Mar 3, 2011

Budget 2011-12 Analysis: Times of 'tough love'

In 2010-11, Rs 5.02 lakh crore was provided by way of tax exemptions to industry. This is nothing but a subsidy for the rich.

Tracking budgets is not easy. While the finer points in any budget get drowned in the chorus that rises to appreciate the finance minister only when more sops are doled out to industry in the name of strengthening economic growth, I have begun to realise that a budget for the ‘aam aadmi’ comes only when elections are around the corner.

You can accuse me of being anti-growth, but the fact remains that unless the government pumps in money to pull out the poor from the clutches of poverty, following the indirect route to sink in money to industry, hoping some of it will trickle down to the poor, remains a faulty assumption. I have always said that if the government launches a direct assault on poverty, the GDP grows.

Well, it has taken several years for the government to realise that farmers need short-term crop loans at a lower rate of interest. The National Farmer Commission had made this recommendation four years back. Pranab Mukherjee has lowered the effective interest rate for farmers who pay back in time to 4 per cent. In addition, the total quantum of agricultural credit has been enhanced by Rs 1 lakh crore, from Rs 3.75 lakh crore in 2010-11 to Rs 4.75 lakh crore in 2011-02. It is time however to differentiate between what the farmers receive and what the agribusiness industry gets in the name of farmers.

With five states going for elections, Mukherjee has reasons to remember the ‘aam aadmi’. Although economists call such concessions ‘populist’ measures, I think these concessions for the poor and marginalised are in reality true economic measures that spur growth. A special relief package of Rs 3,000 crore to the debt-ridden weavers, for instance, has come about only because the UP elections are around the corner. Rahul Gandhi had led a team of weavers from UP to meet Manmohan Singh a week before the presentation of the budget. Whatever the reason, weavers are in crisis and the debt-waiver will benefit 3 lakh weavers working with 15,000 handloom cooperative societies.

A few months back, health minister Gulam Nabi Azad was gheraoed by angry ASHA workers when he visited Jaipur. They were protesting against the paltry wages — Rs 950 per month — they were getting for delivering basic health services and awareness to rural population. These low wages have been in continuation for several years now, and no one took care. I am not sure whether these workers also come in the category of aangadwadi workers. But thanks to the coming elections, the finance minister has doubled the monthly salary of aangadwadi workers who too get Rs 1500 per month, a move that will directly benefit 22 lakh ‘aanganwadi’ workers. There is a need to still raise their salaries. He has also extended the benefit of health insurance that was given to NREGA workers last year, to unorganised labour in several areas.

Integrated development

At the same time, Mukherjee has provided Rs 30 crore for integrated development in each of the tribal districts in the naxalite-affected areas. This is a delayed recognition of the exclusion that almost all budgets have maintained all these years. With a little more vision, he could have launched several sustainable agricultural, health and education initiatives in the red corridor to revitalise the rural economy. If only he knew that agriculture is the first line of defence against Maoism, I am sure he would have thought on those lines.

In the name of inclusive growth, it is only industry and trade that have always walked away with the cake. In many ways the budget is simply an annual ‘maalamal’ exercise for the rich and the business community. Take the tax concessions that are doled out to industry every year and clubbed in the category of ‘revenue foregone’. In 2010-11, the finance minister provided Rs 5.02 lakh crore by way of tax exemptions to industry. This is nothing but a subsidy for the rich. Since 2005-06, the total subsidy being showered on the industry and business sector amounts to a whopping Rs 16.45 lakh crore.

In Budget 2011, Mukherjee has cleverly hidden the annual subsidy dole given to industry, but has in addition to Rs 5.02 lakh crore given last year provided another Rs 1,38,921 crore as corporate and personal tax exemptions this year. Since the economic stimulus that was being given to the industry for tiding over the recession has still not been withdrawn, we can safely compute the total subsidy to the industry at over Rs 6.4 lakh crore. Considering that the annual budget is an exercise involving Rs 12 crore, the massive subsidisation of business and industry has never been questioned.

On the other hand, subsidy on fertilisers, food and fuel has been reduced by Rs 20,000 crore this year, over the revised estimates of last year. This is exactly what Noam Chomsky meant when he said we live in times of ‘tough love’ — love for the rich and tough for the poor.

The finance minister could have easily made a drastic cut in the ‘revenue foregone’ category and thereby made more resources available for making cheaper food and fuel available to the masses, for rebuilding the shattered economy of the naxalite-affected regions, and also for programmes he spelled out for promoting millet cultivation, fodder development, and for sustainable agriculture. These are excellent initiatives, but the budgetary allocation is too low to make any significant impact. More so in case of fodder cultivation, which has remained neglected through the period when a lot of emphasis was given on increasing milk production.

Deccan Herald, Mar 3 2011.
http://www.deccanherald.com/content/142494/times-tough-love.html

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