Union Budget 2016-17
The budget presented by the Finance Minister, Mr Arun
Jaitley, has very little that can be considered new or striking, although
some are saying that it is 'pro-poor' or 'pro-people'. Among the BRICS countries (Brazil, Russia, India, China and South Africa), India occupies the lowest position in terms of expenditure on health and education, and Arun Jaitley has made it clear that he is bent on retaining this status for the country. The budgetary allocation for the social sector, health and education, is 0.6%, even less than the revised estimate (0.7%) for 2015-16. With the public health system in a shambles, and expensive private hospitals and nursing homes mushrooming everywhere, his neglect of the social sector is certainly a basic element of what Mr Jaitley has loved to call a poor man's budget.
A second point that must be noted is that the Finance Minister has allocated Rs 250 billions of rupees for recapitalising the public sector banks. The fact, however, remains that the public sector banks are burdened with the liability of about Rs 1800 billions owing to non-repayment of loans, mostly by the corporate lobby. This default is a legacy of many years. How the money will be recovered and whether any steps will be taken against the big defaulters are as yet unknown. Arun Jaitley has maintained a curious silence on this matter except saying that the legal process will be made speedier. Nobody requires straining his/her intellect to understand that this is mere empty talk, because Narendra Modi does not have the courage to incur the wrath of the corporate lobby, which is not happy with Modi because he has not been able to serve their interests in the expected measure. India is not Gujarat.
The rise in the allocation for the MRNREGA has been flaunted as a symptom of the present government's concern for the rural poor. But the fact is that the present budget allotment, Rs 385 billions, is less than the expenditure incurred in 2010-11 and taking into account the phenomenon of inflation, it would be far lower. It may be noted that some economists, who believed the IMF-World Bank ideology and who have refused to alter their ways even after the global meltdown and the disastrous experience of Latin America were advocating the case for a total abolition of the scheme, which increased the bargaining power of the rural working population. The present National Democratic Alliance (NDA) government, immediately after assuming office, went for a drastic reduction of the scope of the scheme, but stalled their effort in the face of strong protests. In the last financial year, the government curtailed the programme, but now has partly revised its attitude, but only partly. On the outlay on rural development, which has been hailed as Jaitley's focusing on Bharat rather than India, and as an attempt to provide an inclusive approach to development, it may be mentioned that while the proposed measures may have some long-run impact, the immediate reality is grim enough. According to one important spokesman of sugarcane cultivators, "More than 6,000 farmers have committed suicide in the last six months in the country. Hence the farmers were looking forward to something substantial.... it is disappointing that there is no reference at all to the recommendations of the Swaminathan Commission to improve the lot of the farmers, including adopting a more scientific mechanism in agricultural price fixation."
It is interesting as well as amusing to see Jaitley claiming credit for raising enhanced amounts of excise duties. The fall in the price of crude oil and the government's determination not to allow the fuel price to fall are the reasons for increased collection of excise duties. Here too it must be kept in mind that the fall in oil prices in the international market was a windfall, not suggesting any degree of prudence. On the other hand, the fall in the collection of corporation tax and income tax suggests that either the advertised GDP growth rate of 7.5% is a hoax, or there has been widespread tax evasion, because with a growing economy the quantum of direct taxes must also grow. The fall in the collection of direct taxes thus speaks of the entrenched position of the corporate houses and the corrupt upper middle classes in the polity.
Spokesmen of the industry chambers, elated at the effort to restrict the volume of budget deficit, are expecting a reduction in the interest rate. A fall in the interest rate may further ease the situation for them, and this goes in the name of 'industrialisation' and 'development'. On the other hand, given the fact that large amounts of money capital regularly goes into trade and finance, such a reduction may strengthen the forces of inflation. Again, it should be pointed out that numerous old persons live on the interest received from the deposits of their lifetime savings in banks, post offices etc. A reduction in the rate of interest would hurt these people.
In short, as far as the basic principles are concerned, Mr Arun Jaitley has not done much to anger the corporate lobby, the principal economic backer of his. party. The stunning defeat at the Delhi and Bihar assembly polls has, however, forced his government and party to take some lessons and somewhat revise his policy of blatant appeasement of the corporates and multinationals. Otherwise, the whole of the country will be set ablaze, and the flame of anger will not spare Modi and Jaitley, because the desperate politics of Hindutva is not enough to bridge the chasm that is already showing up. The change is, however, marginal, not a drastic one. But Jaitley's decision to levy income tax on up to 60 percent of Provident Fund withdrawals from April 1, 2016 has come as a shocker to the salaried class. It's a criminal act. It is an attack on savings of the people and the move is little more than a case of double taxation.
Vol. 48, No. 35, Mar 6 - 12, 2016