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Inflation Looms Large:NO CHEER FOR AAM AADMI, by Shivaji Sarkar , 4 Mar, 11 Print E-mail

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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