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Mainstream, Vol XLVI, No 13

Union Budget 2008-09

A Political Reading

Sunday 16 March 2008, by Arup Kumar Sen


On the very day the Union Budget 2008-09 was presented in Parliament, Bhikhu Parekh, in his discourse on India, carried in The Indian Express, raised certain important questions. He argued that during the last few years it has come to be widely held that India’s salvation lies in its economic development. It is believed that this will reduce poverty through the trickle down effect, integrate the country in the global economy and make it a major economic and political power in the next 10 to 15 years. In this context, Parekh highlighted some danger signals. He pointed out that our economic growth is not matched by similar progress in other areas of our national life, especially the political. He categorically stated that our political institutions are in a state of decay and that political parties have no other purpose than to stay in power.

P. Chidambaram’s budget speech has well advertised India’s growth story. The Budget has offered concessions to various classes as a pre-election strategy. To put it in the words of one commentator, politically it is one of the sharpest statements one has come across in the past decade-and-a-half.

THE waiving of Rs 60,000-crore worth of farm loan appears to be the most radical measure announced in the Budget. But a deeper scrutiny reveals that this step is more populist than radical. The following story told by M.S. Swaminathan (The Hindu and reproduced in Mainstream) makes the point clear.

The definition of small and marginal farmers, who are supposed to be the main beneficiaries of the loan waiver, has to be different for irrigated and dry farming areas. But the standard definition presented in the Budget classifies marginal farmers as those owning upto one hectare and small farmers as those owning one-to-two hectares. Farmers cultivating crops in rainfed, arid and semi-arid areas may own four-to-five hectares but their income is uncertain and their agricultural destiny is bound closely to the behaviour of the monsoon.

A large number of farming families affected by the agrarian crisis in Vidharbha fall under this category. They will not be eligible for debt waiver and debt relief under the present scheme. Moreover, the programme announced in the Budget covers farmers who have taken loan from scheduled commercial banks, regional rural banks and cooperative credit institutions. It does not cover farmers indebted to moneylenders and traders. But, according to the National Sample Survey Organisation, 48.6 per cent of the farm households surveyed were indebted; 57.7 per cent of the outstanding amount was sourced from institutional channels and 42.3 per cent from money lenders, traders, relatives and friends.

Swaminathan’s apprehension that many small and marginal farmers will not get the benefits of the debt waiver and debt relief scheme is blatantly true in the tribal land of Chhattisgarh. Organised lending accounts for barely about 10 per cent of loans burdening the small and marginal farmers in the region. To put it in the words of the Chief Minister of the State, Raman Singh,
In spite of a large percentage of small and marginal farmers in the State, the outflow of agricultural credit to these sections is fairly low because of the relatively low-banking network in rural areas. As a result, only Rs 350 crores of the total Rs 3200 crores will be waived in Chhattsigarh.

At the end of his discourse, Bhikhu Parekh argued that the fruits of India’s economic growth are largely confined to the cities, and do not extend to the rural areas where the majority of Indians live. He also hinted at the spectre of Maoism haunting our polity. Chhattisgarh is an exemplary State of Maoist insurgency and state terror. There is no guarantee that agrarian distress in other States will not lead to the Chhattisgarh road to insurgency and terror. P. Chidambaram’s populist election Budget does not give us any assurance against such an eventuality.

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