[Marxistindia] on Union Budget

news from the cpi(m) marxistindia at cpim.org
Wed Feb 1 17:42:28 IST 2017


February 1, 2017
Press Statement

The Polit Bureau of the Communist Party of India (Marxist) has issued the
following statement:
Budget 2017-18 Imposes Further Burdens on the People

At a time when the common people of India are reeling under the disastrous
impacts of demonetisation, the Finance Minister has come out with a
contractionary budget which is likely to greatly exacerbate suffering of
the working people.The Economic Survey presented yesterday clearly shows a
deceleration in economic growth, a sharp fall in demand for goods and
services, massive job losses, decline in farm incomes, and social
disruption in cash-intensive sectors. Demonetisation has resulted in large
unutilized industrial capacity, with core industries like automobiles,
cement, steel, paper, aluminium and fertilisers having been hardest hit,
and massive unemployment. It is a travesty that, in such a situation, and
despite having 40 million tonnes of public foodstocks, and a comfortable
current account deficit and foreign exchange situation, the government
wants to pursue contractionary fiscal policies.

The total size of the budget has come down from 13.4 per cent of GDP last
year (Revised Estimate) to 12.7 per cent of GDP this year. The fiscal
deficit target has been achieved through expenditure reduction. The total
revenue receipts have come down from 9.4 per cent of GDP in 2016-17
Revised Estimate (RE) to 9 per cent of GDP in Budget Estimate (BE) of
2017-18. Taxes forgone due to budgetary measures have gone up by about Rs.
30 thousand crores and are put at 2.1 per cent of GDP.

The burden on the working people has been increased with the government
expecting an additional revenue of 75 thousand crores through indirect
taxes, far more than the Rs. 20 thousand crores relief to small income tax
payees given in this budget. Once again this year, excessive reliance for
increasing revenue receipts is on higher excise duty on petroleum
products.

The government is relying on an increase in direct tax collection by 1.3
lakh crores. This may not actually be realised as it is based on the
assumption of an unrealistically high economic growth, ignoring the
uncertainty of the effect of GST on tax mobilisation, and assuming that
demonetisation would work as a magic pill and induce greater tax
compliance.

The Finance Minister appears to be addressing the recession by creating a
housing bubble. The inclusion of affordable housing in the definition of
infrastructure will make it exempt from stringent provisions of land
acquisition, extend priority sector lending at subsidised rates to provide
cheap land and credit to builders, and include larger houses under the
affordable housing are all aimed in that direction. The reduction in
capital gains liability by bringing the base year forward to 2001 (from
1981) is aimed at giving windfall gains to real estate speculators and
builders.

The proposal to reduce income tax for MSMEs with an annual turnover of
under Rs. 50 crores ignores the interconnected-ness of the Indian
corporate sector, and opens up a new avenue for corporate tax evasion.

The finance minister repeatedly talked about demonetisation having
provided banks with funds for increased lending. Forced saving of working
people in short-term deposits can hardly be used for lending as poor
depositors are likely to withdraw a large part of it for consumption as
soon as restrictions on cash withdrawals are lifted.

As per the budget, only 1.48 per cent of total budgetary outlay is
allocated for welfare of scheduled tribes and 2.44 per cent for the
welfare of scheduled castes. This is way below the share of scheduled
tribes and castes in the total population. Similarly, the amount
classified under gender budget is only 5.3 per cent of total budgetary
outlay.

MGNREGA is one of the largest poverty alleviation programme of the
government. Despite the deflationary conditions, and in contrast with loud
claims made by the FM in his speech, the numbers in the budget document
show that there is no substantial increase in allocation for MGNREGA (48
thousand crores) over what is estimated to have been spent last year (47.4
thousand crores).

There is only a small increase in social sector expenses which, given
inflation, would be barely sufficient to meet even the increase in salary
expenditure due to the 7th Pay Commission. While there is a small increase
in the share of total budgetary outlay going to health, the share going to
school education and literacy has actually declined (2.2 per cent in
2016-17, RE to 2.16 per cent in 2017-18, BE).

The Finance Minister repeatedly talked about doubling incomes of farmers.
This does not reflect in any increase in outlays for agriculture. The
allocation for Department of Agriculture, Cooperation and Farmers' Welfare
has fallen from 1.98 per cent of total expenditure in 2016-17 (RE) to 1.95
per cent of total budgetary outlay in 2017-18. There is no increase even
in the major flagship programmes of the government, and the government
seems to be relying only on the banking system for achieving this.

Although the Finance Minister talked of a focus on infrastructure, the
capital expenditure of the government has fallen from 1.86 per cent of GDP
(2016-17, RE) to 1.84 per cent of GDP (2017-18, BE).

The Finance Minister made several announcements regarding political
funding, ostensibly to increase transparency and accountability. The limit
of Rs. 2000 on cash donations to political parties is meaningless as such
transfers are mostly unreported. In absence of a ban on corporate funding
of political parties and overall limit on election expenditure of
political parties, the so-called reform of electoral funding is nothing
but a hogwash.

To sum up, this budget not only ignores but also imposes further burdens
on the people in the wake of demonetisation and widespread deflationary
conditions.



(Hari Singh Kang)
For Central Committee Office





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