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Monday, February 28, 2011

Union Budget 2011-12 fails to address the serious problems affecting the people and the economy

Union Budget 2011-12 fails to address the serious 

problems affecting the people and the economy

The Polit Bureau on Union Budget

New Delhi, February 28: The Polit Bureau of the Communist Party of India (Marxist) has issued the following statement:
The Union Budget 2011-12 fails to address the serious problems affecting the people and the economy. The Budget comes at a time when people are suffering due to high inflation and relentless rise of food and fuel prices. In this backdrop, the massive Rs. 20000 crore cut in major subsidies for 2011-12 on fuel, fertiliser and food, from what was spent in 2010-11 (Revised Estimates), come as a rude shock. The cut in food subsidy by Rs. 27 crore clearly exposes the Government's lack of willingness to enact a meaningful food security legislation. The Finance Minister's stubborn refusal to reduce excise and customs duties on petro products and obduracy in moving away from the ad-valorem duty structure, coupled with the cut on fuel subsidy by Rs. 15000 crore, indicates massive increase in fuel prices in the days to come. This exposes the anti-people character of the Government. 

The direct cash transfer programme announced for implementation from next year is a smokescreen for this subsidy cut. The current BPL lists exclude large sections of the country's poor. Direct cash transfers to a small section of beneficiaries cannot substitute for the subsidised provision of essential commodities like food and fuel. The rise in kerosene prices will immediately affect the poor.

The Budget has provided relief of Rs. 11500 crore in direct taxes, while proposing to mobilise an additional Rs. 11300 crore through indirect taxes, which will inevitably be passed on to the consumers. This is a regressive taxation regime, which enriches the rich while burdening the ordinary citizens. As per the Statement of Revenue Foregone, total tax concessions reached over Rs. 5 lakh crore in 2010-11, with corporate tax exemptions totalling over Rs. 88000 crore. The tax-GDP ratio, which had reached almost 12% in 2007-08, has declined since then to around 10% in the current Budget. At a time when income inequalities are rising fast, a decline in tax GDP ratio shows the waning commitment towards redistributive policies and a throwback to trickle down economics.

No concrete steps to unearth the huge sums of black money stashed in offshore tax havens were announced. The DTAA (Double Taxation Avoidance Agreement) with Mauritius, through which 42% of FDI inflows into India is routed, is the biggest conduit of tax evasion by MNCs and Indian corporates. Rather than plugging such channels, the Finance Minister is signing more tax avoidance treaties with other countries.  

With resource mobilisation taking a back seat, Plan Expenditure as % of GDP in 2011-12 will decrease from what was spent last year. The Budget Support for the Central Plan in 2011-12 has increased by only 12% over 2010-11, while nominal GDP has increased by 14%. Such squeeze in real expenditure marks all the major developmental heads. The flagship schemes of the social sector have been neglected in the budget and social sector spending is slated to fall in real per capita terms.  The allocation for NREGS has fallen by Rs. 100 crore, despite a claimed increase in the wages. The provisions for ICDS are far below the estimates for full universalization as directed by the Supreme Court. 

Agricultural growth has been below 3% on average in the first four years of the Eleventh Five Year Plan, despite a target of 4%. It is shocking in this backdrop that the budget provision for the Agriculture Department has been cut from last year. The allocations for the welfare of women, minorities, dalits and tribals are thoroughly inadequate. Capital expenditure is projected to fall from 1.7 per cent of GDP to only 1.2 per cent, which will affect basic infrastructure for the people.

The announcement of impending legislations directed at liberalizing the sensitive financial sectors like insurance, banking and pension funds is meant to appease foreign finance capital. Further liberalization of rules for Indian Mutual Funds accessing foreign investors would also facilitate the flow of speculative finance into the economy. Greater inflows of such speculative finance at a time when India's current account deficit is widening, does not augur well for the health of India's economy.

Overall, the Budget reflects the abandoning of the aam admi agenda by the UPA-II Government and its pursuit of an aggressive neoliberal agenda. The Polit Bureau of the CPI (M) calls upon the people to strengthen resistance against these neoliberal policies. 

Finance minister Pranab Mukherjee presented Central Budget to Parliament on Monday

NEW DELHI: Finance minister Pranab Mukherjee presented Central Budget to Parliament on Monday.

Following are the highlights of the budget:

* Economy expected to grow at 9 percent in 2012, plus or minus 0.25 percent 
* Inflation seen lower in the financial year 2011-12 
* Disinvestment in 2011-12 seen at 400 billion rupees 
* To create infrastructure debt funds 
* To boost infrastructure development with tax-free bonds of 300 billion rupees 
* Food security bill to be introduced this year 
* To permit SEBI registered mutual funds to access subscriptions from foreign investments 
* Raised foreign institutional investor limit in 5-year corporate bonds for investment in infrastructure by $20 billion 
* Public debt bill to be introduced in parliament soon 
* Corpus of rural infrastructure development fund raised to 180 billion rupees in 2011-12 
* To provide 201.5 billion rupees capital infusion in state-run banks in 2011-12 
* Removal of supply bottlenecks in the food sector will be in focus in 2011-12 
* To raise target of credit flow to agriculture sector to 4.75 trillion rupees 
* Gives 3 percent interest subsidy to farmers in 2011-12 
* Cold storage chains to be given infrastructure status 
* Capitalisation of National Bank for Agriculture and Rural Development (NABARD) of 30 billion rupees in a phased manner 
* To provide 3 billion rupees for 60,000 hectares under palm oil plantation 
* Actively considering new fertiliser policy for urea 
* "Fiscal consolidation has been impressive. This year has also seen significant progress in those critical institutional reforms that will pave the way for double digit growth in the near future." 
* Food inflation remains a concern 
* Current account deficit situation poses some concern 
* Must ensure that private investment is sustained 
* "The economy has shown remarkable resilience." 
* "Certain events in the past few months may have created an impression of drift in governance and a gap in public accountability ... such an impression is misplaced." 
* Corruption is a problem, must fight it collectively 

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