Jayati Ghosh


Jayati Ghosh

FM has ignored 95% Indians

Remember that this is the Central government that has projected itself as one that will focus not only on economic growth but on extending the public delivery of social services and on improving human development indicators. Remember that it is led by a party that is explicit about its focus on aam aadmi, and claims that its symbolic hand will always be with the ordinary people. And then consider the signals that this latest Budget sends out.
First of all, the revenue measures are not just heavily regressive but also suggest a lack of concern for 95 per cent of the population. Direct tax payers — the corporations and the less than five per cent of the population who even file income-tax returns, let alone pay such taxes — have been given a bonanza of tax reductions which will cost the exchequer an estimated Rs 26,000 crores (on top of benefits in the current year that are projected to have cost about Rs 80,000 crores). But indirect taxes have been raised across the board, including for items of mass consumption, so that the common people will now contribute disproportionately to the additional Rs 60,000 crores that is being raised.
The most controversial increases are in the customs rate and excise duty on petrol and diesel. Since these are universal intermediates, increasing these prices will cause direct and indirect increases in most other prices. In a context in which concerns about inflation are already becoming marked, this is a strange move to make, and certainly one that will negatively impact the ordinary citizen.
But while the revenue measures attack the aam aadmi in this manner, the expenditure proposals do little to allay the problems and insecurities that confront most people in the country today: rising food prices, poor employment prospects and uncertain livelihood, inadequate access to good health and education facilities, almost complete lack of social security. This Budget seems at best to trivialise, or ignore and best to reject, the current material concerns of the majority of the population.
On the question of food security and food prices, the immediate and pressing need to enhance the public distribution system to make it an effective alternative to private profiteering in food markets and ensure that the poor are able to access food at reasonable prices, has been completely bypassed. Instead, the finance minister’s expressed concern was only with measures to improve agricultural productivity, although even here the budgetary allocations are rather minor in nature. These measures may even be neutralised in terms of agricultural costs by the proposed restructuring of fertiliser subsidy.
One obvious step would be to increase allocation for food subsidy to ensure a vibrant, effective system of procurement and distribution. The necessary institutional changes that would make the system more accountable, transparent and efficient all require an underlying willingness to provide resources for a universal system. But that seems to be the opposite of what is planned. In fact, crazy as it may seem in the midst of a general food crisis in the country, the allocation for the food subsidy has actually been cut by Rs 424 crores! This suggests that the government does not see public food distribution as an important means of curtailing food inflation. It also suggests that the government is not really serious about the food security legislation that it intends to enact.
On employment, the presumption seems to be that economic growth on its own will deliver more jobs, even though all the recent evidence suggests that without active labour market policies, this is not likely. Some concessions are to be granted to small and medium enterprises, especially in the export sector, but these may be more than counterbalanced by the rise in excise duties and indirect inflationary effects of the rise in petrol prices. Meanwhile, there is hardly any increase in the allocation to the National Rural Employment Guarantee Scheme (though it will be argued that since this is demand-led, the amount may still increase) and laughable amounts have been provided for various urban livelihood schemes.
The finance minister’s speech made much of the substantial increase in plan allocation for social services, and indeed, at Rs 26,000 crores it does seem significant given the paltry nature of increases in this area in the past. But non-plan revenue expenditure on social sectors is actually slated to be cut by nearly Rs 6,000 crores, so the increase is not as much has been claimed. Since the Central government has allocated only Rs 8,000 crores more for both school education and literacy, it is clearly thrusting the financial burden of ensuring the right to education on to the state governments. But many of them are already facing fiscal crises and will find it difficult to raise the required resources.
In fact, since the state governments are largely responsible for social sector spending and still account for around 80 per cent of total social sector spending in the country, it matters critically what resources are made available to the states. Here, it turns out that the total increase in support from the Centre to state and UT plans is less than Rs 6,500 crores. This is obviously completely inadequate to meet even a small part of the growing need for spending on health, education, housing and other infrastructure. In fact, this increase of around 7.5 per cent over the previous year’s spending will barely keep pace with inflation and is well below the projected increase in gross domestic product.
In his opening statement the finance minister spoke about creating an enabling state for inclusive growth. It is strange, then, to find so many fiscal measures that not only exclude the greater chunk of population, but actively work against their interests.

Jayati Ghosh

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