On Union Budget

July 10, 2014

Press Statement

The Polit Bureau of the Communist Party of India (Marxist) has issued the following statement:

The debut budget of the BJP government expresses deep commitment to continue the trajectory of reforms of benefiting foreign and domestic capital by emphasizing on larger FDI flows and enlarged avenues for PPP projects. Fiscal consolidation is sought to be effected through contraction of public expenditures and not by increasing revenues through taxing the rich. Thus it is a recipe for further enriching the rich and impoverishing the poor.

Given the backdrop of slow recovery in the global economy the budget was supposed to reflect initiatives that gear up domestic demand through planned investment on the one hand and check food inflation to increase purchasing power of the majority working people. The advanced estimates for the last quarter of 2013-14 released by Central Statistical Organisation reflects a bleak picture of overall growth rate (at constant 2004-05 prices) of 4.6 % and negative growth in manufacturing as well as in mining and quarrying and a massive decline in growth of construction and trade, hotel and restaurant sector. Despite the fact that there has been considerable decline in the ratio of investment to GDP since 2010-11 both in the public and private sectors this budget with its overriding concern to keep fiscal deficit in check and keeping revenue expenditure to GDP ratio more or less same has failed to address the required increase in total plan expenditure in real terms. Total of budgetary support for central plan and central assistance to states and UT declined in real terms comparing budget estimates. The figures on central assistance for state and UTs although increased but the states are left with very little authority to decide on central schemes and that goes against the federal structure of the country. The budget proposal heavily relies on public private partnership and FDI to gear up investment which is hardly going to happen going by past experience.

The budget proposes to reduce direct tax incurring a revenue loss of Rs. 22,200 crores while increases indirect taxes by Rs. 7525 crores which would obviously have regressive impact on the common people. The revenue generation proposed in the budget is high on expectations since there is no significant increase in tax rates and the revised estimates in revenues for the last two years fell short of the budget estimates which eventually prompted further cut in expenditures. The government depends on disinvestment tuned to Rs. 43425 crores which is higher than last year’s budgeted figure but the actual figures last year was much less than what was estimated.

The budget proposes drastic cut in central plan outlay in agriculture and allied sectors, rural development and social services and women and child development. There is no increase in allocation in MGNREGA, Indira Awas Yojna rather in real terms it has declined. The total plan allocation also declined in real terms roughly by 4 %. Moreover the share of SCs and STs in total plan expenditure is falling short by Rs. 47000 crores and Rs. 14000 crores according to planning commission guidelines based on proportion of population.

The budget also proposes a decline in subsidies to petroleum by Rs. 22054 crores which would impose more burdens on the people and further increase the inflationary pressure. Moreover the budget has no concrete proposal to check the double digit food inflation especially when there is a possibility of mounting pressure on food prices given the projections of bad monsoon.

The budget also fails to propose measures to increase employment growth through revamping manufacturing growth. Investments are low and there is no attempt to raise domestic demand rather the budget essentially relies on incentives to private investment through investment linked deductions that grossly failed to raise investment in the earlier years. Moreover the government announces to raise the cap of foreign investment in insurance, defence and real estate that the earlier government could not implement because of stiff opposition.

Therefore the budget essentially fails to chart a trajectory to increase growth and investment, create employment and check inflation that was needed in the current scenario. It is a budget relying more on privatisation and foreign investment and short on innovative ideas to increase revenue. The budget is grossly regressive and anti-people and would increase the burden on the common people.

Union Budget

August 8, 2009

Press Statement

The Polit Bureau of Communist Party of India (Marxist) has issued the following statement:
ON THE UNION BUDGET 2006-07

The Union Budget 2006-07 has failed to address many of the vital problems of the common people, particularly the peasantry and the unemployed. While the Budget has provided for an increase by 20.4 percent in the Budget Support for the plan, the proposed outlays for agriculture, health, education and employment generation are low and inadequate for meeting the NCMP goals. In view of the fact that the actual Central plan outlays in all sectors except rural development and communications were short of the budget provisions last year, the current year’s meagre increases are a cause for concern.

In particular, the two central problems of the economy, agrarian crisis and unemployment, have not been adequately addressed in the budget. The reduction in the short-run interest rate for farmers and the proposed increase in farm credit are welcome measures, but these are limited in relation to the scale of the problem. Most of the recommendations of the National Commission for Farmers have been ignored, such as the creation of a price stabilisation fund for agricultural commodities and extension of crop insurance to all farmers and crops. No additional protection from imports has been provided for cultivators of raw cotton.

Far from extending the coverage of the Public Distribution System for food in the context of growing evidence of food insecurity and hunger deaths across the country, the Finance Minister has actually reduced the budgetary allocation for the food subsidy.

The projected increases in health and education spending are disappointing. The small increase in spending for the crucial ICDS programme will not be enough even to meet the Supreme Court order to univeralise the system. The UPA government has promised to increase expenditure on education to 6 per cent of GDP; instead, the projected expenditure will still leave the total below 4 per cent of GDP. Health expenditure levels are far below those required to fulfil the promises of the National Rural Health Mission.

On the fiscal front, the increases in tax revenue in the current year (including through the collection of arrears) are a matter of satisfaction. However, the additional resource mobilisation through new fiscal initiatives is meagre despite the immense potential for this at present. The increase in the securities transaction tax by 25 per cent is from a very small base of 0.02 per cent. The failure to impose a long-term capital gains tax on share transactions in the equity market is glaring and extremely unfortunate. The reduction in customs duties on a wide range of goods will hurt small producers and cause job losses for workers.

The announcement of various financial liberalisation measures is a cause for serious concern. Allowing banks to divest government securities and increasing FIIs access to such securities provides a bonanza to foreign speculators. This makes government finances vulnerable to the state of the speculative market. Allowing Indian mutual funds to invest abroad creates the potential for financial volatility and allows domestic savings to flow out of the country at a time when the government claims that huge amounts of foreign savings are required for domestic investment.

Even though the increase in the cess on petroleum products will not impinge on consumers immediately, it will nonetheless take resources away from the public sector oil companies, at a time when they are already under financial strain. This would add to the pressure to raise consumer prices of oil products, which is likely to lead to an inflationary spiral.

Despite the increase in revenue collection, the budget fails to utilise the opportunity to fulfil the major NCMP commitments. This reflects the government’s refusal to make a break from the neo-liberal policy framework.