‘Aam Admi’ Stumped out in the Economic Growth Game
(Thomas D'Silva)
‘Garibi Hatao’ (eradicate poverty) was the slogan popularised by Indira Gandhi nearly four decades ago. It persists in yet another avatar- ‘Aam Admi’! ‘Green Revolution’ was the catch-word in the late 1960s but the pasture for the poor peasant hasn’t turned green yet. Mr. Pranab Mukherjee, the Finanace Minister while presenting the Annual Budget on February 28 for the fiscal year 2011-12 admitted, “While we succeeded in making good progress in addressing many areas of our concern, we could have done better in some others.”
The nation besieged by corruption, price rise, inflation, farmer suicides, agricultural slowdown and economic meltdown was awaiting the annual budget keeping fingers crossed. Three priorities- sustaining a high growth trajectory, making development more inclusive and improving our institutions, public delivery and governance practices making more relevant were highlighted by the Finance Minister (FM). There have been negative trends in all fronts. But our politicians are ever positive and hopeful of a turn-around. As the Assembly elections are round the corner in key states of Assam, West Bengal, Tamil Nadu, Kerala and Puducherry in April and May, how could anyone expect hard economic and policy decisions? If the Railway budget was kind of an ‘election manifesto’ of Mamata Banerjee for West Bengal, the Annual Budget was a ‘balancing act’ maintaining the economic growth and controlling the inflation by Pranab Babu. The Union Budget 2011-12 revolves around fiscal consolidation, inflation control, administrative checks and inclusive growth.
Why does the FM aims to address these four major thrusts in his budget? For this one has to look at the challenges the country is facing today.
Economic Overview:
Every budget is preceded by the Economic Estimates giving a picture of where country stands as far as the receipts and payments are concerned. And what kind of progress is made in various fronts. The GDP growth in the year 2010-11 was maintained at 8.6%. But at the same time the inflation has jumped up to 9% and is threatening to stifle the economic growth. The exports have grown at 29.4% and the imports at 17.9%. So it is healthy for the second fastest growing economy in the world. The proposal for a common Goods and Services Tax (GST) is going through rough weather as many states have expressed dissent. Gross anomaly has been reported in the Public Distribution System (PDS) as there has been pilfering of essential commodities. The black money stashed away in Swiss and other banks overseas has been a cause of concern. And so too the corruption at political and bureaucratic levels. The social sector needs reforms in education and health. In the agricultural sector, the growth is sliding from 4.2% to 3.5%.
The Challenges:
The high inflation resulting in sky rocketing prices of essential goods has been a cause of concern. While the previous budgets aimed at the large chunk of middle class, the FM consciously addresses the ‘aam admi’. Hence he proposes to introduce the Food Security Bill as suggested by the National Advisory Committee (NAC). An overhauling reform in the Public Distribution System (PDS) is expected soon. The Unique Identity (UID) cards will settle the gross anomaly in Below Poverty Line (BPL) card holders. Despite the global recession, India could maintain a steady economic growth around 8.5%. Mr. Mukherjee hopes the budget proposals will up the growth to 9% in the coming fiscal year. For this purpose he has to offer goodies to corporate segment and investors. The price rice being an issue to everyone except the upper class, the FM cannot tax the citizens anymore. Some relief he has to offer them in this count raising the limit of the direct tax from the existing one. The past has been a year of scams. The Prime Minister recently briefing the press admitted of ‘governance deficit’ and ‘ethical deficit’. There have been instances of gross misuse and leakages of public funds. The virus of corruption is eating the system. The budget proposals have to aim at transition towards a more transparent and result oriented economic management system in India.
Budget Estimates:
Gross Tax receipts Rs 932,440 crores
Total Expenditure Rs 1257,435 crores
There has been an increase of 18.3% in total plan allocation and 10.9% in the non-plan allocation.
Some Salient Features of the Budget:
1.Direct Tax: Raising of personal income tax slab from Rs 160,000/- to Rs 180,000/- is welcomed by everyone. The FM has recognized the fact that inflation pressure has resulted in low income groups spending a bigger share of their wallet on food and other basic necessities.
2. Indirect Tax: No major change is introduced for the commodities of necessities. But the luxury goods like diesel cars, SUVs, Service tax of 5% on Luxury Hospitals, select IT goods, etc. will be dear due to increased excise duty. Mr. Mukherjee has proposed to hike service tax rate to eventually converge with GST in future.
3. Issue of Black Money: It is alleged that over 70 lakhs crores of rupees are stashed away in the banks overseas by the tax defaulters. The FM in his budget speech made a special mention of the scourge and proposed to introduce a stringent law to this effect in the parliament. Earlier in a press conference he had hinted at amnesty scheme for black money holders. But as there were not many takers and the intervention of the Supreme Court prevented him from making a statement in this regard.
4. Social Sector spending to witness healthy rise in allocation: Flagship projects like Bharat Nirman, Rajiv Awas Yojana, Midday Meal Scheme, Right to Education, Healthcare, MNREGA scheme are given special attention in the budget.
5. Strong Agricultural Focus: The budget makes special mention of agricultural sector. It proposes to hike oil and fertilizer subsidy, effective warehousing and marketing of the agricultural products, etc.
6. Infrastructure to be addressed through Public Private Partnership and FDI
7. Food Security Bill: To address the black racketeering in the PDS, Mr. Mukherjee has proposed a novel way of doling out cash instead of food grains and kerosene to the BPL families. The role of UID will be effective in implementing this plan.
Apparently, the budget seems to be very positive, yet the economic pundits differ in their assessment. The hype over India’s ‘growth story’ masks not only the growing economic inequalities but also the weakening of our economic fundamentals. For example the tax concession of Rs 414,099 crores in 2008-09 has risen to Rs 511630 crores in 2011-12. This when compared to the subsidies to the poor we get the story: that the rich, the corporate are a favoured group. They are favoured to showcase to the world that India is the ‘second largest economy’ in the world!
What about the poor, the farmers and the crumbling agriculture sector? The investment in this sector fell from 13.9% to 3.4% in the years 2006 to 2011. Where has all the subsidies gone? There seems to be a gap between the policy and its implementation. There has been too much of a pampering of the middle class, with a focus on the market and the purchasing power of this class. And the corporate houses have been calling all the shots and influencing every policy of the government.
George Butler Yeats famously remarked, “But, I being a poor, have only my dreams. I have spread my dreams under your feet, tread softly, because you tread on my dreams”. The poor have been voicing these sentiments. Will the government heed to the voice of the voiceless? Will their dreams of living as human beings, as the citizens of ‘free India’ ever come true? Or will be they be trampled, crushed and buried under the bulldozing feet of the rich and powerful? A budget should have been a wake-up call. Unfortunately, I doubt if the government has heard the call at all. Sorry, the elections are round the corner!
