Economic
Highlights
New
Delhi, 4 March 2011
Inflation Looms Large
NO CHEER FOR AAM AADMI
By Shivaji Sarkar
A nicely packaged central Budget has
little for the common man. The aam
aadmi’s concerns of containing prices, lowering of taxes, easy health care,
a buoyant job market, booming agriculture and growth have not been addressed.
The Rs 12.57 lakh crore Budget has
found little space for the aam aadmi.
The Finance Minister Pranab Mukherjee has virtually gifted the country on a
platter to the corporates, even agriculture. Nothing has been done blatantly.
Everything has been packaged in a way as if it would benefit the common man but
as one looks deeper, it appears the Government has ignored him.
The simplest step that Mukherjee
could have taken was to contain the fuel prices in the face of rising crude oil
price. The Government charges over Rs 22 as various kinds of taxes on each
litre of petrol and almost Rs 17 on diesel. Shockingly, public sector oil PSUs
pay over Rs 150,000 crore as taxes. Foregoing some of the central excise and
customs duties would have been able to contain the burgeoning petrol prices.
Now not only petrol prices would
increase but it would also raise transportation costs and have a cascading
effect on prices. The shadow of inflation looms large. Air fares have risen.
Soon after the State elections in May, railway fares and freights would
definitely be hiked by a new Railway Minister through a supplementary Budget to
meet the higher fuel charges.
An erroneous impression has gone
that the Railway Budget has not increased freight. Nothing is farther from
truth. The Railways have adopted a system of “dynamic freight structure” whereby
all through the year they go on increasing it through administrative orders
without taking Parliament into confidence.
Just to cite one instance the Railways
have raked in an additional Rs 1700 crore from iron ore alone though actual
tonnage has come down. Last year’s Budget had not mentioned about the higher
tariff on iron ore. In fact, it had even increased freight on salt by changing the
classification much before the Budget presentation.
Importantly, the Budget by levying
service tax on health and diagnostics has made medical services beyond the
reach of even the middle class. This needs to be rolled back. This is not all. Over
134 more services, including legal and insurance, would become expensive.
The Government needs to improve the utilisation
of allocation of Rs 52,000 crore in education. A simple step would double the
capacity. The post graduation degree should be awarded in one year as in Europe
and the US.
Also, the syllabus is spread too wide and needs to be compressed in time.
Mukherjee apparently has enumerated
many investments in various agricultural projects. He says the limit for agricultural lending has
been increased to Rs 475,000 crore from Rs 375,000 crore. He conceals that not a penny is being paid by
the Government. The public sector banks would bear the brunt. Interest
subventions of three per cent announced for farm lending is not separately
passed on but is adjusted against the Government’s capitalisation to the banks.
Many import duty reliefs for
refrigeration and equipment for cold chains are being seen as a great boost to the
farm sector. What has evaded the attention is that such investments have been
termed as infrastructure development. It automatically allows foreign direct
investment (FDI), something most political Parties, not the Left alone, had
been opposing.
It is feared that this would lead to the beginning of
the end of the Indian farmer, if not farming. Mukherjee has further backed it
up with the suggestion to dismantle the Agriculture Products Marketing
Committees (APMC), popularly known as “mandi
samitis”. There are some lacunae in it. It needs to be rectified and not
dismantled. It has provided farmers a platform to market their produce.
Dismantling it would throw the farmers to the large
multi-national wolves or speculators of the futures market, who rake in high
profits, edge the farmer out, create massive unemployment but “boosts” the GDP
figures.
The latest UN Conference for Trade and Development
(UNCTAD) in its review of world economy a week before the Budget said that while policy “reforms” proceeded apace, and even generated
GDP growth, this was accompanied by bubbles of wealth and skewed, unsustainable
income distribution.
Surprisingly, the Union Budget is emulating that
failed path. The GDP growth of 8.6 per cent is suspect. If so how does the Economic
Survey estimate that 41.6 per cent people are below the poverty line instead of
28.6 per cent estimated by the Planning Commission.
The Budget harps on taking people out of agriculture,
a specious Manmohamics theory, on the plea that it contributes just “14 per
cent to GDP”. It ignores the fact that 58 per cent of the population or over 65
crore people are employed here or subsist on this small portion of the GDP.
Where would these people be employed? As public
sector employment has been dwindling. As it stands, not many are being employed
by the private corporate. The unorganised sector except for MNREGA is not
adding many jobs.
Corporates, as per the purport of the Budget
proposals, would eat up farm jobs. What would happen to the majority of the
population? Could a nation grow ignoring the majority of its people? The Central
Budget seems to propound it. Remember, the Budget was expected to enunciate a
forward looking farm policy. It has not happened.
It has rather sounded the death knell for subsidies.
Direct subsidy transfer is a nice concept. But apparently it is a ploy to deny
farm subsidies in the long run. The Government has been dishing out misleading
figures on subsidies. It is a mere 9 per cent of the total Budget and in terms
of the GDP of Rs 8980860 crore it would not be even two per cent. Even the Government
investment in the Food Corporation of India is termed as subsidy.
The Finance Minister’s moves might lead to a crisis
for the farming community and burden the middle class. Which has been levied
many indirect taxes. The reforms --- drastic reduction of income tax --- have
not happened, thus further reducing the purchasing capacity. Industrial
production is falling.
Clearly, an unimaginative Budget has allowed many tax
concessions to the corporates. They have got an added stimulus though their
profits are increasing phenomenally. Scandalously, the corporates have not
passed on any benefit to the consumers for the stimulus they have received
since 2008.
In sum, overall Mukherjee has presented a low-key Budget
that does not cheer the poor and the working class. If despite that growth
comes, it would be a miracle. But prices are certain to zoom to new heights.
---- INFA
(Copyright, India News and Feature Alliance)
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