ECONOMY-INDIA: Budget Criticised as Pro-Rich

By Ranjit Devraj Reprint | | Print |

Ranjit Devraj

NEW DELHI, Mar 1 2001 (IPS) - India’s pro-reform budget proposals for the fiscal year beginning April, have been criticised as blatantly pro-rich and serving corporate interests.

“The goodies are all at the top. Cars and soft drinks have become cheaper but there is nothing for the underclass,” said T.N. Ninan, one of India’s top economy analysts, known for his independent views.

The budget has slashed manufacturing levies on a range of consumer goods like cars and soft drinks, which is bound to please India’s growing middle class, estimated to make up 30 percent of the country’s one billion people.

“This is a budget for growth. This is a budget for a new deal to the people of India in the new millennium,” said Finance Minister Yashwant Sinha, while unveiling the budget proposals in parliament Wednesday.

However, the influential opposition Left parties were to stage protest rallies across the country Thursday to protest against the “anti- people” budget.

The finance minister has also pleased the estimated two percent Indians who pay income tax.

He has lifted a 15 percent income tax surcharge that was imposed last year to raise funds for various natural and man-made calamities like the October 1999 ‘super-cyclone’ in eastern Orissa state and the undeclared border war with Pakistan that year.

Taxpayers will now only pay a two percent surcharge to support reconstruction efforts in western coastal Gujarat state, which was devastated Jan. 26 by the country’s worst earthquake in half a century.

But the budget proposals are said to have little to offer the vast majority of people in the low-income South Asian nation.

Easier retrenchment rules for employers are accompanied by a planned withdrawal of the federal government from the decades-old, government-run food security operation, better known as public distribution system.

“This budget is anti-people and anti-labour and seeks to demolish the public distribution system (PDS) and the minimum support price on which the peasants depend,” said D. Raja, national secretary of the Communist Party of India (CPI).

Former defence minister Mulayam Singh Yadav, who leads the powerful, pro-peasant Samajwadi Party, criticised the proposed dilution of the PDS.

Said to be the world’s largest food security operation, the PDS sells staple foodgrain to the poor at less than market prices through a countrywide network of ‘fair price’ shops.

Every year, government procurement agencies buy for the PDS from farmers, at a price, which is not below a minimum that is announced by the government before the crop is sown.

“The central government is withdrawing from its basic duty of ensuring food security for the people,” said Yadav.

However, the top finance ministry official Ajit Kumar defended the decision.

The federally-administered food security system was “devised at a time of foodgrain shortages and had become irrelevant at a time when India was creaking under massive surpluses with nowhere to store it,” he said.

Sinha, however, resisted pressure from multilateral lenders to reduce subsidies on food and fertilisers. Together, these will add up to a heavy 7.5 billion U.S. dollars and represent a nearly 40 percent increase over last year’s bill.

Communist Party of India leader Atul Kumar Anjan said the budget was inspired by the World Bank and the International Monetary Fund (IMF).

The Left parties were specially critical of the change in labour laws, which has made it easy for industrial units with less than a thousand employees, to retrench workers.

According to Anjan, the new hire and fire policy, coupled with the removal of items from a list of manufacture, reserved for small- scale industry, has sounded the death knell of a sector already under attack from cheap imports.

However, finance ministry official Kumar said that the aim was to attract investment which would, in turn, foster growth and employment.

“India is undergoing structural reforms and there is bound to be some hurt and pain in the transition period,” he said.

The leading national daily, ‘The Indian Express’, urged the government to stand “firm”.

” Will the government stand firm in the teeth of resistance from labour unions and political parties who have already denounced the budget as anti-labour and anti-people?” the daily commented in a Thursday editorial.

The Express praised finance minister Sinha for having opened up 14 industries that were reserved for the small-scale sector — including leather goods and toys — and urged him to de-reserve more items.

Carrying forward India’s decade-old economic liberalisation, Sinha hiked from 40 to 49 percent, the maximum investment allowed to foreign institutional investors in Indian businesses.

The finance minister did this in the face of pressure from within the ruling Bhartiya Janata Party (BJP) and its allies as well as opposition parties, who are worried this might lead to foreign take-overs of Indian companies.

Sinha also cut the peak tariff on imported industrial goods from 40 to 27.5 percent. The minister said he planned to reduce this to 20 percent over the next three years, to bring it closer to rates prevailing in South-east Asia.

Under pressure from the World Trade Organisation (WTO), India is due to remove all quantitative restrictions (QRs) this April. Sinha was expected by local industry, which backs the BJP, to compensate for this by raising rather than lowering tariffs.

Madhav Rao Scindia, senior leader of the main Opposition Congress party, demanded hiking the 75 percent import duty on foreign farm products to protect Indian tillers, who would be affected by the lifting of QRs.

“The import duty on farm items should have been 250 to 300 percent,” Scindia said, pointing out that Western countries had duty levels ranging between 150 and 200 percent.