PRAGOTI

Budget 2010, announced recently by the finance minister is a wonderful example of how the government prioritizes its priorities in the era of globalization. This year’s budget is a classic example of contending interests, and clear emergence of who is the boss. It also highlights how skewed the government can be even in the garb of democracy.
Since the financial crisis, the world has been ranting about how India and China are going to be the 'future'. Chindia, a term coined in the process, is supposed to drive global growth, be the focus of all future global economic activities, and somewhere in the midst of all this terms like ‘superpower’, ‘global hub’ and ‘engine of growth’ are thrown in to make it all appear more attractive. With so much focus on India by global stakeholders, the heat was certainly on the finance minister to live up to all such expectations. Incentives to the corporate sector were a precursor for the sustenance of such interests. Lot of foreign investment via FDI and FII were at stake, and along with them the interests of those who benefit from such investments, like the stock market, business houses etc.
On the other hand, he had the domestic issues to deal with. Growth had staggered in the wake of the crisis, but somehow the economy had managed not to fall flat on its face. It was standing on wobbly feet, with unprecedented inflation rates and suspect export market potentials tugging it down. In the wake of a fledging Western export market it was suggested by many economists that countries like China and India should look inwards towards their huge domestic markets as the source of demand to fuel their growth momentum. But to do that, the first priority should certainly have to be the agricultural sector. Kharif food production was 98.3 Lakh tonne against the expected 125.15 lakh tones according to the Economic Survey 2010. Unless the issue of food sustainability is addressed, any rise in overall demand will essentially trigger higher food prices stoking further inflation. As it is by now clear that the rise in food prices is not accruing to the farmers but to middlemen (evident from the differences in wholesale prices and consumer prices), the farmers who produce these foods needed strong support in the wake of low production to ensure the production of the coming year is not affected. Investing in the rural sector would not only address the problem of inflation, but also generate massive growth. As any undergraduate student of economics can tell you, since the Marginal Propensity to Consume (MCP) of the lower income Group is higher, the Keynesian multiplier would definitely been higher.
What we have in the budget, is a complete surrender to the former interests, at the cost of the latter. Without going into microscopic details, let me point out some basic contradictions.
The FRBM act which pegs governments fiscal deficit limit has been cited time and again by the finance ministers whenever public spending on welfare projects are raised. In the wake of the financial crisis, all such concerns were dropped in an instant as the government rushed to provide a stimulus package last year. I for one do not subscribe to the FRBM Bill and am more than happy with stimulus packages. But what the Finance Minister has done this time in the name of balancing defies logic. On one hand we have loss of direct tax revenues (stemming from concessions in income and corporate tax) of Rs 26,000 crores. That is supposedly necessary to maintain growth. However, he suddenly remembers he has to control deficit and thus has announced a food subsidy decrease of Rs 424 crores, a decrease in fertilizer subsidy by Rs 3000 crores, and rise in fuel prices of 6% for petrol and 7.75% for diesel. Collectively, indirect taxes are poised to rise by Rs 60,000 crores, which more than compensates for the fall in direct tax income. Once again, any undergraduate level economics text book will tell you that indirect taxes are more regressive, as the burden falls on the lower income groups through rise in prices, which will trigger further inflation, as if we did not have enough!
Look into the whole issue of income tax concessions and the skewedness is more evident. Relief rate rises with rise in income level with no relief for the bottom half at all! The Finance minister said that the income tax relief will benefit 60% of the population, but chose to ignore mentioning which half of the spectrum.
The other big announcement is disinvestment of PSUs. When the UPA first came to power, it ceremoniously scrapped the ministry of Disinvestment that was setup by the previous NDA regime. Now suddenly we are back to it. It is argued that it will allow the people to own and control PSUs. I simply fail to understand how transferring ownership from the ‘Public’ sector to the “Private’ sector allows the ‘Public’ to own and control them! Is the finance minister trying to say that the Government run PSUs were not run by the public? Is one supposed to understand that he is saying that the Government is not run by the public?
This budget is going to trigger growth with massive inflation. “Growth’ is necessary for global interests to remain interested in India. But high nominal growth rates are eroded by high inflation rates, such that real growth rates falter. Nominal high growth figures serve the purpose of foreign investors, who invest in our country and then expatriate the profits such that the domestic inflation rate does not affect their earnings. For the unfortunate few entrepreneurs stranded within Indian boundaries, there are the tax cuts and sops to ease the inflationary burdens. To woo all such investors, the government is offering a plethora of Private Public Partnerships, chances to own government assets (by disinvesting PSUs), more licenses to Non Banking Financial institutions etc. The budget is a clear invitation to domestic and global corporate to profit from the ‘growth’ in India. All eyes are on India as the next global hub, and the nation will not disappoint.
The rest of India has to bear the burden of global aspirations. So what if rising prices squeeze our savings to fuel profits? So what if the benefits of direct tax cuts accrue to the rich, while the burden for the same has to be shared by the poor through indirect taxes? We are poised to become a ‘global economic superpower’, and as Spiderman says, ‘With great power comes greater responsibilities”.

AMITAYU SENGUPTA

An excellent article.

A sensible article from unexpected quarters!

Very incisive! Pragoti needs to publish more of these!

A perceptive piece. Evocative and brilliant.

Yes! Nothing is impossible...

When had the CPI(M) not denounced incidents in Nagaland and Manipur?????!!!!!! In fact the CM of West Bengal (who happens to be a member of the CPI(M) ) had taken the blaim on himself for the unfortunate incident on March 14, 2007 in Nandigram. Wasn't sufficiently clear about your reference to the labour movement in the Guragon region, as to whether you support it or deny it. And who says that CPI(M) supports 'draconian laws' as a measure to combat terrorism?! It has been one of the most vociferous opposer to erstwhile MISA and POTA. Certainly Guantanamo, Bagram and Jacobabad are not the model that CPI(M) has ever espoused. With regard to Maoists, there haas always been the attempt to counter them politically as well as through the cannels of the state administration.

took the help of a bengali friend to decipher the content of the article. it is not only by a bourgeois economist, for that variety exists in dozens, but by a specific bourgeois economist i am told who spends more time in anti-Left TV channels gesticulating against the left front than the time he spends in his department. be that as it may; the table that he quotes, presumably taken from the Sachar Committee report, actually shows that more muslim dominated villages in west bengal have primary schools and health centres compared to the all-India average! did cowboy read the report carefully? it is a self-goal!! as far as the main argument of the cited article is concerned, this is the oft-repeated anti-reservationaist argument: no need for reservation; provide better schooling, healthcare, basic infrastructure etc. etc.

no harm in doing that. but what's the harm in providing reservations? cowboy must explain (in case he is endorsing the bourgeois economists' position).

as far as the AP govt's gimmick in the name of Muslim reservations is concerned, the less said the better. they did it in a way which sealed the fate of that reservation in the high court. but what about the Central government? after all, Ranganath Mishra Commission was constituted by the Congress government at the centre, not the AP govt...why is Manmohanji, Madamji and Rahulbaba silent? Does cowboy have a clue?

red salute to the writer for a very timely and inspiring intervention. SFI is once again proving why it is considered to be the cutting edge of the country's democratic movement. in the most adverse of circumstances; when the anti-Left forces are on the offensive in the bastion of Left democratic forces; and when the Left itself seemed to be faltering and demoralized; it is the SFI which has sparked the hope of a new Left resurgence.

lal salaam to all SFI comrades. red salute to the student martyrs.

The AP government's way of providing reservations to Muslims never considered the backward among them criterion. The first time they did it, the High Court quashed it saying that the criterion was not defined. The AP government then brought about a Backward Classes Commission to identify backwards among Muslims. The Commission simply added Muslims (in the state) enbloc into a Backward category and called them backward. The High Court in its recent judgement has again quashed the judgement on the grounds that the AP government has not determined backward communities correctly and this amounts to reservation on the basis of religion alone.

You are advised to check news reports on the AP court judgement. This blog which has tracked the issue (www.theminorityview.com) has this to say about an EPW editorial on the subject -

The Editorial comments that in view of the strict approach of the West Bengal Government to have more sharp policy for identification of backward Muslims, it is unlikely that the logic of the judgement of the Andhra Pradesh High Court can be extended to a similar action taken by the West Bengal Government.

Clearly, the WB government is identifying backwards (excluding the Ashraf communities) among Muslims and adding them to the OBC list (which is currently 7%), a 10% addition will increase this to 17%.

while i understand the grievance of the farmers with regard to animals destroying their crops, i do not know how killing wild animals can be a progressive demand....they can be captured, driven away from the fields through various means....but the demand or the action of killing them should not be celebrated to say the least....

Read this Cowboy comrade ( http://www.anandabazar.com/2edit3.htm) and see what is the state of Muslims in West Bengal. Don`t tell us that the writer is a bourgeois economist, the old cliche of the CPI(M) party. And secondly it was the AP government which moved a bill for reservation after the commission`s report was placed. Though the high court quashed it on the ground that reservation based on religion is unconstitutional. The AP government reservation was not for all muslims but for backward section of the muslims. I repeat for the backward section of the muslims. So the credit goes to the AP government not to the Left front in West Bengal.