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Home > Archives (2006 on) > 2008 > March 8, 2008 > Union Budget 2008-09

Mainstream, Vol XLVI, No 12

Union Budget 2008-09

Monday 10 March 2008, by Jayati Ghosh


This was supposed to be a “people-friendly” Budget. After all, the government has completed nearly four years of its tenure and this was almost its last chance to make good on its promises to the people in the National Common Minimum Programme. And then, general elections are due after a year. So even the most basic political sense should have ensured a Union Budget with allocations that would benefit the people.

But the surprise is that, going beyond the verbiage of the budget speech, this Budget provides next to nothing in terms of increased outlays for the critical areas that affect basic conditions or the potential areas of concern in the immediate future. Essentially, these areas relate to the agrarian crisis, food security and nutrition, health, education and social security.

In the context of a continuing agrarian crisis, Finance Minister P. Chidambaram did announce such a package, with much fanfare and declarations of concern for the plight of farmers. But while it was presented by him as a “momentous decision” that would benefit about 30 million small and marginal farmers and ten million other farmers, the actual impact of this scheme is likely to be rather different. It may turn out not to have any real beneficial effects for the areas and cultivators that are the worst affected by agrarian distress at present.

The proposed loan waiver and debt relief package provides for complete writeoff of all outstanding debt held on December 31, 2007 to scheduled commercial banks and cooperative societies, of small and marginal farmers, that is, those holding less than two hectares of land.

For all other farmers, there will be a one-time settlement for the outstanding debt, whereby 25 per cent will be written off “if” the farmer repays 75 per cent.

This package therefore has a number of important exclusions. First, it excludes from full benefits all the farmers on dry land and poor quality land who hold more than two hectares, even though they are among the worst affected from the agrarian crisis. Thus, most of the distressed farmers of the Vidharbha region of Maharashtra or Rayalseema in Andhra Pradesh or South Karnataka, will not get the debt relief. In fact, they will probably also not even benefit from the one-time settlement, since if they could repay 75 per cent of the outstanding loan they would not be in distress in the first place!

Second, this package excludes the majority of farmers who have taken debt from private sources, since there has been no attempt to deal with the private outstanding debt. Yet private debt accounts for more than two-thirds of total rural debt, and is especially high among small tenants, women farmers and those cultivators who do not have land titles in their own names, who are already among the most disadvantaged agriculturalists. Therefore the real elements of the agricultural debt crisis are simply not addressed by this package.

If the Central Government were really serious about providing debt relief to troubled farmers, it should have established a Debt Relief Commission, along the lines of that which has recently been established by the State Government of Kerala. This would identify the pockets and categories of severe agrarian distress and provide relief accordingly, including to those holding private debt by refinancing the moneylenders. Of course, this would necessarily mean that the Central Government make available real finance for this purpose, instead of the book transfer between the government and banks that is currently being used to finance the proposed scheme.

IT should be noted that the amount of unpaid loans of small and marginal famers currently held by the scheduled commercial banks is estimated to be around Rs 20,500 crores. This is around the same amount that is routinely written off every year as bad debts of the banks, mostly to industrialists. So what is being presented as a huge once-for-all gift to Indian farmers is something that is regularly provided to industry without any fuss.

Also, in all the publicity being accorded to this debt relief package, what is being ignored is that this Budget has almost nothing else that would make cultivation a viable or profitable activity once again. There is no budgetary allocation for significant increases in agricultural extension activity, or input provision, or price stabilisation schemes that would protect farmers from the price volatility that has made cultivation so risky. There is also no attempt to expand and improve the crop insurance scheme in ways that would make it genuinely useful to farmers. The total Central Plan spending on agriculture and allied activities is projected to increase by only Rs 1530 crores, and the total irrigation spending is actually to fall to a paltry Rs 414 crores.

Given all this, it is really surprising to see that this is being presented by the government as a “farmer-friendly Budget”. Either the government has been misled by its own propaganda, or it cynically believes that it does not matter how farmers actually fare, as long as they can be convinced that the government cares about them.

Consider next the problem of food and nutrition. Food price inflation has already emerged as a major area of concern, and it is likely to get worse rather than better in the near future. Global prices of essential foodgrians are risng and domestic procurement prices must also rise accordingly if the government is to be in a position to procure foodgrains for the Public Distribution System and other uses like the mid-day meal scheme.

Therefore, there should be a rise in food subsidy to ensure adequate procurement and prevent basic food prices from going up too much for retail consumers. However, the allocation for the food subsidy shows hardly any increase, from Rs 31,546 crores in the current fiscal year to a proposed outlay of Rs 32,667 crores in the coming year. This is even less than the government’s own inflation projections for the coming year, which means there will be a decline in real terms. A pathetically small amount of Rs 48 crores is all that is allocated for strengthening and expanding the PDS system.

A major aspect of nutrition and health relates to the Integrated Child Development Scheme (ICDS) which is absolutely crucial for ensuring minimum access to health and nutrition facilites of pregnant and lactating mothers, infants and young children. The ICDS has been operating on the underpaid labour of women, and the Finance Minister has now consented to increase the remuneration of Anganwadi workers to Rs 1500 per onth and that of Anganwadi helpers to Rs 750 per month. This is an improvement, but still leaves them receiving less than minimum wages. Further, the Supreme Court has repeatedly instructed the government to make the scheme universal to all habitations, but the small increase in budgetary allocation to the ICDS (only Rs 852 crores) ensures that this will not happen even in the coming year.

The National Rural Health Mission is a flagship programme of the UPA Government, launched with much fanfare. However, it too runs on the underpaid labour of women (the ASHAs who are the backbone of the scheme receive at best Rs 800 per month) because of the very small allocations that have been made to it. Even in this Budget, the total spending on NRHM is slated to be less than Rs 11,000 crores, and the spending will barely keep pace with inflation.

Education was supposed to be a major area of concern for this government, and the NCMP promised to bring education spending to six per cent of the GDP. This promise was certainly not kept last year—the government’s own Economic Survey showed that it was less than three per cent—but even in the current year the allocations suggest that it will remain in this region. That is less than what the NDA Government spent as a share of the GDP!

What is most shocking of all is the reduced commitment to elementary education. Allocations to the Sarva Shiksha Abhiyan have actually fallen, as the Central Government moves to pass more of the burden to the State Governments. This makes a mockery of the government’s commitment to ensuring the right to education, and casts doubt on its commitment to legislate on this.

There are welcome increases in budgetary allocations for secondary and higher education, but even here the increases are nowhere near what is required. Yet the Finance Minister cannot claim that there is a shortage of fiscal resources to provide for these crucial areas of education spending. His own Budget estimates project an increase in revenue receipts of 17.5 per cent, while the total spending is to increase by less than six per cent. Surely, this is a time when the crucial and necessary demand for ensuring quality school education for all should not be sacrificed to the mistaken notions of fiscal rectitude.

All in all, therefore, this Budget is a disappointment as far as the proposed spending on basic conditions of life and human development are concerned.

(Courtesy: The Asian Age)

The author is a Professor, Centre for Economic Studies and Planning, School of Social Sciences, Jawaharlal Nehru University, New Delhi.

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