Press Statement

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

On The Union Budget 2002-2003

 The budget for 2002-2003 is singularly devoid of any measure aimed at reviving the economy which is admittedly in a deep all-round crisis. Far from "kick starting" the economy, the budget proposals may well compound the current recessionary trend. Continuing with its policy of subsidising the rich and imposing greater burdens on the poor, this budget has hiked the prices of many essential commodities like kerosene, urea, sugar, LPG cylinder, postal rates etc. The vast majority of Indians will, as a result, have to bear greater burdens.

The Finance Minister’s claim that the large foreign exchange reserves and food stocks represent sound fundamentals of the economy is misleading. Rather, it is a symptom of the acute compression of demand in the economy, of which the industrial recession, rural economic distress and the huge shortfalls in tax revenues are the other symptoms.

The shortfall in gross tax revenues is indeed staggering, at Rs. 30,000 crore compared to Budget estimates, of which Rs. 10,000 crore is the loss of State Governments. This also explains the fiscal crises currently being faced by the State Governments. The tax shortfall is in every item of tax revenues, but is dominated by the fall in customs duties of Rs. 11,652 crore. This reflects the import duty concessions doled out as part of trade liberalisation, well beyond the requirements of the WTO. It also reflects the fall in unit value of imports, on account of falling world prices and dumping in a range of goods. Both of these have compounded the recession, reduced tax revenues and aggravated unemployment. Instead of confronting these problems, the Finance Minister has chosen to further worsen the situation by reducing import duties again.

The Budget is devoid of any strategy to boost demand in the economy in the current reccessionary situation. The existing food stocks could have provided the base for a massive food for work programme to create employment and build infrastructure. Instead, all that the FM has done is to provide a pitiful increase of Rs.371 crore over last year’s revised estimates.

In fact, increased expenditure in such areas would generate more economic activity and therefore more tax revenues in future. By contrast, the FM has chosen to adopt further deflationary measures such as cutting government employment by 12,200 posts and freezing future employment.

Rather than go in for more productive expenditure, the large food stocks have been used as an excuse for launching an attack on the farming community and on the poor. The FM has come close to announcing the dismantling of the procurement system for foodgrains. In a period of declining world prices the peasantry would not receive any support, and is to be further hit by an increase in fertiliser prices.

The poor will be hit in several ways, even apart from the curtailment of the PDS which would inevitably follow the dismantling of the procurement system. The shift to a free market system in petroleum pricing does away with the mechanism of cross-subsidisation aimed at subsidising ordinary consumers. The immediate effect of this is rising kerosene and LPG prices for the poor and middle classes, balanced ironically by falling petrol prices. Rises in sugar prices and even postal rates, as well as imposition of excise duties on some items of mass consumption, which were previously excluded, all point to the anti-poor thrust of the Budget. Meanwhile, the rate of corporate tax on foreign companies has been reduced, and expenditure tax on luxury hotels will no longer apply on expenses other than room charges.

This combination of regressive tax policies and deflation is in fact inevitable given the neo-liberal economic regime. And the new financial liberalisation measures announced will compound the problems. These allow new forms of capital outflow, which make the economy more vulnerable and constrain the freedom of the government in economic policy making, further eroding our economic sovereignty.

The Polit Bureau of the CPI(M) calls upon all its units to organise protest actions against these anti-people measures and appeals to the people to join in large numbers to safeguard the economic sovereignty of the country and to defend their livelihood.