Economic Highlights

New Delhi, 22 February 2014

                                                                     FM’s Jugglery

                                                         ROB THE POOR TO FUND RICH

                                                                 By Shivaji Sarkar

The last Budget presented by Finance Minister P Chidambaram has robbed the poor to give concessions to the rich and neo-rich. Slashing taxes on automobiles, mobikes, fridges and some other goods may have helped the rich but the poor see cuts of over Rs 31,000 crore in many programmes, including the mid-day meal, aimed at them.

The interim budget has virtually predicted a continuous rise in prices of petroleum products. It also hints at further job losses. Thus, it has been sheer window-dressed for international rating agencies. It shows that budgetary expenditure has been “reduced” to keep the fiscal deficit within 4.6 per cent lower than the budget estimates of 4.8 per cent. This has been achieved neither by cutting non-productive spending nor by boosting earnings.

The improvement has been shown despite non-plan expenditure – interest payments, subsidies, staff salaries and pensions – being higher than the budgeted and tax revenues being lower than expected. This has been achieved by cutting plan expenditure – seen as an investment in the future – by Rs 8,000 crore and below the budgeted amount and raising non-tax revenues to roughly Rs 21,000 crore more than what the budget for the year had projected.

Most of this extra revenue is by way of dividends from the public sector companies, which is supposed to be spent on further strengthening them or on improving their infrastructure. In addition, there is also about Rs 16000 crore received on account of disinvestment against the budgeted Rs 40,000 crore.

The subsidy on petroleum products, as LPG has virtually been denied, is projected to come down from Rs 85,480 crore to, in the 2013-14 revised estimates, to Rs 63,427 crore in 2014-15. It also takes into account the gradual increase in the prices of all petroleum products, which people would have to pay. In simple terms, inflation would increase further and there is little to cheer in Chidambaram’s announcement of the price index coming down.

Worse, the farmer too has not got a bit. The Rs 7 lakh crore fund that the Government says would be available for their loans is not to be provided by it directly. The banks would do so.  The fertilizer prices too are likely to go up as input price is likely to increase in the wake of higher gas price and a stagnated subsidy bill of Rs 68,000 crore.

And let it be amply clear that if there has been a growth in food production, it is not thanks to the Government. Rather, it is because the Indian farmers have learnt new techniques on their own and diversified.

The poor, apart from slated to paying higher prices, have also been squeezed. This is because over Rs 31,000 crore have been slashed from spending on the much-touted flagship schemes and welfare programmes. This helps keep the budget within the “deficit” limit. It may be noted that Rural Development Minister Jairam Ramesh, had protested in December against such cuts. But it has made no difference. For 2013-14, the budget estimate for the department of rural development had been pegged at Rs 74,478 crore, which has been reduced to Rs 59, 356 crore (Rs 15,122 crore cut).

The allocation for Health and Family Welfare, which the Finance Minister claims “will reach Rs 36,322 crore from a low of Rs 7248 crore ten years ago”, has actually been reduced from Rs 32,745 crore announced in the last year’s budget to Rs 25,990 crore in revised estimates and a mere Rs 7726 crore in 2014-15. So much for tall claims!

Several other schemes like education, rural roads, rural housing, drinking water and sanitation have suffered compression of spending. Undeniably, it will affect the lives of the people in many ways including loss of jobs.

In fact, in terms of Plan allocation there is stagnation. Chidambaram sticks to the figure of Rs 555322 crore for 2014-15, a figure he had chosen for the current year. In other words, if the factor of inflation is accounted for, he has allocated at least ten per cent less. Similarly, his increase of ten per cent defence outlay is also to be adjusted against inflation leaving little scope for critical preparations.

There is little to cheer about the announced reduction in gold imports to 975 tonnes due to the import curbs. The customs figures point to an increase in gold smuggling. Now the World Gold Council quarterly report says that consumer appetite has been largely unaffected by restrictions. The WGC also hints at further smuggling of gold into country.

The Government finances are to see more constriction as outgo on salaries and other benefits to the employees increase and reemploying of redundant officials to reward them for their “loyalty” continues. As part of the dearness allowance is to be merged in staff salaries, the Government would be forced to lose about 20 per cent of its accruals on this count. Further, rather than desisting, the UPA-II also commits over Rs 5000 crore to loss-making Air India.

While the government staff has reasons to rejoice, it is telling heavily on all other sectors. Unemployment has risen from 3.8 per cent in 2011-12 to 4.7 per cent in men and 7.2 per cent among women in 2012-13, says the UN. But Government data says that unemployment is around 11 per cent. The UPA’s last budget has little for creation of new jobs.

Even the FM’s figure for taking 14 crore people out of poverty has been challenged by the international rating agency McKinsey the very next day. It says that the Government’s benchmark of Rs 870 per person for poverty is to be corrected to Rs 1336 per month – or Rs 6700 per family of five. The McKinsey report says that 56 per cent of the population – 68 crore – have consumption levels below this mark!

As if all this is not enough, the latest blow has come from the banking sector. More loans are turning bad due to the slowdown leading to bank non-performing assets (NPA) soaring by 35.2 per cent between April and December 2014.

It goes without saying that the interim budget leaves the country with more worries than solutions. Instead of presenting it with poll slogans, the FM should have tried to consolidate his figures. The new Government, whichever it is, indeed has a difficult task ahead. ---INFA

(Copyright, India News and  Feature Alliance)