The preparation of a nation’s Budget is a complex exercise. Several competing interests have to be accommodated in a situation where resources are scarce and the cake is just not large enough to satisfy everyone. India is a collation of social polarisations, from the very rich to the abysmally poor. At one end of the spectrum there are vast numbers of our citizens who do not even have the money to eat two square meals a day. And, at the other end, we have people who do not know what to do with the amount of money they have. The Union Budget is a balancing exercise between these polarities.
Arun Jaitley has done, what he must believe, is the best he can do in these circumstances. His intention cannot be faulted. But what he has achieved can be subject to analysis. To my mind, the imagination of this Budget is corporate and anti-poor. Perhaps
Mr Jaitley’s thinking is that if the corporate sector is strengthened, the size of the cake will grow, and the benefits will trickle down to all sections of society. That could be the only reason why he reduced corporate tax from the current 30 per cent to 25 per cent. But there is no guarantee that this benefit to the already very rich will lead them to invest more, or to invest in a manner which will give a real boost to employment.
His argument that India’s corporate tax is much higher than other Southeast Asian countries is factual. But countries choose their tax regimen keeping in mind their own objective conditions. The Southeast Asian countries have already reached a much higher level of overall economic development. They have also much less of the absolutely poor and illiterate and malnutritioned. Therefore, their need for taxes, and their priorities, cannot be mechanically superimposed on our realities.
By contrast, the Budget is conspicuously silent on the plight of the “aam aadmi”. Close to 70 per cent of our population is still linked to agriculture. That is also the sector which has the largest number of the poor and hungry. Their abject conditions will not improve unless there is a quantum jump in agricultural productivity, which continues to grow at the rate of two to three per cent. We have the world’s largest endowment of fertile agricultural land, but our food productivity is very low. China’s rice yield per hectare is twice as much as ours. That of Vietnam and Indonesia is 50 per cent more.
Even a successful farming state like Punjab has an average rice harvest of 3.8 tonnes per hectare; the world’s average is 4.3 tonnes. Obviously, therefore, agriculture needs massive infusions of technology and infrastructure.
The Budget should have focused on providing allocations for better seeds, fertilisers and pesticides, improved and wider irrigation techniques, credible credit avenues and effective satellite mapping. Money needs to be provided to expand storage facilities, develop cold chains and improve the transport network. Merely increasing the money available for agricultural credit is hardly a remedy. Most farmers do not have the wherewithal to avail of credit, and are already under a debt burden. This year has already seen dozens of suicides by farmers caught in a vicious debt trap.
Minimum Support Prices (MSP) are far below the cost of production. The government has reneged on its poll promise to raise the MSP by 50 per cent, and farmers are jostling to even get a bag of urea. In such a worrying situation, the neglect of agriculture and irrigation in the Budget is unforgiveable, because it consciously ignores the needs of the poor in order to protect the interests of the rich.
The decision to raise service taxes further is also a matter of concern. Service tax at 12.3 per cent was already high. Mr Jaitley has now raised it further to 14 per cent. This will certainly have an all round inflationary impact. The middle class is already straining to make both ends meet. Higher prices will place a further burden on it. This will appear even more burdensome since no tax concessions have been provided to it. Mr Jaitley’s justification for ignoring the middle class is that his fiscal space is reduced because of the Finance Commission’s recommendation to increase allocation of Central revenues to states. However, if his fiscal space was constricted, why not raise more funds from the corporate rich, who are in a position to pay without pain?
The decision to give to Bihar and West Bengal the same assistance as was given to Andhra Pradesh at the time of the reorganisation of the state is a welcome move. This was a promise made to Bihar at the time of the creation of Jharkhand in 2000, but the Centre had not acted upon it. However, this increased assistance, while welcome, cannot be a substitute for the long-standing and well-argued case of Bihar for special category status. There are other crucial areas where the interest of the states, especially that of the least developed, have been ignored.
The Centre’s contribution to the mid-day meal scheme has been reduced to 25 per cent. Funds have also been cut in support to the Sarva Shiksha Abhiyan. In fact, it is a matter of concern that the Budget seems to follow a conscious policy of reducing financial support to welfare schemes. The Integrated Child Development Scheme (ICDS) has had its budget cut by a whopping 50 per cent; the all important area of primary education has had its outlay reduced by over 21 per cent; and the National Livelihood Mission has had its funds slashed by 12 per cent.
Moreover, no roadmap has been laid for increasing manufacturing. In one of the youngest nations of the world, job creation has also been largely ignored.
A nation is an integral whole. The successful cannot secede to form a separate republic. The poor and the marginalised cannot be simply disowned. Mr Jaitley would do well to remember that, except in fantasy, you cannot build a first floor of an edifice without a ground floor or a foundation. For a government that swears by the slogan of “Sabka Saath, Sabka Vikas”, this Budget seems to be focused only on “Kuch ka vikas”.
Author-diplomat Pavan K. Varma is a Rajya Sabha member
