example, allocation for National Advisory Council headed by Sonia Gandhi has been increased from Rs.1.73 crore to Rs.14.59 crore.
The figure of capital expenditure is also down by 43%, from Rs.1, 19,722 crore in 2004-05 to Rs. 67,832 crore in 2005-06 which is less than the fiscal deficit figure. It means there is substantially less allocation for asset creation as because major chunk of revenue collected is spent to meet government’s expenditure. It further shows how the government is gradually moving away from discharging barest social obligation. On the contrary, revenue expenditure is up by a whopping 15.66%, from Rs. 3,86,069 crore in 2004-05 to Rs.4, 46,512 crore. It may be added that as per Fiscal Responsibility and Budget Management (FRBM) Act 2003, there should be a zero deficit budget by March 2008. UPA Government has now pushed it back to 2009 to be coterminous with its electoral term. Even to achieve that, revenue deficit must come down by Rs.30,000 crore every year to wipe out the present level Rs.95,312 crore – a task or target that looks illusory in the backdrop of past experiences. To widen its tax base, the UPA Government, like its predecessors, is totally silent, from electoral exigencies, on including the rural capitalists or the kulaks into the tax net, though they have amassed huge wealth over these years. Agriculture contributes 25% to GDP but the landed gentry do not have to pay tax.
On the ridiculous, if not devilish, plea of checking black-money circulation, the finance minister has imposed a bank withdrawal tax at the rate of 0.1% on withdrawal of Rs.10, 000 or more in a day, which will hard hit the small traders and even the middle class households. It will simply mean branding even the honest citizens keeping their hard-earned money in banks, as criminals. But he has not spent a single word on recovery of bank NPA, the vast sum of un-repaid bank loans, now amounting to Rs.1.3 lakh crore, which has been grabbed by the monopolists and industrial houses. On the contrary, the defaulters continue to enjoy their privilege to seek and grab more loans which they fully utilize. In addition, thousands of crore of rupees of income tax, corporate tax and indirect taxes lie unrealized and the Finance Minister has not taken, nor even spelt out, any measure to realize also this huge sum of money, which lies ready at hand to be realized.
The Finance Minister has proposed “to remove lower and upper bounds to the Statutory Liquidity Ratio (SLR)” the money the commercial banks are supposed to keep in specified easily encashable instruments, and also “to remove the limits of the Cash Reserve Ratio (CRR)”, the commercial banks are to statutorily keep deposited with the Reserve Bank of India to meet liquidity commitments and liabilities. This means the banks will have more liquid cash at their disposal for deployment. Banks are already flushed with funds and are not getting appropriate investment avenues. So the government is encouraging the Indian banks to open subsidiaries overseas and acquire banks abroad. Comrade Shibdas Ghosh, our beloved leader and teacher and a foremost Marxist thinker of the era showed long back that by coalescence of banking capital and industrial capital, a financial oligarchy had emerged in the country. Is not asking this financial oligarchy to invest capital abroad a clear symptom of banking finance capital being exported and thereby proving the imperialist character of the Indian capital?
In the name of rationalization of income tax structure and enhancing the exemption limit to Rs.1 lakh, the Finance Minister has benefited the higher group of tax payers with progressive bigger tax cut i.e., the higher the income, the more the tax is reduced, the lower groups getting lesser and lesser benefits. It will not be out of context to mention that this year, the income tax rebate for savings under section 88 has been abolished and, instead, a flat rate exemption of Rs.1 lakh for savings has been proposed under a new section 80C. And investment in mutual funds and shares has been included in the permitted savings instruments. And this investment will be taxed at the time of withdrawal. This will push the tax payers indirectly towards speculative share markets with its attendant risks. On the other hand, through this the industrialists will have more opportunity to mop up money for their investments at the cost of interests of the small investors.
It may be added that real implications of some of the measures announced by the Finance Minister in sweet words, cannot be properly understood at the outset, but are unfolded with time. Deregulation of pricing of petro-products is a case in point. Similar is the case of individual taxation. Apparently it may occur that tax-payers are benefited. But on a careful observation it would reveal that discouraging public savings has two objectives. By forcing people to spend, an attempt is made to create some demand in the market plagued by acute recession. On the other hand, shortfall in capital formation on account of increased spending and reduced saving would be made good by inviting FDI . This is the sinister design.
Moreover, the Finance Minister has kept derivative trading on the stock exchanges i.e., futures and options outside the purview of the taxes on speculative trading. Rather any income from such trading will be reclassified as business income. This would allow an investor (read big monopolists, giant speculators, banks, insurance companies) to set off any losses from derivative trading against his regular business income – almost a bonanza to the moneyed segment. Everyone is aware that trading on shares is a speculative activity. Now the crisis-ridden capitalism, in order to intensify speculation on the bourses, has introduced derivatives or forward, futures and options, a set of instruments where widespread speculation is the main activity so much so that the speculative bet is what is contracted under this trading. There is heavy Foreign Institutional Investment (FII) exposure in derivative market. With such liberalization of rampant speculation, there will be more circulation of capital both indigenous and foreign in the stock market that brings no benefit to the industry or the common people or for that matter economic development in the truest sense of the term. It is also apprehended even by the government, if all the foreign capital entering the country either in the form of FDI or FII investments, has a foreign origin. It is also Indian money hoarded as black by the monopolists and other unscrupulous elements that are being moved out of the country through illegal routes like hawala etc. only to brought back to the country as foreign investment.
Pro-monopoly tilt of the government is also evident from the decision to introduce VAT, through a complicated procedure and bringing even small traders within its purview. Implementation of such a complex system through existing flawed corrupt machinery would only increase harassment and invoke an inspector raj thereby gradually throwing out small traders and intermediaries from the retail business. This would pave the way for retail invasion by the monopolists both national and foreign, forcing people to procure items of daily use from big retail chain or shopping malls at higher price.
Hoax of pro-people measures
To cover up these offers to the monopolist-capitalists, the Finance Minister waxing eloquently at his best on his and the ruling party Congress’s concern for the people of the country, particularly the villagers, dished out a plethora of promises for the common people which the monopoly-controlled and government media, both print and electronic, pompously publicized. To sidetrack and divert people’s attention from the burning economic problems of life, he, with populist verbiage, announced allocation of Rs.25,000 crore for implementation of National Common Minimum Programme (NCMP) which includes their National Rural Employment Guarantee Scheme. While granting Rs.11,000 crore for this scheme he said, “when fully rolled out, the scheme will provide livelihood security for crores of rural families….” Even on paper, let alone in reality, according to the scheme, one member of a BPL family will be provided only 100 days’ work a year. We, in pages of Proletarian Era of the past issues had shown, and it was also widely reported in the dailies, how the wage rate per day violates even the Minimum Wages Act. So, how only 100 days’ work for a single member of a family can ‘provide livelihood security’ to the whole family for the whole year? Is it not duping par excellence? Can it touch let alone solving the rural unemployment problem?
In the budget, the allocation towards capital account under the head Plan Expenditure which is meant for investment for industrialization etc., has been drastically cut by Rs.20,199 crore, from Rs.47,714 crore in 2004-‘05 to Rs.27,515 crore in 2005-’06. If industrialization is thus slowed down, will it not adversely affect growth of employment opportunity in the country? Thus, let alone chalking out definite scheme for industrialization to minimize unemployment problem, the government is doing the opposite and leaving everything at the mercy of market forces.
Announcing introduction of the high-sounding Bharat Nirman Programme, the Finance Minister has glibly promised to create one crore jobs in villages, to build 60 lakh new houses for the poor, to connect all villagers with roads, to supply drinking water to 74 thousand habitations, to connect all the remaining 125,000 villages with electricity and 66,822 villages with telephone by 2009, but all without any allocation in the budget !
Citing such other tall talks in his budget speech, the media blare out “Plenty of money for the common people”. But just within two days, the Union Rural Development Minister Raghubans Prasad Singh punctured (albeit for other reasons) the balloon. As reported in all leading dailies, he openly branded the Finance Minister’s claim as an ‘arithmetical jugglery’, if not a ‘hoax’. He explained with detailed facts and figures available to him how the trickery had been perpetrated and showed that the allocation for rural development has actually been reduced.
This apart, every year in the budget, the government announces different yojanas or schemes for the common man. Last year also this UPA Government did not lag behind. But how much have those been implemented and how many needy people have been benefited is the moot question. In our country, people are accustomed to see that finance ministers of different ruling parties at different times shower promises in budget speeches but at the end of the year very little of those promises are realized, on account of non-availability of the promised allocation on the plea of shortage of fund in the case of public welfare programmes. The difference in this year’s budget is that the present Finance Minister, in tacit understanding with CPI (M) and CPI, has overdone it with a view to projecting the government as pro-people without indicating as to where the money would come from. Last year, in the budget for 2004-05, the target for revenue collection was set at Rs.3, 17,733 crore, but the government could collect only Rs.3, 06,021 crore. The shortfall was thus Rs.11, 712 crore. This year too, it is apprehended by most eminent economists that the shortfall will be greater and government loan will escalate by 42%, resulting in spiraling inflation, the brunt of which will have to be borne by the common people. Another trickery of the Finance Minister is that in almost all public welfare programmes announced, states are to provide a matching grant varying from 25% to 33.33% and he deliberately declared the total outlay as central government outlay without taking into account the states’ liability — as if the Centre will bear the whole expenditure. This also shows the hollowness of his claim of concern for the well-being of the common people for if any state fails to fulfill the matching grant condition, the central grant would be withheld.
Similarly, while waxing eloquent about the betterment of small scale and cottage industries, the budget, at one stroke, “identified 108 items for dereservation. Among them, 30 items are in the category of textile products including hosiery”. Clearly this is a ploy to hand over these sectors to the monopolists and MNCs by ousting the small businessmen and manufacturers. Likewise, while the government is boasting of success in giving the industry an ‘export thrust’, budget reveals that while exports have gone up by 25.55%, imports have gone up by34.72%. Hence imports far outstrip exports.
Mr. Chidambaram has claimed credit for investment in his budget statement, but conveniently forgets to mention that the PSU-s are borrowing for their own funding half of the investment of Rs.1,00,86 crore.
The whole budget is replete with such deceits. The entire budget document in fine print is not covered by the media in general and hence common people can not go through it and find out the deceptions interspersed in between the lines. This is what the Finance Minister has tried to cash on.
CPI (M)-CPI support this anti-people budget
Thus it is clear that what the previous BJP government did, this UPA government led by the Congress, in its second budget, also has done the same: actually ignoring the public welfare measures and helping the monopolists and industrialists, etc. to mint higher profits. One difference is that this government has cleverly kept the issue of privatization and disinvestment out of the budget to deal with those issues separately.
CPI (M) has vociferously publicized the absence of disinvestment in budget proposal as an outcome of their maintaining pressure on the UPA government. On the day of the budget they said, “It is due to the pressure of the leftists that Chidambaram, the proponent of reform, refrained from disinvestment”. (Ganashakti, Bengali daily of CPI (M), 1.3.05) But the Finance Minister in a post-budget interview to the Economic Times, made no secret of the fact that he will certainly “take the proposals (of disinvestment) to CCEA, if it approves the divestment we will sell the shares and put the money in the National Investment Fund. Otherwise, how will the fund be built up?” Also, before the budget, the UPA government had already allowed FDI in telecom industry up to 74% and in aviation industry up to 49%. Only three days before the budget it had allowed, inter alia, deregulation of PSU banks, giving them the right to hire and fire and merging and abolishing branches. Moreover, in the budget it opened up important sectors like mining and construction, trade and pensions to monopoly capital with probable risky consequences for workers and employees of the country.
Cunning as the government is, many of the important financial decisions, including price increase and tariff hike are kept out of the budget only to be made effective through ordinances. Earlier we have seen this in the case of postal tariff. Of late we have seen petrol, diesel prices increased in a similar manner. Similarly decision to augment FDI limit in telecom, aviation and insurance and now in private banks and retail trade have been taken outside the budget.
Thus, judging all these aspects our Central Committee opined, “As evident from the budget announcements Government’s policy to gradually withdraw from the sphere of direct economic activities and hand over them to the domestic and foreign monopoly houses for intensifying their ruthless exploitation has been more pronounced, while the process of globalization-liberalization-privatization has been in a swift camouflaged manner given further momentum.”
But it is surprising that the parties like CPI(M) and CPI, who claim themselves as leftists, yet extend support to the government led by the Congress, one of the most trusted representatives of the ruling capitalist class, have, in general, ensured and expressed their support to this budget. We have discussed and shown above the deceitful and anti-people character of this budget. It is now evident that the UPA government and its Finance Minister have drawn out this budget, including its proposals and provisions, in full consent and consultation with CPI (M)-CPI. So, under these circumstances, people must come to realize further that they cannot expect anything from parties like the CPI (M)-CPI. Rather, they have no other alternative but to build up powerful democratic movement to resist such economic onslaughts on their life and livelihood through this budget.
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