Budget Special
New Delhi, 2 March 2010
UNION BUDGET
LOSES VISION ON AAM
ADMI
By Shivaji Sarkar
It is the year of lack of vision and
imagination. It started with the Railway Budget and spread to the General
Budget. Both the budgets lack focus. Finance Minister Pranab Mukherjee does not
know how to tackle the critical price situation that has now started troubling the
Prime Minister’s Economic Advisory Council and put lakhs of people out of job.
The Finance Minister has tried to do
too many things and spread the money thinly all over. Instead, he should have
cut on Government expenses. His objective of higher growth and fiscal
consolidation is likely to run into severe problems as the budget would prove
inflationary and does not address the basic issues of food security, employment
and agriculture. It is certain he would have to resort to mid-term corrections
but then it might be too late.
It is slightly misleading to tell
the people that the fiscal deficit – borrowings - at Rs 381408 crore would be
5.5 per cent of the GDP against 6.9 per
cent, including oil bonds, last year. Mukherjee does not say that he has
taken a higher GDP base to reach his calculation, but he has done some jugglery
to project that figure. His budgetary deficit
in 2009-10 at Rs 414041crore (6.7 per cent of the GDP) is Rs 1345 crore higher
than his budget estimates of Rs 400996 crore, which he had pegged at 6.8 per cent of the GDP. Even in the new
fiscal year his actual deficit would be much higher than the estimates. This
means the non-government sector would be constrained on getting credit and may
result in further increase in taxes during mid-term or next year.
Ironically, while the budget speech
mentions the “aam admi” five times, it
has not taken care of providing him the jobs. In fact, the “aam admi” is being squeezed on two counts. He is not getting
employment opportunities and has to pay almost 20 per cent higher prices for
food grains and essential commodities. Sadly, the budget has not taken care to
limit the prices. Indirect tax proposals of Rs 46500 crore would further
increase the prices. Even if taxes on petroleum products - 7.5 per cent customs
duty and Re 1 excise - are partially withdrawn its cascading effect on prices,
including higher expenditure for railways and industry, would hardly be negated.
Undoubtedly, the “aam admi” has to prepare himself for double digit inflation.
The homeless “aam admi” now would have to pay 10 per cent service tax for
purchasing a flat. It means that for a house costing Rs 20 lakh, one would now
have to pay an additional Rs 2 lakh. Fears are that this move may stymie
development of the sector. However, he may find recourse in the fact that luxuries such as the mobile phone, watches and
microwave ovens would be cheaper.
Importantly, the road map for
creation of jobs, either in rural or urban areas is unclear. The National
Sample Survey Organisation states that unemployment has risen to 8.28 per cent
from 7.31 per cent in 1999-2000 despite addition of 1.51 lakh jobs during the past
year. Evidently the benefit of the stated growth is not reaching the urban and
rural poor.
As for the budgetary provisions,
these were aimed at about three crore-odd income-tax payers. The Finance Minister
has, however, not freed them of TDS liabilities on bank deposits. The relief of
Rs 26,000 crore given should have driven them to spend more. But the high
prices, which are now to affect manufactured goods as well, would prevent them
from doing so. The big question before the Government is: how would it achieve
the targeted growth of 9 to 11 per cent.
It was expected that the budget
would initiate measures to strengthen the public distribution system, as was
advised by a key adviser to the Government, economist Arjun Sengupta, and focus
on agriculture. The public investment in
agriculture in real terms has witnessed steady decline from the Sixth Plan to
the Tenth Plan. Growth in the GDP in agriculture and allied sectors has come
down from 4.7 per cent in 2007-08 to a mere 1.6 per cent in 2008-09. The sector
accounted for 18.9 per cent in terms of GDP in 2004-05. Though now it has come down
to 15.7 per cent, it still provides employment to 52 per cent people.
Crop production is estimated to fall
short of the target by 26 million tonnes and if the kharif crop made it up,
then the shortfall at a total production of around 215 million tonnes would be
almost 18 million tonnes short of the production in 2008-09.
Lower crop production –rice, wheat,
coarse cereals, pulses, oilseeds, sugarcane and commercial crops like jute,
cottons - also means resulting in lower employment – job losses - in the rural
areas. The allocation of Rs 400 crore to six States for a “green revolution” is
too small an amount to usher in any change. The Mahatma Gandhi Rural Employment
Guarantee Act (MREGA), which has got only Rs 1000 crore additional allocation
from Rs 39000 crore last year, for covering higher number of people, cannot mitigate the problem of the
rural workers. How would Mukherjee achieve his growth target ignoring 52 per cent
of the population employed with agriculture and almost 62 per cent dependant on
it?
Likewise, power generation remains
deficient. A mere 3454 mw capacity was added against the Eleventh Plan target
of 78,700 mw. The Government has granted a token of Rs 5130 crore to the
sector, hardly enough to add about 1000 mw. Despite knowing that the power
sector is the highest coal consumer, taxes on coal has been increased. It is
bound to increase the electricity tariff and make manufactured products
expensive. Mukherjee’s proposal for a Coal Regulatory Authority is indicative
of opening up this sector to foreign players, which might further raise coal
prices.
Overall the budgetary proposals are
likely to cause more problems for all sectors, including railways and the
industry, and the projected growth sadly may only on paper. The Finance Minister
should have limited his focus to agriculture and power and not spread out his
small kitty for political rhetoric in this difficult situation.—INFA
(Copyright,
India News and Feature Alliance)
Railways Running
Into Losses
Railway
Minister Mamata Banerjee has presenter d a budget that looks too
expansionist while the need was to consolidate. She has made proposals to
suggest that she wants to do a lot, but forgets that the weak health of the
Railways is not capable of delivering. In fact, she has gone beyond her
brief.
The Railways are not supposed to get into non-core areas
of activities such as education, health and culture. Banerjee alone can
answer why she has ignored basic issues of security and safety and
improving its economic health. Sadly, there is no economics in her budget
and zshe has failed to take care of the brand --Indian Railways. No concern
has been shown to what the railways world over do – passenger km, freight
km and turnover km. They have to earn from the first two and then take care
thatde the total turnover km adequately funds the costs. Even though the
Railways has social objectives it does not mean that it be taken to
unviable, impractical routes of extension – both in terms of adding to new
track and intruding new trains. The railways is doing something for which
it neither has the capacity nor enough rolling stock or manpower. The Bengal janata election express may
politically benefit her but in the end shall severely constrict the
railways.
Clearly, she has ignored the basic issue of
consolidating the system. Instead she has saddled the railways with a net
loss of over Rs 26,000 crore – Rs 10,000 crore borrowings by the Indian Railway
Finance Corporation (IRFC) and Rs 16,000 crore budgetary support. The
question to be asked is: Why should railways seek budgetary support? In
sum, the budget has exposed the myth created by Mamata’s predecessor, Lalu
Prasad of the railways “efficiency and profitability”.
|
|
|