Is this budget really political and election-oriented? | Nilotpal Basu

Published on 04-03-2008 In National

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Is this budget really political and election-oriented?

Seldom has one seen the kind of shrill cacophony accompanying the presentation of the Union Budget as it has happened this year around. In fact, the build up was very much there for past several days in the run-up to the big event. It was a major spectacle for 24 hour news channel broadcasts. But the bottom line of what was sought to be pushed as a unanimous verdict on the substance of the budget itself is surprising at first sight.

The contention of the mainstream media is that the budget is political. This is surprising. What is a budgetary exercise? It essentially balances the income and expenditure of the government. What is the source generating income and mobilizing resources? Who will be taxed – who will be exempted? Is the consideration meant to be an apolitical exercise? Similarly, where to incur the expenditure – for whom, for benefiting which sections? These too are shaped by political considerations.

Therefore, one is flabbergasted by the tone of injured innocence that the mainstream media echoes that the budget is `political'! All budgets, for that matter, are political and cannot be but anything else. The moot question is – whose political interest does it serve?

The special significance of Union Budget, 2008-09 was that this was the last full-fledged budget of the UPA government. In parliamentary democracy, budget making or rather its endorsement or disapproval is an exclusive prerogative of the legislature. So far as the present dispensation is concerned, it happens to be a minority coalition. This makes it incumbent on the government that it conforms to the common minimum programme that forms the basis of its ability to marshal majority support in the parliament. Political forces do tend to become more concerned about people's well-being as and how the election approaches. The Common Minimum Programme which, indeed, was a response to the people's verdict attempting to address some of these popular concerns which shaped the verdict, 2004.

So, it was quite understandable that the clash of a neo-liberal policy paradigm with disproportionate emphasis on market-driven policies would come into conflict with the welfare centric requirements which people were clamouring about. And, this was accentuated by the actual sense of acute distress that struck large sections of the population. Three major areas were distressing the people. First, the gravest agrarian crisis which cost literally thousands of farmer's lives through suicides. Second, the price rise driven by sky-rocketing of prices of food, as well as, the high international price of oil products. And, third, the bleak employment scenario.

Together with these major concerns, the FM was straddled with the global recessionary trend triggered by the crisis of the US financial system. The response of the US Fed to further cut the interest rate is inducing huge outflow of dollars flooding other markets. The Indian market is not only impacted in terms of volatility but hardening of the rupee. This, in turn, is impacting competitiveness of exports and leading to job loss in labour intensive SMEs particularly in textile, leather and handicrafts sectors.

Therefore, what the FM needed was to address these core concerns. His advantage was the background of revenue buoyancy. It is true that there are certain positive steps in responding to some of the urgent requirements. But overall, budget 2008-09 appears to be a largely wasted opportunity.

The Rs. 60,000 crore debt waiver package is the signpost of this exercise. Though a positive step, there are two glaring questions which are coming to the fore. Half of indebted farmers owe to informal moneylenders and not institutions. Any follower of agriculture sector will understand that the difference between quantum of dry land and irrigated farms are like the chalk and the cheese. Notably, farmers in Vidarbha who are forced to commit suicide will not be benefited because of the absence of larger quantum for classification of small and marginal farmers – this being a dry land area.

The real disappointment is the response on the price situation. The FM has budgeted a projection for 6 per cent inflation. However, the food subsidy bill has been hiked only by 3.5 per cent. This implies real reduction. Obviously, there is nothing to strengthen the PDS, let alone its expansion.
Similarly, either on direct employment generation, whether in rural area or in the unorganized sector, the budget offers very little. Neither is there any major attempt to address the requirements of social security as suggested by the National Commission on the unorganized sector employees.

In the capital market, the enhancement of the short term capital gains tax is a step in the right direction. So is the introduction of the new commodity transaction tax in the lines of the security transaction tax. But the point is whether it will be enough to regulate the dollar flow and stabilize the market and at the same time obviate the deleterious effect on the employment in the labour intensive sector.

Finally, though the FM had to bow down to postpone by a year the attempt to realize the zero revenue deficit targets arising out of the FRBM Act, he could not fully come out of its spell. Otherwise, how can one explain that with a projected revenue growth of nearly 18 per cent, the increase in the capital expenditure is only around 9 per cent? The gross budgetary support increase is only Rs. 38,000 crores, which has resulted in making the NCMP targets for education and health a distant dream.

The FM had earlier given concessions to the corporate sector. So much so that he himself admitted that though the corporate tax rate is 33.66 per cent, but work out to an effective rate of about 20 per cent. And the same continues. Nobody in the mainstream media complains about that. But when some hesitant steps are there towards the poor and the downtrodden, the likelihood of whose impact is still to be borne out by actual facts – the charge of being election oriented only reveals a lopsided view which completely ignores the ground realities of the Indian society.

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