For the last few years, every time I have participated in TV discussions on the Budget day, I have noticed how the stock markets play its mischievous card. Before the finance minister gets up to present the Budget in Parliament, the Sensex invariably slumps. This indicates the nervousness in the market. As the finance minister goes on reading his speech, the Sensex also steadily rises.
This is nothing but a blackmail strategy that markets use across the globe.
So when a day after the UPA government passed the Food Security Bill, the stock markets fell by 590 points, I wasn’t the least bit surprised. Nor should it be considered as an expression of an economic blow. It is simply the market’s way to express its discomfort and contempt at the poor getting the subsidy benefit.
The Food Bill is expected to cost `1.25 lakh crores. This has prompted the industry barons, economic commentators, and the business media to repeatedly ask the question: Where will the money come from? More so, at a time when the Indian economy is in crisis, and the rupee is in free fall, such a massive financial outlay for 810 million poor and hungry is being touted as a political misadventure. There is no need to feed the poor, the money should have instead been diverted to create infrastructure, and in the bargain create more jobs, goes the refrain.
This is not the first time that such a question has been raised. I remember when the UPA-I announced writing off `62,000 crores (which later became `74,000 crores) of outstanding loans to farmers, a similar hue and cry was raised. I too was faced with a volley of questions on TV channels the day the farm loan waiver was announced.
When I asked where the resources for the Sixth Pay Commission, bringing in an additional burden of over `1.5 lakh crores every year, came from; there was no answer.
“Subsidies” is a bad word when it comes to the poor. The argument is that subsidies are a drain on the national exchequer, and add on to the fiscal deficit. So whether it is fuel subsidy, fertiliser subsidy or food subsidy, they have perpetually been on the chopping block. All these subsidies not only have provided safety net to India’s teeming millions, but have also helped the country become self-sufficient in food and dairy production. It has provided a cushion to the aam aadmi against continuously rising inflation, and at the same time help minimise the impact of rising costs resulting from privatisation of health and education services.
But interestingly, while all eyes are on the subsidies being given to the poor, there is no mention of the massive subsidies being doled out to business and industry year after year. The only difference being that these subsidies are not called subsidies (because it is a bad word) but are classified as efficiency incentives. Since 2005-06, the government has been giving tax concessions, including income-tax concessions, to the industry which is clubbed under the category of “revenue foregone”. Till this year, the tax concessions to industry total to more than `30 lakh crore. In this year’s Budget, finance minister P. Chidambaram has allocated `5.73 lakh crore as revenue foregone.
I didn’t see the Sensex crashing to express its displeasure at this massive subsidy. Nor do I find any mainline economist ever mentioning that `30 lakh crore was a wasteful expenditure. After all, despite such a massive subsidy support, the industry output is in minus, the manufacturing sector is gasping for breath, and exports are not picking up. India is faced with jobless growth, and we see a spate of suicides in the urban areas across the country among those who lost their jobs. Does it not mean that the `30 lakh-crore subsidy has gone into a black hole?
In past three years, roughly `15 lakh crore has been given to industry as tax concessions. If this money had been recovered and invested in public infrastructure, not only the entire fiscal deficit would have been wiped out, but lakhs of jobs could have been created.
In addition, despite the downturn in economy, the Reserve Bank of India has admitted that India Inc. is sitting comfortably over a cash reserve of `10 lakh crore.
There is no need for India to bend over backwards to attract foreign direct investments when its own corporates were sitting over a mountain of cash. Forking it out could have created investor’s confidence and improved the business sentiments. The rupee would start to look up. The ensuing economic crisis should have been evident in the period 2004-2008 itself when India’s economy grew at nine per cent. Behind all the jubilation, a startling study done on behalf of the Planning Commission should have served as an eye-opener.
Accordingly, in the period of high economic growth, 14 million jobs were lost in agriculture, and another 5.3 million in manufacturing. In other words, both agriculture and manufacturing sector became victims of high economic growth. Sub-sequently, it has now been shown that for the first time in history the number of landless agricultural workers has swelled to more than those who own land.
Agriculture has become a losing proposition. Every day, some 2,500 farmers are quitting agriculture and probably migrating to cities looking for menial jobs. This is no “inclusive growth”. Kaushik Basu, the former chief economic adviser to Prime Minister and now a chief economist with the World Bank, has himself admitted that the time of “inclusive growth” is over. He has tweeted, suggesting “intelligent growth” to be the new plank of economic growth.
The only way to bring prosperity into the rural areas, and thereby boost the country’s economy, is by making agriculture sustainable and economically viable. Most importantly, the road to all-around economic development passes through the village of Hiware Bazaar in Maharashtra.
Once a drought-prone village, where rural-urban migration was the only way to survive, this village now boasts of 60 millionaires. This village has effectively demonstrated how an ecologically devastated landscape can become a bustling market place. It is, therefore, time to invest in agriculture, rural development and food security. That’s where the future of India lies.