WHY did the Union Budget 2013-14 announcements leave a sinking feeling amongst all the stakeholders after the initial euphoria? One, the devil is in the detail. And second, the common man on the street has become savvy with all the repeated attempts of the government to play foul with him. The aam aadmi is angry because there is not even a passing reference to him in the mountain of documents produced in the Budget. The minimum expectation was that the common man would be spared the spiraling inflation caused mostly by the bank interest rates and fuel prices. Although the corporate world had drawn relief from small measures in the beginning, even the retail investors in the stock market, mostly from the middle class, quickly beat a hasty retreat when the real picture started to emerge.
The Union Budget this year has been trying to straddle between two stools – populist measures like NREGA and the food security Bill and dealing with the economic situation in the country which is of the government’s own making.
Union finance minister Palaniappan Chidambaram is known for his jugglery and sleight of hand. The jugglery only lends credence to fact that the poor will suffer even more though the image is created that the government has tried hard to stave off a difficult economic situation. The fiscal deficit figures mentioned in the Union Budget papers this year is deliberately manipulated to reveal a somber and placative economic situation. The finance minister is heavily dependent on the convention that the figures made out in the Budget will take its own time to be coming to fruition, and that would be at least another six months by which time the world would have forgotten what he said in his Budget speech.
There are so many imponderables and presumptions in this year’s Budget that even common people have suddenly become wary of the causes and effects. There is a presumption that the economy has bottomed out and the near term future is only going to be better. But looking at the policy paralysis, the open internecine fights among cabinet ministers, the way power plants have been starved on basic raw material – coal, etc can stretch the economic downturn much beyond the global trends.
What can be worrisome for the common people is that the real subsidies granted in the Budget are not reflected in the accounts to fudge figures and show a rosy picture. The best example of this is in the gargantuan oil subsidy.
There has been a serious attempt at hiding expenses so as to bring down the deficit figures. Oil subsidies were paid as oil bonds given to oil companies in equivalent amount. The bonds had become a considerable part of the government’s debt, even if these bonds never got reflected on the expenditure side of the Budget. Thus the oil subsidy was made to look under control even while the harsh truth was being hidden from the people.
On the other hand, the subsidy bill of oil and fertilizer has been carried forward year after year and hence this year about Rs1-lakh crore of the subsidy has been taken out of the Budget purview. In meeting the deficit target of 4.8 per cent this year the finance minister has cleverly run down its own stated pro-poor policies like the Food Security Bill which has been acclaimed as the panacea suggested by Congress chief Sonia Gandhi. But the food subsidy has been curtailed in this year’s budget even as the finance minister has promised that he would provide more money if there is a need for it in future. The fact remains that the poor would get about Rs 12 per month per head if one goes by the government’s calculation of providing for food for the poor!
It is a different matter that this Union Budget will be the last one for the present government to give recourse to its various big ticket schemes like NREGA or the food security. But inflation is actually good for the government even though the aam aadmi has been viciously and often violently affected by its effects. If inflation has been going up all through the present government’s tenure it is obvious that there is some kind of incentive for the government in it. The fact is that inflation brings more number of people in the higher tax bracket and hence increased revenue collection figures for the government as an assumption. The higher tax collection means that much less the deficit.
Poor Budget planning has only led to a high total outstanding debt from the level of 40 per cent of the GDP. There does not seem to be any state initiative to adopt austerity measures in the Union Budget this year. There is an imminent danger of food inflation going through the roof, yet the Budget failed to show any strategy for that.
These practices though clever only bring out the trust deficit that people have against this government. There is no linkage between the Budget and the 12th Five Year Plan which has been propagated by the prime minister as his favourite piece of action in his whole term in office.
Even if skill development has been at the root of many of the plans put forth by the Union finance minister the Budget utterly fails to provide adequate funds for it. The youth of the country has been caught in the quagmire of unemployment due to the economic downturn for which the government seems to be a mute onlooker, while skill development programmes have got even less money than what they used to in the past Budgets.
Prime minister Manmohan Singh has not left any opportunity to talk about skill development plans for the youth in his rare public appearances, but in a country where over 600 million youth seek better jobs and better living conditions finance minister Chidambaram has only allocated Rs1,000-crore for skill development this year. If that is compared with a BJP-ruled state like Gujarat it is small change. Gujarat has allocated Rs 800-crore for skill development in its Budget.
There has been a strenuous effort to project the idea of despondency in the country about the economic situation prevailing in the global market place. But the fact that increased investments in infrastructure alone would be able to deliver this country from any economic pain is lost on the government. The government’s ploy has been to convince the poor in the country that rising prices, declining growth rates, dismal job creation, high current account deficit and fiscal deficit are all facts of life that we have to live with.
The Union finance minister Chidambaram also had assured the country that the economy of country would reach the size of $5-trillion in another ten years. But looking at the Budget proposals the target figure of $5-trillion also needs to be reviewed.
Another facetious but clever move by the finance minister is to announce ‘world’s first public sector women’s bank’, as if the present banking system does not have any provisioning for women. The whole micro-financing system is targeted at women self-help groups in entrepreneurship and home-building. On the other hand, the government has put income tax on co-operative banks for women which have been existence for decades now. The income tax on such targeted banking systems has led to such banks dying an untimely death.
In all this the only silver lining has been the tax on the super rich. But the government’s own records show that there are just about 40,000 super rich people in the country according to their income tax returns. So what is the effect on additional taxation on luxury yacht going to be? Well, our guess is as good as the finance minister’s!