Press Statement

The Polit Bureau of the Communist Party of India (Marxist) has issued the following statement:
Union Budget: Yet Another Attack on People’s Livelihood

This Budget carries forward the pro-imperialist agenda of the Government. Like the previous Budgets, it is explicitly pro-rich and anti-poor, providing major fiscal concession to big business and the rich, and implying further increases in living costs of workers and peasants. It does nothing to address the two most crucial problems of the Indian economy today, that is the crisis in agriculture (aggravated by severe drought) and the collapse in employment.

The Budget has opened the way for the de-Indianization of the banking sector and the privatization of nationalized banks: henceforth, not only are foreigners allowed to hold upto 74 percent of equity in private banks, but the latter in turn are allowed to “merge” with nationalized banks.

At the same time the budget is remarkably silent on the problems facing the people. It has nothing to offer to the peasantry reeling under the impact of price-crashes; on the contrary it actually raises the price of fertilizers at the very time when output prices have crashed. The Budget talks of making agricultural credit available at 2 percent above the Prime Lending Rate, but since the amount of credit for agriculture has itself declined to well below the stipulated “norm”, with private, especially foreign, banks being the worst culprits, the rate reduction means little.

Likewise it offers nothing to the agricultural labourers whose employment opportunities and livelihood have declined drastically according to the Economic Survey itself. No Employment Expansion Schemes for putting purchasing power in the hands of the poor figure in the Budget. The claims about Poverty Reduction therefore are completely untenable. In any case the idea that spending an extra Rs.507 crores on Antyodaya would make a dent on poverty can scarcely stand scrutiny.

The Finance Minister has trumpeted the new Health Insurance Scheme, which he claims will make health facilities available to all. But this is far from the truth. Rather than building up an efficient network of public health services, the scheme is designed to make even the poor rely on private health services. The poor will have to pay for their health services, and some part of the hospitalization charges would be covered only on regular payment of the insurance premium. Not only does this leave untouched the bulk of the actual health expenditure of the poor in terms of medicines, it forces them to rely on private facilities, even in rural areas.

The usual, and by now hackneyed, claim that the budget is “growth-oriented” appears particularly hollow this year. The total Budget support for the Plan has increased by a mere 6.0 percent in nominal terms; given the implicit inflation rate underlying the budget this means an absolute stagnation in real Budget support! The much-hyped Infrastructure Development programme does not entail much actual expenditure by the government itself. The Finance Minister has declared additional spending of Rs.60,000 crores. But only a small fraction of this is supposed to be spent by the Government, and that too, over a number of years. The actual amount budgeted for such expenditure this year is only Rs. 2,000 crore!

Total capital expenditure by the Central Government is only 5 per cent higher than what was budgeted last year. Given the large shortfalls in actual expenditure compared to budgeted figures, which have become characteristic of this government, it is likely that there would be hardly any real increase in capital expenditure. Clearly, this Budget does not actually involve any growth led by public spending.

What the Budget does in the name of promoting growth is to hand out substantial concessions, e.g. through eliminating long term capital gains taxes, to the capitalists. This, in the midst of a recession, is bizarre logic.

The employment scenario is likely to get even worse as a result of the dereservation of SSI items, and the whole array of cuts in Customs Duties, which would adversely impact on domestic production, that is already facing the problem of import competition.

The 50 paise cess on diesel will have a cascading effect on all costs and prices, including in the agricultural sector. In the name of controlling adulteration, an additional excise duty of Rs. 1.50 per litre has been imposed on light diesel oil, which will further hit the production conditions of cultivators, and the living standards of all ordinary people. On top of all this, a duty of Rs. 50 per metric tonne is being imposed on domestic and imported crude oil, in the name of refurbishing the National Calamity Contingency Fund. These amount to indirect taxes of a regressive nature, even as there are huge concessions on many direct taxes.

The support to the State governments through the debt-swap was long overdue; indeed the delay on this score has already meant huge avoidable expenditures by States on interest payments. Moreover the magnitude of gains to the State governments is exaggerated. The debt-rescheduling is not a debt write-off which is what is required in the current situation. Moreover, as the Finance Minister himself has now conceded, there would be a loss to State governments on account of the shift to VAT. What he has promised to the States is 100 percent compensation for the loss only for the first year; it would be 75 percent in the second year and 50 percent in the third year. He is silent on what would happen beyond three years; besides, the tapering off of compensation even within these three years would hit the States hard.
In sum, this budget represents yet another grievous attack on the livelihood of the vast majority of the people. The Polit Bureau of the CPI(M) expresses its strong opposition to these anti-people and pro-rich provisions.