Union Budget 2021-22: Taxing the working class while corporates profit from COVID-19 pandemic

The assumption that the government is making is that we are where we were one year ago. This is a false claim

By Gautam Mody
Published: Wednesday 03 February 2021

The Union government’s annual Economic Survey 2020-21 (ES) released January 29, 2021 says India has “charted its own unique trajectory”. Indeed India has been unique in its unparalleled draconian countrywide lockdown that pushed more people out of jobs and countless more back into poverty than any other county in the world. The Budget Statement of 2021-22 (BS) only confirmed that the government is committed to an institutionalised programme to increase income inequality while allowing for the unbridled growth of corporate private capital.

This is the Bharatiya Janata Party’s growth model — an economy driven by the sheer brute power of private capital on the back of rising mass poverty. Both the key annual government statements on the state of the economy (ES) and its actions in the year ahead (BS) carefully avoid any discussion on the jobs crisis one that existed well before the pandemic. 

Who bore the costs of the pandemic? 

Just like in the last one, Union finance minister Nirmala Sitharaman felt no need to explain in the BS, how and why the fiscal deficit is nearly twice of what it was in the previous year. The government also felt no need to explain where this shortfall in taxes occurred. These are important questions on who is bearing the costs of the pandemic.

The shortfall in collection of taxes was: 35 per cent from corporate taxes, 29 per cent from income tax and only 15 per cent from indirect taxes (goods and services tax, excise on petrol and diesel). This suggests that companies and the rich who pay income tax suffered more from the pandemic as they paid less taxes than expected.

But the poor, who lost jobs, suffered the most during pandemic, also paid way more taxes in proportion to their income than the rich. They not just paid GST on every essential commodity they consumed, the high taxes on petrol and diesel pushed the price up of these commodities further, leading to the poor bear a larger cost of the pandemic.

We knew that the poorest suffered the most from the pandemic and continue to suffer, but this budget reveals that even the government extracted more from them during the pandemic.

To make it further easier for the rich and super rich of the country, the BS also announced that it will reduce the investigation period for tax evasion from six years to three years and raise the limit for serious fraud cases to an annual incomes of Rs 50 lakh and above. This effectively puts an end to a substantial number of earlier income-tax evasion cases.

During the pandemic, the government did spend a little more on food subsidy and for employment guarantee, but the BS makes it very clear that now it is back to business as usual. In the year ahead government will cut back to 2019-20 expenditure on all social protection measures including food subsidy, employment guarantee, anganwadi, mid-day meal programmes, etc. 

Where is our economy today? 

The assumption that the government is making is that we are where we were one year ago. This is a false claim since the ES’s estimates of economic growth for 2021-22 are questionable. Several independent economists have argued that the scale of economic decline for the past year is far greater than the government claims and the pace of recovery will be slower than what again the government claims.

Curtailing government expenditure on social protection will not just hurt the most marginalised but will sharply curtail the recovery of demand within the economy which in turn will keep employment levels down and affect the growth rate. It may be recalled that demand was declining for three years in a row before the pandemic and unemployment was at a 50-year-high. The pandemic has only sharpened the economic crisis precipitated by the BJP government’s policies.

The government has only one magic answer to all problems — privatise the public sector and monetise public assets including lands and public works — highways, electricity lines whatever. The BS announced that it will, in the year ahead, privatise two public sector banks. It has decided this without even naming which banks it plans to privatise. This indicates that there is no rationale or reason other than a brazen commitment to the private sector.

The BS makes promises to increase the expenditure on healthcare including a Rs 35,000 crore vaccination programme. In a country as huge as ours, the financial commitment does not add up. As for the vaccination programme there is no clarity yet on who and how many will be vaccinated.

The pandemic has taught governments across the world to address the concerns of emergency, essential and frontline workers. For us, they are the health workers including ASHAs and ANMs, anganwadi workers, municipal workers, transport workers, teachers and so many others.

There is money for the much-questioned new education policy but no money for getting our schools up and running and our children back to school. There are grandiose plans of building new metro lines without any funds to getting the lockdown curtailed public transport system and railways back to peak capacity catering to working people’s needs.

The message from this BS is if you suffered so be it. Don’t complain, don’t expect anything, just get on with it. This is the BJP notion of self-reliance — self-reliance of individuals, not that of the country, and thus, government opened the insurance industry to complete foreign ownership and control. 

Election agenda 

The government announced a Rs 100 crore package for tea plantation workers in Assam and West Bengal. It is a welcomed move for tea plantation workers who are beyond destitution and have been so for decades. But exactly how far will this money go: If it is divided equally among the 500,000 tea plantation workers in the two states, it is Rs 2,000 per worker for the whole year. Both Assam and West Bengal go to election in the months ahead. What the BJP understands very well is that if you keep people poor then you can buy their votes on the cheap. The Rs 2,000 per worker pre-election fits this story. 

Who benefited from the pandemic? 

The Bombay Stock Exchange index rose by 5 per cent immediately after the budget speech. The index has risen by 87 per cent since the day the horrific lockdown was announced. The revenues and profits of the largest companies have been growing. And yet the expenditure of these companies on their workers is declining.

This tells us a very simple story. Just as the note ban and the introduction of GST did, the lockdown helped large companies take over the business of small and medium businesses and those in the unorganised sector. Small businesses have been wiped out and jobs have been lost while large companies, their super rich owners and multinationals have gained.

The four labour codes and the three new farm laws will make this divide even sharper, as all working people — workers and farmers — are being pushed further to the margins. Whether it is a worker under the new fixed-term contract or a small or medium-sized farmer with a contract with a large company, everyone — except the few super-rich — are being reduced to the same level of precarity.

The BS made several references to that the government is going to double farm incomes by 2022 after in fact cutting expenditure on agriculture. Even if the government’s claims are true, the vast swathes of the farming community could not hear this because they are at protest sites on the margins of the country’s capital city with their internet cut off.

But the BJP does not think there is anything wrong with it. It wants others to know what it is doing for each one of us. If you object, then you do not understand what is good for you. And if you protest you are an anti-national.

Calling this budget a crude expression of the BJP’s agenda possibly is anti-national too.

The author is the general secretary of New Trade Union Initiative. Views expressed are the author’s own and don’t necessarily reflect those of Down To Earth.

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