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Events & Issues
New Delhi, 5 March 2013
‘Growth’ Story
FARMERS GAIN,
HEALTH SUFFERS
By Dhurjati Mukherjee
The Union Budget continues to be
analysed by economists and political leaders. While Finance Minister P
Chidambaram has received both kudos and brickbats from obvious quarters, in all
fairness he has at least resisted the temptation to give a populist Budget ahead
of the State Assemblies and General elections. His main concern in his own
words is: “Getting back to the growth (8 per cent) is the challenge that faces
the country.”
Other than wooing investors and taxing the ‘super-rich”, Chidambaram has
rightly given top priority to farmers, who constitute nearly two-thirds of India. However,
on two important fronts—education and health the Finance Minister has been less
generous than compared to his previous Budget. Though he may have his reasons,
the concerned Ministers are upset and would like him to have a rethink. Whether
they succeed is worth a watch.
Importantly, acknowledging the fact that the “key to start the growth
engine is to attract more investment both from domestic investors and foreign
investors”, the Harvard-educated Minister is keeping his fingers crossed that
his sop to companies yields result. To boost fresh investment in reviving
industrial growth is a 15 per cent deduction for all companies that invest Rs
100 crores or more on new projects and plans. Interestingly, the investment
allowance is valid for only two years from April 2013 perhaps to test waters.
At the same time, the Finance Ministry hopes that its move will generate
millions of fresh jobs, considered essential critical as the young generation
graph is growing.
As regards the agriculture sector, the FM has taken into account the
suggestion mooted by the National Commission on Farmers. They will now get much
higher priority loans worth nearly Rs 700,000 crores during 2013-14 – up 40 per
cent from Rs Rs 500,000 – and the interest for those paying in time, which was
brought down from 7 per cent to 5 per cent in the previous budget, has been
reduced to 4 per cent.
However, the allocation for a second green revolution in the eastern
States is rather disappointing. This has remained unchanged at Rs 1,000 crores
though the requirement is much more as many States – not just in eastern India – are the
beneficiaries of the fund. Assam,
Bihar, Chhattisgarh and West Bengal have
already increased their contribution to rice production through the continuance
of this programme.
An encouraging aspect is the proposed allocation of Rs 500 crores to a
programme to encourage farmers to switch to alternative crops from rice and
wheat through use of technological innovations. Also, the increase in outlay
for watershed programme intended to benefit small and marginal farmers to
improve productivity and the start of a new experimental programme for
introducing new crop varieties – rich in micronutrients such as iron-rich
bajra, protein-rich maize and zinc-rich wheat shows the innovativeness of the
Finance Minister.
The latter ‘Nitrifarms’ programme got only Rs 200 crores for carrying out
trials to grow super nutritious or bio-fortified crops though more could have
been allotted, keeping in view the fact that well over 46 per cent of children
are moderately to severely underweight due to malnutrition – more than the
levels in sub-Saharan Africa.
Rural India
has however got the fillip on expected lines. The attention give to it was
manifest in a significant 46 per cent hike totaling Rs 80,194 crores though the
Rural Development Ministry was able to spend Rs 55,000 crores this fiscal (out
of budget estimates of Rs 75,000 crores). But there was discontentment as
allocation for NREGA, Pradhan Mantri Gram Sadak Yojana and Indira Awas Yojana
remained more or less the same.
The education and health sectors need focused attention and this is
generally agreed by most economists and social scientists. But unfortunately
education has effectively been given just a little over 7 per cent hike in
allocation compared to the previous budgetary estimate though it works out to
17 per cent when compared to the revised estimate. Keeping into consideration
the inflation rate of around 7.4 per cent, one can easily conclude there has
been virtually no hike.
With Rs 65,869 crores allocation for 2013-14, the Human Resource Development
Ministry will have to struggle to take up new schemes, let alone set up new
colleges or institutes. Even the HRD minister is reported to have acknowledged
the inadequacy of the budgetary hike for the education sector and that more
funds would be needed.
Despite a hike of 28 per cent with an allocation of Rs 37,000 crores for
the health sector, rising inflation and increasing costs of inputs may hamper
wider coverage. The fund allocation of Rs 21,239 crores for the proposed
National Health Mission – integrating the NRHM and the Urban Health Mission –
has been found to be much low compared to the needs. If this trend continues,
soon public expenditure on health will be around one per cent of GDP and not
2.5 per cent by the end of the 12th Plan, as envisaged by the Prime
Minister.
As made quite often of the Railway budget, not benefitting the eastern States,
similarly there have been allegations of the Union Budget neglecting the East. Here
too, industrial corridors have been proposed in the Western and Southern States
while road projects in Gujarat, Madhya Pradesh, Maharashtra,
Rajasthan and Uttar Pradesh, will be awarded in the first six months of
2013-14. One needs to mention here the road network has to be expanded more in States
such as Bihar, West Bengal, Jharkhand etc to
improve commercial activities and improve the livelihood conditions of the
economically weaker sections and the lower income groups.
While the FM has sought to provide new skills development scheme by
offering training to about 10 lakh youth after which they would be given Rs
10,000 per candidate, this is clearly inadequate as the amount should have been
at least Rs 25,000-Rs 30,000 to encourage them to start their own business. Nevertheless,
it is an encouraging proposition and it would be wise that NGOs be involved for
the task.
Regarding personal taxation, the Minister offered tax exemption to those
who earn between Rs 2 lakhs and Rs 5 lakhs of around Rs 2000 a year, a move
that will benefit 18 million taxpayers or about half of the country’s tax base.
But the surcharge of 10 per cent should have been for people having a taxable
income of Rs 60-70 lakhs instead of Rs 1 crore as levied in the budget. After
the increase of surcharge from 5 to 10 per cent on domestic companies having
taxable income of Rs 10 crores per annum has been on expected lines.
Finally, though the Finance Minister has been able to contain the fiscal
deficit for the current year at 5.2 per cent of GDP, this came at a cost of
around Rs 92,000 crores cut in Plan expenditure which does not augur well,
specially for social sector schemes. For example, the HRD ministry expenditure
was revised to Rs 56,223 crores (from BE of Rs 61,427 crores), NREGA
expenditure cut to Rs 55,000 crores (from Rs 76,376 crores) etc.
One may mention here that the gross budgetary support (GBS) or Plan
outlay for the next fiscal is around 6.5 to 7 per cent more than the BE of
2012-13 – the hike being less than the inflation rate. It is also distressing
to note that growth of consumption expenditure, which averaged 8 per cent
annually between 2009-12 fell to around 4 per cent this year. It needs to be
pointed out here that though fiscal consolidation is imperative, it should not
come by squeezing expenditures but by widening the tax net and expanding the
tax to GDP ration, which has fallen from 11.9 per cent in 2007-08 to less than
10 per cent.
Importantly, total subsidies have declined by over Rs 26,000 crores,
though this related more to the oil sector. Though food security found a key
mention in Chidambaram’s speech with an additional allocation of Rs 10,000
crores, the Bill simply cannot be implemented in at least the next couple of
months and thus cannot be utilized as the beneficiaries have not been
identified yet. Total food subsidy is actually Rs 5000 crores more than the
revised estimates.
Chidambaram’s promises are limited to reforms that he can deliver and his
whole attention has been on curtailing expenditure to reign in fiscal deficit,
expected to be 4.8 per cent in 2013-14. The Budget is not of populist nature
and represents a basic promise that the Government must deliver to prevent the
economy from slipping further and also check food inflation and rising costs.
It is a tall order. Will Chidambaram’s calculations yield the desired result,
is worth a close watch. ---INFA
(Copyright,
India News and Feature Alliance)
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