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Opinion
Budget 2005: Reality
Check
A lot was expected from this Budget, as indeed a lot was expected from the
UPA government in terms of changing course and showing a new direction for
both the Indian economy and the polity. Sadly, both these hopes now appear
to have been over-optimistic. Economically, so far, the government has
simply not shown enough determination or even desire to move away from the
neo-liberal policy framework that has had such negative implications for
the economy over the past decade and more.
Thus, both the proposals of this year's Budget (2005-06) and the evidence
of taxation and spending patterns in the current fiscal year are
disappointing. As has become usual with this Finance Minister, the
rhetoric employed in the Budget speech was rather different from the
actual outlays.
Consider the Budget's contribution to the Central Plan. This is supposed
to go up in the aggregate from Rs 82,529 crore in 2004-05 (Revised
Estimates) to Rs 110,385 crore in the coming year, with an increase from
Rs 8,589 crore to 11,494 crore under rural development (under which
employment programmes fall). But the actual figure for 2002-03 was Rs
11,939 crore and for 2003-04 Rs 11,369 crore. In short, the budget support
for rural development, which had gone down last year, is only being raised
back to the level that had prevailed in the preceding two years.
Arguably, the single most important promise in the national Common Minimum
Programme (CMP) is related to employment generation, which the government
(to its credit) at least recognised as a major problem requiring direct
public intervention. But the draft Employment Guarantee Bill (now placed
in Parliament) has been diluted so that its provisions come nowhere near
providing a genuine employment guarantee; and now the Finance Ministry is
providing hardly any increased allocation for such a scheme. The
government's own estimates are that such a scheme would cost at least Rs
25,000 crore per year, while other estimates go up to about Rs 45,000
crore per year.
In the current budget, the proposed allocation for Food for Work (FFW) is
only Rs 5,400 crore, a relatively small increase of Rs 3,582 crore, while
the allocation for the Sampoorna Grameen Rozgar Yojana (SGRY) has actually
been cut by Rs 990 crore! This suggests that even the piffling amount
being set aside for EGA (Employment Guarantee Act) is at the cost of other
employment programmes, rather than in addition to them.
Since FFW covers only 150 districts, what is happening is simply that the
central government plans to scale down employment programmes in the rest
of the country to accommodate FFW. This is, in fact, a regression from
universality to district-wise targeting. This is very unfortunate since it
is clear that the main problem facing most rural women is lack of
employment - both for themselves and for other family members - and the
employment scheme is critical to ensure that this most pressing problem is
addressed.
The other area of declared policy priority of the UPA government has been
agriculture. The agrarian crisis has led to a generalized depression in
the rural economy that has particularly affected rural women. There is no
question that both expenditure and allocations to agriculture have
increased - the actual spending in the current year (at Rs 4,799 cr) is
estimated to be higher than the original plan outlay of Rs 4,643 crore and
even more (Rs 6,425 crore) has been budgeted for coming year.
But these are still trifling amounts in relation to the extent of the
crisis. Further, instead of providing much-needed protection to Indian
farmers who have been battered by the extreme volatility and highly
subsidized prices prevailing in world markets, the Finance Minister has
left unchanged the current tariff rates on most agricultural commodities.
Nothing has been done to protect cotton and oilseed farmers, who have been
in great difficulties in recent times.
It is not only that the FM's tax projections for the coming year are
clearly unrealistic, just as they have proven to be for the current year.
The other major area of "window-dressing" is with reference to fiscal
deficit. There is a substantial "off-loading" of borrowing from the budget
to off-budget entities.
At least three such methods deserve mention. The first is state
governments, who will now have to borrow nearly Rs 30,000 crore for their
Plans from the market, whereas earlier the Centre would have borrowed this
amount and handed it to the states. The problem is that many state
governments may not be able to borrow this, and state governments remain
the most critical with respect to spending that matters for ordinary women
- in infrastructure, health and education.
The second method is with regard to the Infrastructure Development Fund,
whose capital of Rs 10,000 cr is not provided for in the Budget, since the
new agency will do the borrowing. The third is that there is no mention of
the food component of the Employment Programmes in the Budget documents.
The 5 million tonnes promised by the Finance Minister as the food
component of the FFW - and which does not figure in the Budget - will
obviously be loaned by the Food Corporation of India to the FFW programme.
Off-budget transactions like these are likely to create future budgetary
problems as well as problems for public sector entities. For example, the
Food Corporation will not be paid for the food-grain it provides for the
employment schemes - surely this cannot be good for its financial
viability.
Most of the tax concessions given in the Budget lack any justification.
For instance, the reduction in import tariffs on a range of agricultural
goods is precisely the opposite of what the government should be doing if
it wished to undo the damage already done to this sector.
The real problem is that it is now clearly evident that no real change of
course in economic policy is being contemplated. But this is precisely
what most Indian women really needed. Without such a basic change of
course, mere palliative measures - as in the present Budget - are not
likely to be adequate.
– Jayati Ghosh
March 20, 2005
Jayati Ghosh is Professor of
Economics at the Centre of Economic Studies and Planning, School of Social
Sciences, Jawaharlal Nehru University, New Delhi.
By arrangement with
Womens Feature Service
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