Monday, February 29, 2016

No Vision for Growth; No Vision for Improving People's Interests

No Vision for Growth; No Vision for Improving People's Interests

Press Statement

The Polit Bureau of the Communist Party of India (Marxist) has issued the following statement:

Union Budget 2016-17:

No Vision for Growth; No Vision for Improving People's Interests

In the backdrop of global economic slowdown the budget should have increased measures that enhance domestic demand. Instead it chose to continue with the same regressive policies that are contractionary. This would aggravate inequality, unemployment and further contract exports. It would lead to increasing distress in agriculture and the countryside, the collapse of industrial production, the slowdown in construction activities and many services.

The Government's claim about the impressive growth performance of the Indian economy is belied by the revenue realization figures for the year 2015-16. The revenues from corporate and personal income taxes have been far short of the budget estimate - by a whopping sum of nearly Rs. 46,000 crores. The lower revenue realizations have also affected adversely the states share in central taxes as the amount transferred to them in 2015-16 is less than promised budget estimates. The fiscal deficit targets have actually been met by a higher realization of excise duties - Rs. 54000 crores more than budget estimates. Taking advantage of the fall in global oil prices instead of passing the benefit to the people, revenue from excise duties were raised.

The direct tax proposals will lead to a revenue loss of Rs. 1060 crores, a gain to the rich, indirect tax proposals are to yield Rs. 20670 crores,  further burdens on the consumers. Even this is based on an expectation of GDP growth of 11% even though last year the nominal growth estimate of a similar order proved to be optimistic. The Finance Minister has also given a very perverse signal as far as tax discipline is concerned by announcing yet more amnesty schemes for the benefit of tax defaulters.

Preoccupied with further reduction of the fiscal deficit, the finance minister has proposed to reduce the central government expenditure to GDP ratio further. Notwithstanding claims of increases on certain heads of expenditure there is a parallel slashing on other heads. In agriculture the main increase which the budget shows are by way of transfer to banks and insurance companies that has no real benefit to the farmers. Despite tall claims of a big push in infrastructure, capital expenditure in 2015-16 was lower than budgeted and is proposed to be kept at almost the same level in 2016-17 - implying a reduction in real terms and as a share of GDP from 1.8 to 1.6%. Both food and fertilizer subsidies have been cut by Rs. 5000 and Rs. 2000 crores respectively. The expenditure on Tribal Sub Plan, which is supposed to be 8.6 % of the total plan expenditure, is only 4.4% - a shortfall of Rs. 24000 crores. Allocations for Minority Welfare have fallen in real terms. The allocation for the ICDS has been slashed by Rs. 1500 crores despite the direction of the Supreme Court for its universalization, which would have required an additional Rs. 10,000 crores. Similarly, in the case of the SC Sub-Plan, the expenditure is pegged at 7% of the total when it should be 16.6% - a shortfall of Rs. 52470 crores. The Finance Minister also proposes that, for the first time, 60 per cent of all pension and provident fund withdrawals will be taxed! Therefore, if the workers and salaried middle class withdraw their own savings, they will have to bear the burden of this proposed tax.

The lofty claim of highest ever allocation for MNREGA is patently false because it was higher in the year 2010-11. Maintaining 2010-11 levels in real terms would have required an expenditure of over Rs. 65000 crores in 2016-17. What is even more shocking is a concealment of the fact that in 2015-16, despite it being a drought year and the promise of doubling the number of days of work from 100 to 200, the actual level of expenditure was so low as to generate only an average of 38 days of work.

The proposal is to raise Rs. 56,500 crores through disinvestment in public sector enterprises. Proposals to liberalize FDI in insurance and to decentralize foodgrain procurement also represent dangerous moves that would add to the destabilization of the Indian economy.

The budget is, therefore, distorted without any vision. It is once again a blatant attack on the poor and the oppressed. This is a budget to appease the rich accentuating the problems of unemployment and rising inequality.

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