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Home / Opinion / Budget 2014: Undermining entitlements will hurt the government

The Narendra Modi government’s first budget excites hope and apprehension in equal measure. The Sensex is already shooting up in eager anticipation of what is likely to be India’s most blatantly pro-market, pro-corporate, pro-profit budget ever. The vast numbers of Indians desperately looking for jobs and better returns from agriculture are left facing the bleak prospects of a drought, both of natural and man-made causes. They will be asked to bear the pain of this budget till the benefits “trickle down" to them.

There is little difference between United Progressive Alliance-II (UPA) government and the current National Democratic Alliance (NDA) government in terms of their fundamental perspectives on the fiscal policy. However, the NDA government does not even pay lip service to inclusive growth. It is visibly under a lot of pressure from the private sector and the better off sections of the population, to accentuate the pro-market inclinations that defined the last three budgets of the UPA-II government.

The public discourse is accompanied by propaganda and misconception. Perhaps the most fundamental misconception is that India is an over-taxed nation. The reality is just the opposite. One of the main reasons for the limited fiscal policy space available is the extremely low tax-to-GDP (gross domestic product) ratio compared to developing and developed nations. For instance, for the year 2010, the tax-to-GDP ratio was just 16.3% for India, while it was a much higher 33.2 % for Brazil and 33.8% for the Organisation for Economic Co-operation and Development (OECD) countries. Few of us realize that revenue collected from personal income tax accounts for only 11% of the total tax revenue collected by the centre and states combined and it finances just about 7% of the total budgetary spending in the country (as of 2012-13). Similarly, corporate tax is reduced through a plethora of exemptions. If the government were to increase taxes and improve the tax-to-GDP ratio, there would be enough money to fund our vital social sector programmes.

That there are sufficient allocations for the development sector, and only efficiency needs to be improved, is another misconception. The total budgetary spending on social sectors in India used to be a meagre 5.3% of GDP in 2004-05 and though it has increased over the last decade, the figure still hovers around 7% of GDP. Within this 7%, the direct contribution from the Union budget has been 2% of GDP. This level of public spending on social sectors is significantly lower than those of many developing countries. The poor quality of infrastructure in these sectors (e.g. schools, hospitals, anganwadi centres etc.), the shortage of competent and trained personnel, the shortage of staff for monitoring, supervision and accounts, are all manifestations of the deficiency of public resources in the social sector in India.

The government needs to understand that it cannot afford to squeeze the poor and their entitlements any more. Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) expenditure has been illegally frozen for almost five years. The government must ensure that its demand-based architecture is protected. The National Food Security Act needs an increased allocation of at least 15,000 crore to help make sure that the 80 million stocks of rotting food stocks are put to immediate use against hunger and malnutrition. The education sector is floundering with allocations of 3.6% of the GDP, while its allocation should be twice this amount. Health is a bigger victim with an allocation of 1.5%, and needs at least another 2% of the GDP to prevent its admission to the ICU. What is more disconcerting is that India’s public spending on social security payments for the poor and unorganized sector that comprises 94% of our workforce has been less than 0.15 % of GDP, even in the most recent years. Pensions, for the elderly, disabled and single women, are not universal. Shockingly, the central government still gives 200 per month—surely a record for deliberate cruelty and negligence towards our most vulnerable citizens.

But, undermining the few entitlements in this sector seems to be the priority of this government. The Economic Survey this year calls for zero budgeting of social sector programmes—a blatant effort to undermine hard fought entitlements. Policy initiatives that undermine labour laws, entitlements such as MGNREGA, environment laws, and facilitate land grab and privatization are likely to result in massive discontent. If the government listens to the voices on the ground they will realize that their electoral mandate is in fact a reaction to these failed neoliberal policies.

There is, of course, disaffection with poor implementation, and the impunity of corrupt officials. A smart budgetary measure would be to allocate resources for public monitoring, and back it with political will, empowering people and enabling participation. If the government were to spend 1% of social sector programmes on transparency, accountability and participation, it would realize that democracy is an important human, and therefore, budgetary resource. The pending citizen-centric accountability laws need to be approved in this Parliament session. Ignoring the will of the people can prove to be immensely costly.

Nikhil Dey and Aruna Roy are social activists of Mazdoor Kisan Shakti Sangathan, Rajasthan.

Comments are welcome at views@livemint.com

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