Should A Paperless Budget Be Heartless Too?

 



By Ganesh Bhat :

As per PROUT: “In pure economic terms developmental programmes are those programmes which directly increase national wealth and indirectly support this increase”

Economics today is a theoretical extravaganza. It should be made more practical. Economics must be a precise, practical science and should be properly developed for the welfare of all,” is the observation of Shri Prabhat Ranjan Sarkar, profounder of socio-economic theory-PROUT. India’s budget 2021 has proved the first part and over looked the later part of the remark.

       Two days ahead of Budget, the Economic Survey recommended for an “expansionary fiscal policy” in 2021-22 to boost growth. It also advised the government to continue with structural reforms and significant privatization of state-owned companies. That is faithfully reflected in the Budget. For the first four decades after independence, a period of shortages and ever more stringent government controls on all economic activities, budgets were anxiously awaited  for what they would tax next, leading to hoarding and artificial shortages of  essentials  and other daily necessities. Since the 1990s, successive governments have used budgets to announce their policy priorities and paved way for introducing new taxes beyond the budget proposals.   

India’s draconian countrywide lockdown pushed more people out of jobs and sent many more millions back into poverty. The revenues and profits of the largest companies have been growing, and yet their expenditure on workers is declining. Just like the ban on high-denomination currency notes in November 2016 and the introduction of GST, the lockdown helped large companies take over the businesses and market-shares of small and medium businesses, especially those in the unorganised sector. Reverse migration of labourers created new challenges and a peculiar situation of shortage of labour in the cities and swelling of unemployed in rural areas. It was natural, that the people expected initiatives and schemes to be announced in the budget, which could create employment in rural areas and help the people in general. But, Budget 2021-22 has confirmed that the government is committed to institutionalize India’s already high and growing income inequality and it will allow the unbridled growth of corporate private capital.   Booming stock market from the moment of budget presentation indicates that it is this speculative investor section, which is happy with the budget.

The budget is being hailed as an Expenditure Budget by economists who have given 10 out of 10but they fail to explain how it benefits the common people, how it creates employment and increase their purchasing capacity?   The government’s actions proposed for the year ahead carefully avoid discussing the employment crisis—a mess that existed well before the COVID-19 pandemic.  

      It is announced that the fiscal deficit for the year 2020-2021 would be a massive 9.5 per cent of the GDP and that for the next year would be 6.8 per cent.  Revenue deficit is the excess of revenue expenditure over revenue receipts.  Such a deficit implies the government’s need to borrow funds to meet expenses which may not provide future returns.  High borrowings in the current year (indicated by fiscal deficit) and increase in outstanding debt leads to high interest cost.   In 2021-22, interest payments are estimated to be 15% higher than the interest obligations in 2019-20.   Interest payment is estimated at 45% of revenue receipts in 2021-22, up from 36% in 2019-20. This leaves little scope for developmental projects.  

      No Populism, but focus on Growth, praise the sycophants, overlooking the criticism   that the Centre is setting a new trend of playing 'dirty politics' for votes through the budget; allocation of more funds to poll-bound states is looked upon as a kind of bribery.

The capital expenditure is proposed to be raised; investment in construction of highways is announced. Such steps at best can make the people believe that their area is being helped, but it will not create employment on a massive scale; because machines replace the human labour; the real beneficiaries will be the contractors and investors. Tourism, hospitality and other sectors which have the potentiality of creating employment opportunity has been neglected in budget.  

 PROUT opines, “In pure economic terms developmental programmes are those programmes which directly increase national wealth and indirectly support this increase. Programmes which only increase national wealth indirectly, not directly, cannot be regarded as developmental programmes until the minimum requirements of the people are guaranteed.” Will the present government heed to this advice? In an attempt of making India as the most attractive destination for FDI, we are forgetting the basic psychology of the investors, which is to earn maximum profits in minimum time; and that they are least concerned about creating employment opportunities to the local people

        The government appears to have realised that the finances of the government are in a precarious state, we are borrowing to fund the ever-burgeoning revenue deficit and are paying interest on the existing and fresh borrowings. So, they have decided to start selling the assets, divest and monetize so that necessary finances are raised, donors of party fund are appeased and the people at the helm of affairs get praises from all (self- centred) corners. Yes, this can run for some more time, and a time will come when the government has nothing to divest. The so called experts blinded by the capitalistic thinking and centralized economic system suggest similar steps. They fail to understand; rather refuse to understand the benefits of decentralised economy and easier, safer, sustainable ways of raising capital.

Disinvestment is the centerpiece of this Budget. The LIC IPO, the PSUs (BPCL, Air India, Shipping Corporation, CCI, IDBI, BEL, Pawan Hans, NISL), the 75% permission for Insurance investment and the general liberalisation under incentive frameworks at State level are all breaking new ground, never before attempted at this scale.  Proposal to privatise two public sector Banks and  a general insurance company indicates that either we have not learnt from the failures of private Banks during the last year or it is being conveniently ignored.   

           With non-performing assets (NPAs) set to rise in the wake of the economic slowdown induced by the pandemic, creation of an asset reconstruction company/ asset management company (ARC/AMC) — popularly known as a “bad bank” was announced. The purpose of a “bad bank” is to park the bad assets of commercial banks and later sell those assets at a discounted price in the market. This will help clean up the balance sheets of commercial banks. A good chunk of gross NPAs totalling about   9 lakh crore as of March 2020 is expected to be transferred to the bad bank.

             This government was under severe criticism for writing off the NPAs of Banks, which consisted large amount of loans availed by the business houses close to the power centre.  Instead of the Government writing off bad corporate loans and getting bad name, now they can get it done through bad banks. This will give scope for increased political interference, overlooking of security norms by banks, favouritism, unethical practices etc., while sanctioning loans.  Starting a bad bank in the guise of easing credit to fund growth cycle is a bad idea and a clear policy of ‘privatize the profits and socialize the losses’.

       A new agriculture infrastructure development cess (AIDC) on petrol, diesel and several other imported items has been introduced with an assurance that it won’t place any additional burden on consumers. Because, the government feels that there is an immediate need to improve agricultural infrastructure so that we produce more, while also conserving and processing agricultural output efficiently with a motto to ensure enhanced remuneration for our farmers.        If, the government is really interested in solving the crisis of agrarian sector, it should think of giving industrial status to agriculture. This can be realised by implementing cooperation in farming, scientific land use and crop planning, encouraging setting up of agrico and agro industries in rural areas, availability of timely institutional finance etc. Taking up production, procurement, processing, distribution and marketing of essential commodities exclusively through cooperatives is necessary to get fair price to agricultural produce. Industrial status to agriculture cannot be achieved through contract corporate farming and marketing methods, which the government is encouraging.

     However, following the introduction of the cess, states are likely to lose some revenue. Currently, the Centre shares 41% of its total tax revenue with states. But surcharges and cesses are not included in this pool. In May last year the government had announced a  1 lakh crore agriculture infrastructure fund. People need to be informed as to whether the present cess is in addition to the above fund, who were and are going to be the beneficiaries of this fund etc.,

      Government appears to have aimed at achieving twin objects of reducing the share of state’s revenue and also creating a public opinion against farmers with AIDC.  It is proposed to strengthen thousands of schools to implement National Education Policy. NEP itself is short sighted and devoid of holistic   approach. Strengthening of any number of schools will not be able to impart humanistic education; it can at best create obedient intellectual labour to work for the capitalist class. A voluntary vehicle scrapping policy to phase out old and unfit vehicles was announced for encouraging fuel efficient, environment friendly vehicles, thereby reducing vehicular pollution and oil import bill. This policy appears to be for the benefit of vehicle manufacturers, who may be able to increase their sales through advertisement and offer of loans. This may help the economy in the short run, but not in the long run as the debt economy has suffered in every country. The solution to the problem lies in fortifying an efficient public transport system and ensuring of adequate purchasing power to common people. The entire budget has conveniently overlooked the issues and solutions to the problems of the common people, forgetting that the motto of government is to work for the good and happiness of all.

    The party in power probably thinks that Minimum Government, Maximum Governance means privatisation. This budget proves that the government is overly business-friendly, is nurturing crony capitalism and that all the economic policies in the country are formulated by a handful of people who are pillars of capitalism. Hardly few people in the entire country (including 795 MPs), read the entire Budget from the beginning till the end of around 2,000 pages! And for that, why print thousands of copies? This transition from paper to digital is a welcome move. They say it is a historic budget as it is paperless... but, is it necessary that it should be heartless also?


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