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Behind the Budget, a rejection of common people’s interests

Behind the Budget, a rejection of common people’s interests
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First Published: Sat, Feb 27 2010. 12 30 AM IST

Professor of Economics, School of Social Sciences, Jawaharlal Nehru University, New Delhi
Professor of Economics, School of Social Sciences, Jawaharlal Nehru University, New Delhi
Updated: Tue, Mar 16 2010. 05 28 PM IST
Professor of Economics, School of Social Sciences, Jawaharlal Nehru University, New Delhi
If anyone asks an average Indian today what her (or his) most significant economic problem is, my guess is the answer will be rising food prices. The second will probably be employment, especially the difficulty in finding decent paid or self-employed livelihood, whether in agriculture, industry or services. The third may be ensuring minimal health security for the household, and providing adequate education for children.
How far has the finance minister, who claimed in his Budget speech that he was concerned with improving the conditions of the people, delivered on these issues? In fact, this Budget is remarkable for its rejection of the material concerns of most of the population. The minister made some sympathetic noises about measures to improve agricultural productivity, but on the more pressing question of ensuring adequate distribution of food to prevent local speculation and rising prices, and to make sure that the poor are able to access food at reasonable prices, he was silent. Moreover, he reduced the food subsidy allocation by Rs424 crore! This suggests that the government does not see public food distribution as an important means of curtailing food inflation, and is not serious about the food security legislation that it intends to enact.
Second, the presumption seems to be that economic growth on its own will deliver more jobs, even though recent evidence suggests that without active labour market policies, this is not likely. Some concessions will be granted to small and medium enterprises, especially in the export sector, but these may be more than counterbalanced by the hike in excise duties and indirect inflationary effects of higher petrol prices. Meanwhile, there was 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), while laughable amounts were provided for various urban livelihood schemes.
The regressive tax measures in the Budget provide the strongest indication of the minister’s lack of concern for the bottom three-fourths of the population. Direct taxpayers—the corporations and the less than 5% of the population who pay such taxes—were given a bonanza of tax reductions, which will cost the exchequer an estimated Rs26,000 crore (besides benefits this year that are projected to have cost around Rs80,000 crore). But indirect taxes were raised across the board, including for items of mass consumption, so that the common people will now contribute disproportionately to the additional Rs60,000 crore that is being raised. This rise is bound to generate further inflationary pressures. At a time when inflation concerns are already marked, this is a strange move to make, and one that will negatively affect the ordinary citizen.
Lastly, the minister made much of the substantial increase in Plan allocation for social services, and at Rs26,000 crore it does seem significant given the paltry increases in this area in the past. But non-Plan revenue expenditure on social sectors is to be cut by nearly Rs6,000 crore, so the increase is not as much as has been trumpeted. Since the Union government has allocated only Rs8,000 crore more for school education and literacy programmes, the financial burden of ensuring the right to education is to be thrust on the states. But many of them already face fiscal crises, and will find it difficult to raise the required resources.
Since the states still account for around 80% of total social sector spending in the country, it matters what resources are made available to them. Here, the total increase in Plan support from the Centre to the states and Union territories is less than Rs6,500 crore, which is inadequate for health, education, housing and other infrastructure spending. This increase of around 7.5% over the previous year’s spending will barely keep pace with inflation, and is well below the projected increase in gross domestic product.
The minister seems to have forgotten about most common people of the country, barring the voters of his own constituency, who will benefit from some special schemes.
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First Published: Sat, Feb 27 2010. 12 30 AM IST