The precipitous economic situation requires government to take control of the economy rather than sub-contract it to private capital
In the recent General Elections, the Bharatiya Janata Party made virtually no material promises to the people of the country. Consequently, the Union Budget 2018-19 offers nothing to anyone except to foreign and Indian capital.
In the opening statement of Budget Statement 2019 (BS), the BJP government identifies ‘India Inc’ as ‘India’s job creators’ and ‘the nation’s wealth creators’ with whom it will build ‘mutual trust’ ‘for kick-starting’ the economy.
Of course, the BS throws no light on why the economy needs ‘kick-starting’ after the BJP’s five years in government. Also, rather than looking towards the coming year, the BS only lists the BJP supposed achievements over the last five years.
Today, more than 7.5 per cent of the working population is unemployed apart from the millions who are underemployed especially in the rural areas. The economic situation has been worsening month-on-month as demand declines leading to persistently low investment and the possibility of further increases in unemployment and decline in wages.
The effects of the BJP’s failed economic policy have been felt most acutely in the country’s rural areas and in the agrarian economy. The precipitous economic situation requires government to take control of the economy rather than sub-contract it to private capital.
But this outsourcing is inevitable as the BJP government believes, as stated in the BS, that without foreign investment, especially investment in the stock market and real estate, the profits of private capital will stop ringing.
To this end the BJP government has sharpened its commitment to economic conservatism by lowering the total expenditure, in real terms, on National Rural Employment Guarantee Act (NREGA), Anganwadi services, the mid-day meal scheme, rural and urban housing schemes, the National Rural Health Mission, Ayushman Bharat, the unorganised sector workers’ pension scheme, PDS or National Food Security Act and Swachh Bharat.
The total expenditure on social security and social protection has been reduced by seven per cent without taking inflation into account. This will further push down disposable incomes resulting in the reduction of consumption and in turn the lowering of investment, wages and employment; all of which will only deepen the economic crisis.
Tax sops to corporates
The Budget offers a variety of tax concessions to private capital across the board. The biggest give away is the reduction of corporate taxes for companies with turnover between Rs 250 crores and Rs 400 crores, from 30 per cent to 25 per cent.
Apart from these, the BJP government has persisted in creating multiple rates of taxes, which it claims are incentives for private business to grow. Creating multiple rates of tax is above all against core principles of taxation as they create space for tax avoidance, tax evasion and tax fraud.
In the case of workers however, the BJP government believes that there must be standardisation and streamlining of labour laws into four codes. The BS does not shy away from the fact that these codes are not for workers but are in the interest of companies for whom things will easier for ‘registration and filing returns’.
The tax measures on capital gains and on ‘affordable’ housing are all aimed at allowing real estate developers and speculators off-load unsold stock without bearing existing tax liabilities.
The concessions granted to non-banking financial companies’ (NBFC) are unwarranted without significant enhancement of the prudential norms relating to them. In the absence of this, the easing of lending norms for public sector banks to lend to NBFCs is only likely to add further to the instability to the financial system.
Furthermore, the BS makes an aggressive commitment on privatisation of public enterprises through the ‘strategic sale’ route. This comes after five years of running down profit making PSUs by extraordinarily high dividends and draining their cash reserves.
The BS also promises to open up virtually all remaining sectors of the economy to 100 per cent foreign direct investment including aviation, insurance and media.
The BS makes claims on fighting manual scavenging, improving access to employment for women and expanding the opportunities for women’s self-employment.
In reality though, there have more deaths of manual scavengers in the last five years than ever before while rate of unemployment of women workers has doubled between 2014 and 2019. Like on everything else, the BS chooses not to reveal to us what the expected outcome of government’s efforts.
Plunging rural economy
The sharpest decline in demand in our economy has been felt in rural areas. Under the BJP government, there has been a persistent attack on agricultural incomes and on wages of rural workers. The BS has nothing to offer the rural economy.
In 2017 the BJP government promised to double rural income in five years ie, by 2022. In today’s situation this would require rural incomes to rise by over 25 per cent year on year for the next three years in order to double. On how that might happen, the BS again remains silent.
How the BJP government will finance its spending plans also remains unaddressed. GST collections remain far below expectations while income tax revenues too have fallen short. The BS, meanwhile, proposes an additional Rs 1 tax on both diesel and petrol, contributing to the already existing burden of indirect taxes on the working class and the poor.
The Budget not only fails the peoples’ expectation but is intransparent and opaque on what the outcomes will be.
Leave alone providing urgent material relief to the working class and the poor, it provides no solution on how to pull back the economy from the precipice. The package of infrastructure investment rolled out through public-private partnerships and the private sector led industrial development do not add up.
How the economy might reach a seven per cent rate of growth as claimed by the BJP government’s Economic Survey 2018-19 released yesterday is a question mark?
Perhaps, and nothing says it better about the BJP government than its very own Economic Survey, which states that government should not worry about economic policy.
Instead, it says that government should understand how people behave and think, must have the capacity to respond to human behaviour and change how people behave and think. Bringing out the truth of what is the real situation we face is the challenge before our movement.
(Gautam Mody is the general secretary of the New Trade Union Initiative)
The article was originally published on the website of New Trade Union Initiative
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