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Mainstream, VOL LIII, No 11, March 7, 2015

Budget and Some Unanswered Questions

Monday 9 March 2015, by Bharat Dogra

Some aspects of this year’s Union Budget made it different from Budgets of previous years. In previous years it has been customary to compare the new fiscal year’s allocations for various Ministries, sectors and programmes with the allocations made for the previous years.

The most important aspect of a Budget is (or should be) regarding the impact it makes on the most vulnerable and poor people. In addition, it is also important to see its overall impact on economic well-being and environment protection. So a good assessment could be made by comparing those allocations which are important from this point of view.

However, the difference this year is that just before the announcement of the Union Budget the government accepted the key recommendation of the 14th Finance Commission to increase the share of the State governments in the Central taxes by 10 per cent (from 32 per cent to 42 per cent). So the Union Government can now take the stand that some of the schemes and programmes of the social sector will be budgeted by the State governments with the additional resources at their command, also keeping in view the more specific situation and needs of the State.

The Union Budget for 2015-16 has made very big cuts in several priority programmes and schemes including mid-fay meals, ICDS, Indira Awas Yojana (housing for the poor in rural areas), drinking water etc. The magnitude of these cuts is shocking. In other priority areas (such as health and rural development), where increase was overdue, there is stagnancy: in real terms amounting in some cases almost to a decline.

The ICDS budget has been cut from Rs 16,000 crores to Rs 8000 crores, the mid-day meal budget from Rs 13,000 crores to Rs 9000 crores while the Sarva Shiksha Abhiyan budget has been reduced from Rs 28,000 crores to Rs 22,000 crores. There are reductions also in drinking water, health and family welfare.

The outlay for the Women and Child Development Ministry has been reduced from Rs 21,193 crores in the previous year to Rs 10,351 crores this year. The overall allocation under gender budgeting has also gone down significantly.

The budget for the Scheduled Caste Sub-plan was reduced from Rs 50,548 crores (Budget estimates 2014-15) to Rs 33,638 (Revised estimates 2014-15) to Rs 30,850 crores (Budget estimates for 2015-16). The budget for Tribal Sub-plan has been reduced from Rs 32,386 crores (Budget Estimates 2014-15) to Rs 20,535 crores (Revised Estimates) to Rs 19,979 crores (Budget estimates 2015-16)

This should be considered keeping in view the fact that Budget cuts in critical social areas were widely reported in the last few months of the previous financial year 2014-15. So on the whole decline in funds reaching the poor (or priority sections important for them) is even more.

Despite all this the Union Government can still take the optimistic view that all these cuts in rhe Union Budget will be made up by the State governments due to the increase of their resources. However, is this increase enough to offset the big cuts in critical areas made in the Union Budget? How committed will be the State governments to make up the cuts? The answers to both these questions are not at all clear just now. There are apprehensions that the net impact may be an overall decline in some programmes of critical importance to the poor, weaker sections, women and children.

This apprehension has increased because the Finance Minister did not take up these questions with any clarity and emphasis in his Budget speech. In fact some of the most important Budget cuts were not even mentioned in the Budget speech as the Finance Minister was keen to concentrate on what appeared to be the more positive aspects of the Budget. Hence the Budget speech gave the appearance of a populist Budget which it is not. Even the subsequent TV debate did not give adequate importance to some Budget cuts which are important for the poor and for social concerns. There were a few exceptions like the Rajya Sabha TV channel which clearly presented the figures of critical social sectors immediately after the Budget speech.

So this Budget has left behind an unanswered question: whether the big cutbacks in crucial areas can be made up in the State budgets. Or whether there will be a serious shortage in crucial social sector areas at least for some time. Another question is: why adequate efforts were not made to raise the tax-GDP ratio which is very low? Instead of direct taxes being raised more to make taxation progressive, the Budget has abolished the wealth tax and initiated moves for significant reduction of corporate tax.

Bharat Dogra is a free-lance journalist who has been involved with several social initiatives and movements.