INDIA'S 2008-09 BUDGET: NOT WHAT IT CLAIMS

By B. Prasant, PV correspondent in India

India's 2008-09 budget is clearly aimed at upcoming Parliamentary elections early next year. The budget is filled with attempts to hide the burgeoning economic crisis the nation faces, behind a facade of cosmetic measures.

     The new Budget admits inter alia how every important economic and financial sector has started to stagnate and fall behind targets set during the 2007-08 financial year. The growth rate itself has gone down from 8.5% to just over 8%.

     The Budget has not addressed the inflationary trends in the economy adequately, especially with regard to food and fuel prices. The food subsidy is to increase by only about 3.5% over 2007-08, actually a reduction since the Budget assumes an inflation rate over 6%.

     It is clear that the government does not envisage an expansion of the PDS (Public Distribution System) to protect the people against rising food prices. While the shift to a fixed excise duty on unbranded petroleum is a welcome measure, this will not reduce high fuel prices. Petrol and diesel prices could have been brought down had there been similar restructuring of the customs duties on petro products.

     A disturbing aspect of Budget 2008-09 is its failure to provide an adequate fiscal stimulus to the Indian economy at a time when the world economy is poised for a downturn and the rupee has appreciated against the dollar, adversely affecting growth and employment generation.

     Although the Finance Minister has budgeted for a 17.5% increase in tax revenues over 2007-08, revenue expenditure will rise by 12.2%, and capital expenditure (after adjusting for book transactions) by a mere 8.8%. The opportunities provided by the rising tax revenues have not been properly utilized. Budgetary support for the Eleventh Five Year Plan has been increased in Budget 2008-09 by 382 billion rupees (Can. $9.5 billion) over last year, far less than the Rs. 600 billion suggested by the Left Parties. This fiscal conservatism is in keeping with the retrogressive trend for some decades now in the union (central) government's "liberalisation" budgets.

     As CPI(M) chief minister of Bengal Buddhadeb Bhattacharjee recently noted, "It is estimated that there are over 350 million workers in the unorganised sector. The Budget has helped only a fraction of them through the extension of the existing insurance schemes. Moreover, while the Finance Minister has assured that the outlay for the rural employment programme would be increased in accordance with demand, the outlay has been increased by around 20% only in Budget 2008-09, when the number of districts covered under the scheme has almost doubled."

     Taxes have been reduced in a wide sweep for the rich and for the corporate houses. The resulting shortfall will be collected through indirect taxes that will adversely affect the mass of the people. Prices of commodities of common consumption will go up further. With the increase in the per litre price of petrol and diesel, costs will go up even more as transporters shift the burden of freight onto the groaning shoulders of the common people.

     The attempt by the finance minister to bedazzle the nation with a so-called "debt waiver" worth Rs 600 billion for the indebted peasants has to be viewed in perspective. The peasants comprise close to 70% of India's population. With no effort to remedy the reasons why peasants' debt is on the rise, a "debt waiver" is a publicity stunt. Is there appropriate provision in the budget itself to cover the waiver amounts? The answer is an emphatic "no". Where will the funds come from? 

     It has been broadly hinted that the shares of profit-making public sector undertakings will be sold to generate "adequate" funds. This is a double-ended ploy typical of our World Bank-trained finance minister. If the Left objects to the measure, especially about how the "book transfer" would be subtly managed, harming the nation's core sectors immensely, the union government could then gleefully declare that the Left are anti-peasant! If the Left does not raise hell, then the same charge will be levelled against it!

     There is another dangerous agenda behind the facade of this scheme. The debt waiver is announced, but the banks will be reimbursed not in a year, but in three instalments over three years, minus interest payments. The largest bulk of agricultural loans comes from the cooperative banks and loan cooperative societies. These institutions would simply go bankrupt while implementing the debt waiver, if the entire compensatory amount of money is not received in full at one time. Most banks - even the larger ones - do not have the capacity to absorb the three-year-long loss. Even if some banks do have the capacity, where would they get the interest on the debt waiver for three years? No way out is mentioned.

     Then again, peasants who own more than a couple of hectares of land, even if it is not adequately irrigated, would not get the benefit of the waiver. Yet many of the thousands of peasants committing suicide in states like Maharashtra and Andhra Pradesh, as procurement prices plunge for food crops, do own more than two hectares. Also, the proposed debt waiver law would not cover loans given by money lenders, the biggest source of agricultural loans in states ruled by the Congress and the BJP.

     Finally, kisans who have already paid back bank loans will be deprived of the debt waiver. The danger of corruption on a mass scale looms large. Many peasants facing deprivation from the waiver scheme for paying off bank loans before the plan was announced are now pleading desperately with the banks to declare them as defaulters. The smaller cooperative banks which dominate the banking scene in the Communist-ruled states will become bankrupt, leaving the peasants in the complete grip of the money lenders. 

     In 1977, the Left-supported Janata Party government implemented a debt waiver scheme under pressure from the Left. In 2004, the BJP-led central government announced a waiver of loans worth Rs 140 billion. However, there was no budgetary provision either in 1977 or in 2004. The CPI(M) called both announcements "instances of sheer deception."

     This time, too, the debt waiver scheme has been announced without any budgetary provision. The Left peasant organisations must immediately demand that the funds to compensate the debt waiver must be made not through sale of shares of profit-making PSUs, but through taxes on big capital and on the corporate sector.  At the same time, a demand must be raised that peasants who had paid back bank loans earlier must be brought within the scheme. The Left peasants' organisations, as veteran peasant movement leader and CPI(M) central committee member Benoy Konar told People's Voice, "expect that the Left MPs will become aggressively vocal on this issue in the Parliament."

Found at: http://www.peoplesvoice.ca/articleprint14/11.%20INDIA'S_2008-09_BUDGET__NOT_WHAT_IT_CLAIMS.html