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Never before in the history of our country have so many people been driven to
suicide. Today it has become a veritable epidemic. Not only are the poorest,
victims of suicide. it now claims the agriculturist, frustrated by continuous
crop failure and/or price crashes; the unemployed youth, who sees no future; the
worker/employee, suddenly jobless, after years of service; the teenaged girl,
unable to pay the dowry in the marriage market: and even the stability-seeking
middle class, who suddenly find their life's savings disappear, either due to
batik frauds or stock-market manipulations.
And amidst these horrifying conditions comes this suicidal budget, which will
not only kill tile economy but push lakhs more to the brink. A budget, which no
longer even has a fig-leaf of "benefiting tile poor. " There are no
pretenses any longer.... it is nakedly, blatantly and crudely targeted to rob
even the little that remains with the masses. It is a direct attack on the
poor, the agriculturist, the workers and employees, the middle-classes, and even
the small businessman. On the other hand, it gives huge doles to big business,
foreign capital, and the rich at large. No wonder big business applauded
vociferously, giving their stooge, Yeshwant Sinha, 9 points ill a scale of 10,
for their 'dream budget.’
Yes, a dream for the moneybags, but a nightmare for the people!! Yet, for all
the noise on 'Tehelka' in parliament, the entire political clan passed it
without even a whimper, or, at most. some mock semantics. The budget session of
parliament sat for only 16 days out of the 55 days allotted, and the disastrous
impact of this budget was conveniently drowned in the din of 'Tehelka'
and other frauds. But, while Tehelka was illegal loot, the budget is
legal loot. While Tehelka involves lakhs, the budget involves thousands
of crores. While Tehelka jeopardises the country’s defence through murky
deals, the budget openly hands over the country to foreign capital. If
Tehelka exposes the traitorous deals of politicians and army bosses, the
budget exposes the fifth column openly operating in the parliament and the
bureaucracy, acting at the behest of the international gangsters in the IMF,
World Bank, WTO. etc.
What then does this budget do?
Saps People's Purchasing Power
By reducing people's purchasing power, the home market for commodities shrinks,
resulting in growing industrial stagnation.
Through this budget postal charges have been hiked, excise duty on numerous
items of common usage has been doubled, the PDS has been defacto scrapped,
foodgrain procurement has been handed over to private traders, and even the
savings of the middle classes have been attacked. Both peasants and workers have
been consciously targeted.
Foodgrain production fell last year by a massive 10 million tonnes. With
declining public investment in agriculture and opening out the agricultural
market to free trade and cheap imports (there has been a nominal hike in import
duty in this budget) the income of the bulk of the rural population which is
already low, is going to fall drastically.
The workers have been directly targeted in this budget by introducing a free
hire-and-fire policy, total freedom to employ contract labour and a huge cut in
interest on their Provident Fund.
But, the attack is not limited to peasants and workers, even the middle-classes
and the small businessman have been hit badly in this budget.
Both the earnings and savings of the middle classes have been effected. Small
savings have been heavily taxed — directly, through a cut in concessions, and
indirectly through a reduction of interest rates. The tax-net is to be vastly
extended to rope in all-and-sundry from the urban middle classes. Finally,
government employment is to be reduced drastically.
As for the small scale sector, the budget has launched a two pronged attack
against it. First, it has cut their concessions and dereserved a number of them.
Second, the budget has further opened the country to a flood of cheap imports by
reducing customs duty and removing the quantitative restrictions (QRs) on the
balance of the 700-odd items. Thereby squeezed out of business, thousands will
end up in bankruptcy, throwing out lakhs from their jobs — an entire populace
will be pushed to penury.
So, with such a massive attack on the living standards of the peasants,
workers, middle-classes and small businessmen, there will he a big fall in the
purchasing power of over 85% of the Indian population. This drop will result in
reduced demand for industrial goods and growing stagnation in the Indian
economy.
Saps Investment Potential for Growth
Besides creating a shrinkage in the home market, the budget also results in
reducing the potential for productive investment.
A major source for investments is through domestic savings. This is not only
declining at a fast rate, but whatever exists is being tapped by the burgeoning
government's public debt, and much is siphoned off into speculative channels.
Domestic savings have seen a phenomenal drop in the last decade from 25% of GDP
to a mere 21% of GDP today. The current budget, with its slash in interest rates
etc., together with a drop in the people's purchasing capacity, will result in a
further fall in domestic savings.
Today, with the government debt at 50% of the GDP, the bulk of these savings are
mopped up by the government. And with continuously falling tax revenue (dropped
from 7.9% of GDP to 6.6% of GDP in the last decade) this situation will only
worsen. Besides, with interest charges and defence and police expenditure
skyrocketing, together with the profligate expenditure on ministries, MPs and
top bureaucrats, little remains for productive investment.
Not surprisingly the Centre's capital expenditure has fallen to half that
achieved in the 1980s; and overall public investment, including that of the
States and the PSUs, has, as a proportion of GDP, come down during the last
three years to levels last seen during the 1960s.
As far as private capital goes, with greater returns being available in the
service sector and speculative outlets, little goes towards productive
(employment generating) investments.
The False Media Hype
So, with a speedily declining home market and a dearth of capital investment,
the economy cannot but go into further decline. The current budget, acts only to
catalyse this process on both fronts.
But here the captains of industry and their retinue of 'economist' touts will
yell in unison “false, utterly false; the economic fundamentals are fine and GDP
growth rates will soon reach 8%, given a little stronger dose of liberalisation.”
To prove their point they pompously declare “who says demand will drop —
forget the 85% populace, look at the spiraling exports. That, together with vast
wealth of the top of the top 5%, will act to stimulate growth.” And as for
the lack of capital, they gleefully reply "so what if there is none here, we
will attract $10 billion every year front abroad by ensuring them tax-holidays,
high returns and easy repatriation facilities.” They add as an aside “why only
$10 billion, just wait and see, we will get even more." No doubt! Bootlicking
the Americans, disinvestments of highly profitable PSUs at throw-away prices and
making rupee convertible on capital account, will give a rich crop of foreign
capital
Fine gentlemen, you have repeated this same globalisation mantra for the last
decade, to no effect. The GDP growth rate has dropped even further last year
(from 6.6% in 98/99 to 6% in 2000-01), inspite of a big jump in exports.
Besides, your arguments are not based on sound economic principles, but on
parroting what the moneybags say. The fat fees you get govern your logic, not
tile needs of the country and the welfare of its people.
Firstly, your euphoria over exports is misplaced. The current slowdown in the
world economy will dampen its growth. Besides, with the continuous devaluation
of the rupee, cut-throat competition abroad and the terms of trade heavily
weighted in favour of the imperialist countries — the gains from exports are
totally illusory. And as for the top 5% stimulating growth — their expenditure
will be chiefly on luxuries, and with cheap imports now flooding all spheres of
the consumer market, the bulk of their expenditure will merely enhance the
market for foreign goods, leaving domestic products for lesser beings.
Regarding the question of foreign investment spurring investment, the past
decade shows that the bulk of such amount either goes towards speculative
capital or goes to purchase existing industries - neither of which are
employment generating. On the contrary, their windfall profits siphon out of the
country greater amounts than what they invest. Even the foreign debt, with
continuous devaluations and huge service charges, results more in a drain on our
resources, rather than investment generation. Besides, foreign capital, unlike
indigenous capital has one serious drawback - the returns on it accrue to
another country which gets removed from the money circulation within our
country.
So, all your arguments are ill founded and contains an admixture of lies,
half-truths and duplicity, to create the euphoria around liberalisation and
globalisation which is demanded by your bosses. The present budget, is no
‘dream’ for the masses. It is not only a nightmare when viewed from the angle of
its impact on people's living standards; it is also a nightmare when seen from
its fascistic content, wherein vast sums have been allocated to the army, para-military
and police.
Let us now look at some of its details to get a clearer picture.
Attacks on the People
As mentioned earlier, we find in this budget, a systematic attack on the
peasants, workers, middle-classes and small businessmen-comprising over 85% of
India's population.
Postal : There has been, yet again, a major hike in postal tariffs,
varying from 25% to 100%. The poor man's post has been taxed the maximum, with
the rate of postcards having been doubled to 50 paisa.
Rural Investment : There has been a further decline (in real terms) in
this budget in the already grossly-unutilised Rural Infrastructure Fund. Last
year actual sanctions from this were a mere 30%, disbursements were even less.
Privatisation of food grain distribution: The budget has proposed to wind
up the system of the procurement and distribution of foodgrains. The FCI will
now procure only the quantity necessary to maintain a “security reserve”
of 10 million tonnes. Given that it, at present, has a huge stock of roughly 50
m.t., it would mean zero procurement for the next few years. Also, food movement
and food distribution throughout the country is to be freed and privatised and
the task of servicing the PDS is to be left to the States, which would be
provided 'financial assistance' to meet the subsidy for those below the
poverty line. This means that the PDS is to be basically dismantled. Private
agents that will take over are to be given huge concessions. Already there has
been a 50 to 70% decrease in the offtake from the PDS in the past three years,
it will now reduce even further.
Besides, the privatisation of foodgrain procurement will put the farmer at the
mercy of the unscrupulous traders. Already in the last season they faced
depressed prices, due to the FCI's non-cooperation. This resulted in a large
number of suicides. One can just imagine the disastrous impact resulting from
turning over all procurement to these private sharks.
Working class and Employees:
This budget has launched a series of attacks on the working class and employees.
Firstly it plans a massive retrenchment drive. The Banking Services Recruitment
Board is to be disbanded. It also plans a 2% cut in central government jobs
every year for the next 5 years, reducing the staff by 10%.
Secondly, it has introduced a new policy on labour which gives full freedom to
lay-off and retrench employees or close down unprofitable units. Earlier this
was allowed for companies employing upto 100 workers - this budget has increased
the amount to upto 1000 workers; which defacto covers over 95% of the organised
industrial sector.
Thirdly, the budget also allows for widespread out-sourcing and the
indiscriminate use of contract labour.
Fourthly, the finance minister announced that the Industrial Disputes Act would
itself be amended.
Fifthly, it has further reduced the interest of the Provident Fund by a huge
1.5% (this is over-and-above the 1 % reduced last year) bringing the interest
rate down to 9.5% which is barely above the yearly official inflation rate. This
effects the savings of 1 crore workers who stand to lose Rs. 1,750 crores each
year on their Rs. 70,000 crore savings. The Finance Minister, in his budget
speech has threatened to cut this interest rates even further, by saying that
its determination would, in future, be left to an expert committee.
Sixthly, large scale disinvestments of PSUs, will lead to big retrenchment of
the labour force and the introduction of more contract labour. The budget plans
a Rs. 12,000 crore disinvestment of PSUs in the current year.
Small Scale Industry attacked:
Fourteen items, including toys. leather goods and shoes, have been dereserved
from the domain of the small scale industries (SSIs). Also the excise exemption
on SSI unit, with sales upto Rs. 1 crore has been withdrawn on (i) cotton yarn
(ii) ball and roller bearing and (iii) arms and ammunition. Besides, the
government's 'Economic Survey' suggests : the total abolition of
reservations for the SSI sector scrapping of the Sick Industrial Companies Act
(SIC) and winding up of the BIFR.
Middle class Squeezed:
The earnings/savings of the middle class has been attacked in numerous direct
and indirect ways.
Firstly while there has been further tax allowances for those earning over Rs. 1
lakh a year, there has been very little allowance for those earning under that
amount.
Secondly, while reducing tax on the high income groups and ignoring the huge
black economy and bank defaults (so-called npas) by big business the budget
seeks to bring into the tax net even the smallest urban middle class earner. By
extending the 1 by 6 system to all urban areas in this budget, every person who
has a telephone or owns his/her house will now be harassed by the tax
authorities. They will be forced to fill tax returns whether they are eligible
to pay or not.
Thirdly, tax exemption on interest on all time-deposits have been reduced (e.g.
Post Office/ bank deposits) and the reduction of interest by 1.5% on all other
government savings schemes (like ppf). will hit hard at the small savings of the
middle-classes and retired people. For example a person with a Rs. 4 lakh spread
of savings in these schemes, stands to lose Rs. 8000 annually on interest
earning i.e., roughly 20% of their previous income.
Fourthly, while reducing excise duty on many luxury items the budget has (in the
name of rationalisation) doubled the excise duty (from 8% to 16%) on a large
number of items of common usage, affecting chiefly the middle classes. This
increased tax, will extract from them a huge amount of Rs. 4.677 crores in just
the one year.
Inflation : Finall5 a big jump in inflation has severely
eroded the real income of the vast masses of people. In tile last year, even
according to the official figures, the inflation rate more than doubled compared
to the previous year, from 3.9% to 8.3% in 2000-01. The real inflation rate,
particularly for the poorer classes would be, in fact, much higher.
Big Gifts to the Rich and Powerful
While squeezing the masses of the people of even their limited source of income
the budget has given huge gifts to the rich, particularly to foreign capital and
the big bourgeoisie aligned to them. This is done in the name of encouraging
foreign investments, promoting the capital markets (i.e., stock exchange),
developing the infrastructure. etc.
Reduction in Income/Corporate Tax:
As much as Its. 5,500 crores has been granted to the rich by the abolition of
the 15% surcharge on income/corporate tax and the reduction in the tax charge.
The higher the income, the greater will be the benefit:
So, for example those earning Rs. 10 lakhs would gain an additional Rs. 3,500
per month in tax relief.
Sops to Agribusiness:
* All food preparations based on fruits and vegetables have been completely
exempted from excise duty. This will include a wide range of products like
pickles, sauces, ketchups, juices, etc.
* Support to be given to build better storage facilities.
* Big grain companies will be permitted to buy directly from farmers without any
purchase or sales tax; and those investing in the handling, storage and
transportation of food grains would enjoy tax holidays. This is at the
instructions of the large grain conglomerates like Cargill, that are waiting in
the wings to rush into the food distribution business.
* A proposal that private seed companies be exempted from land ceiling laws.
This will directly benefit the Monsanto type multinationals which have entered
the seed business in a big way.
* A proposal that all controls on the distribution and marketing of sugar be
abolished.
Sops to Car industry:
This industry, dominated by the powerful multinationals have got huge
concessions
* Excise duty reduced from 24% to 16%.
* Accelerated depreciation of 50% allowed for one year on new commercial
vehicles - thereby encouraging people to buy in the current year.
* Further increase in the customs duty on the import of cars and scooters from
35% to 60% in order to protect the MNCs functioning in this countr5'.
Promotion of FII Penetration
This has been done in two ways - by enhancing the portfolio investment limit and
by giving big tax concession for investment in the capital markets (stock
exchanges):
* The FIIs have been allowed to enhance the maximum amount of equity in Indian
firms from 40% to 49% through the portfolio investment route. By this the budget
further facilitates the take-over of Indian industries (comprador or otherwise)
by foreign capital.
* The tax on dividend income has been slashed by half from 20% to 10%.
* A zero tax on capital gains (profits) reinvested in the primary market (i.e..
in new shares floated on the stock exchange).
* 100% FDI allowed in NBFCs investing a minimum of $50 million, through the
automatic route.
* In a ‘confidence building measure', the budget has permitted the 2-wav
conversions of ADRs or GDRs (American/Global Deposit Receipts) of companies.
Accordingly, shares of Indian firms can now also be converted into underlying
ADRs or GDRs listed in overseas markets.
* Incentive provided for long-term finance or investing in the equity capital of
enterprises engaged in infrastructure facilities. Any income by way of interest,
dividends, or long4enn capital gains is fully exempt from tax.
All these measures basically facilitate the greater penetration of foreign
capital (which today dominates and determines India's Stock Exchanges) in Indian
industry and commerce.
Drastic Cut in Import Duties:
Not only has the budget facilitated the penetration of foreign capital it has
opened the doors wide open to allow foreign goods to flood the Indian market by
a reduction ill import duties. The Finance Minister went so far as to say that
in three years the peak rate would be reduced from the present 35% to just 20%.
In this budget the 10% surcharge was removed and so the peak rate has dropped
from 38.5% to 35%. Besides, the customs duties on the following items has been
reduced by 10-15% giving a bonanza of Rs. 2,128 crores to the foreign producer -
textile machinery: silk/cotton ware: DMT, PTA, Caprolactum used in the
manufacture of synthetic fibres; soda ash; rough diamonds; cut gems; LNG; Cine
industry equipment. etc.
Sops to Pepsi and Coca Cola:
Excise duty on aerated soft drinks and soft drink concentrates to vending
machines reduced from 24% to 16%.
Tax Holidays:
A vast spectrum of industries are being granted tax holidays.
* A ten-year tax holiday for the core sector of infrastructure namely, roads,
highways, rail Systems, water-treatment and supply, irrigation, sanitation and
solid waste management systems; and for airports, ports, inland ports and
waterways, industrial parks and the generation and distribution of power: and
for the development of special economic zones (SEZs).
Again, these tax holidays will basically benefit the foreign investor and their
big comprador accomplices who alone will have the type of capital to eater such
sectors.
Sops for Info-Tech:
* Customs duty has been slashed from 25% to 15%.
* 32 more items have been added to the list of machines and equipment imported
at 5% basic customs duty.
* The 5-year lax holiday for the telecommunications sector which ended in March
2000 extended to March 2003.
* Government decides to fully computerise various wings and departments by March
2003, creating a huge market for computer hardware.
The cuts in import duties will have a serious impact of indigenous hardware
manufacturers which are likely to crumble in the face of imports.
Besides, all these major gifts, the finance minister, in this budget announced
numerous another minor concessions and also a number of future plans that have
been the consistent demand of big business. Some of these are the phasing out of
price controls on drugs; a road map for dismantling administrative prices in the
petroleum sector and a revamping of the area retention pricing scheme for
fertilisers.
Rich-Poor Gap Widens:
With a budget inbuilt to develop such enormous extremes iii wealth between the
rich and the poor it is quite natural, that it also allocated huge funds to
strengthen the state machinery in order to crush the potential revolts of the
people and to protect the rich from the wrath of the masses.
A Fascistic Budget
While welfare expenditures have been slashed, it is the defence, para-military
and central assistance to the police (a slate subject) that saw big increases.
The rise in defence expenditure continues unabated. This year it has been
increased by 14% over last year to reach a gigantic figure of Rs. 62,000 crores.
56% of this goes to the army which is primarily used, not for 'defence', but in
coiuiter4nsurgeiicy operations against the Indian people itself. Of this total
defence expenditure a massive Rs. 20,000 crores we be spent on the purchase of
high-tech modern equipment. Specifically ordered are highly expensive items like
the unmanned aerial vehicles, thermal cameras, etc., which will be specifically
used in counter-insurgency operations
There has also been a Rs. 651 crore hike (12%) in expenditure on the para-military
forces taking it to Rs. 6,500 crores. This does not include the allotments for
the special police, commandos, intelligence agencies and forces like the Jammu &
Kashmir Light Infantry. The actual figure will be near Rs. 8,000 crores.
Though the police is a state subject and its expenses are met by the various
state governments, this central budget has allocated Rs. 2,342 crores to
increase its striking power against the masses. It is this police force that
acts as the first line of defence for the ruling elite to defend it against the
people's wrath. To increase its fire-power the budget has once again earmarked
Rs. 1,000 crores for its 'modernisation'. It has also allocated Rs. 743 crores
as "special assistance to the states": the provision for accommodation of
the police is Rs. 294 crores; and for the construction of buildings for the
police Rs. 305 crores — these allocations amount to a massive 32% increase over
the last year.
What is the Alternative ?
The 2001-02 budget is an entire package — it strikes hard at the masses, gives
enormous benefits to big business and the elite and it finances the state to
suppress the growing discontent of the masses, that will arise out of the
growing inequalities. In essence this has been the nature of all budgets in
the post-liberalisation era, wherein welfare expenditures and subsidies to the
poor are being systematically cut. But the difference between this budget and
the earlier ones, is that it has taken a quantum leap in the above measures,
proving that it is really ushering in 'the second generation of economic
reforms" as dictated by the imperialists.
Yet, even in its said intention, it has fallen flat on its face, if we witness
the crash in the stock exchange prices soon after the introduction of the
budget.
If the present economic reforms are disastrous for the country, going back to
the pre-liberalisation period is no answer. Radical change is the only solution.
That is, an economic system that raises the purchasing power of the masses,
stops the drain of capital abroad, and puts an end to all wasteful, unproductive
expenditure.
Today, the negative impact of this budget will be least felt in the Guerrilla
Zones developing under the leadership of the CPI(ML)]People's War], Here, the
masses are mobilised and it is their strength that acts as their chief
bargaining power - and implementation of economic policies is governed by this,
not by government fiat. Wage rates, prices of agricultural and other
commodities, etc., are determined by their organised strength. And agriculture,
developmental works etc., are dependent on their cooperative effort and not
government largesses. People here, are slowly taking their future into their own
hands and throwing off the yoke of this entire exploitative system by building
these Guerrilla Zones into Liberated Areas. It is only then that a real
democratic economy will be initiated as the true alternative to the existing
system.
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