Expectations of the Left
Prasenjit Bose Since the Finance Minister would not have the opportunity to present a full Budget in 2009 because of impending Lok Sabha elections, Budget 2008-09 would be his last opportunity to fulfil the promises made in the National Common Minimum Programme (NCMP). The expenditure priorities have already been set forth by the Eleventh Plan. What is required is adequate budgetary support for the Plan, especially in priority areas like agriculture, PDS, education, health and employment generation. To meet the NCMP commitments, the gross budgetary support (GBS) for the Plan has to be stepped up. Budgets in 2006 and 2007 witnessed increases in GBS by around Rs 30,000 crore over previous years. It is evident that an increase of such magnitude, which amounts to less than 1% of current GDP, is inadequate for vital expenditure commitments. The increase in the GBS should be twice the amount seen in recent budgets. Agriculture, which was promised a new deal under the UPA, continues to languish. The advanced estimates for 2007-08 already show agricultural growth slipping to 2.6%, compared to 3.4% registered in 2006-07. To meet the Eleventh Plan target of 4% agriculture growth rate, the government needs to replace the half-hearted measures adopted so far with substantial allocations for debt relief, the Food Security Mission and Rashtriya Krishi Vikas Yojana. The rise in prices of essential commodities over the last two years has underlined the importance of strengthening the PDS. Domestic food production and public procurement also needs to increase to avoid the embarrassment of high-cost wheat imports. India should increase the food subsidy, which currently stands only at around 1% of GDP. It is also time to consider doing away with the targeted PDS, which has turned out to be a failure, and introduce a revamped, more efficient and universal PDS. The ban on futures trading of wheat, rice and some pulses imposed last year should continue for the sake of stability in food prices. Education and health have been accorded high priority under the Eleventh Plan. Expenditure on the former, up five-fold over the Tenth Plan, is aimed at building 6,000 schools, funding the Sarva Shiksha Abhiyan to ensure the Right to Education, building new ITIs and vocational training institutes to bridge the skill deficit, and setting up 30 new central universities along with new IITs, IIMs and IISERs to expand the country's knowledge base. These laudable objectives have to be backed up by adequate outlays. Outlays on the rural health mission and more Aiims-type institutions also have to be increased. The universalisation of the ICDS is being impeded by inadequate funding, which needs to be addressed. The NREGA, despite problems, has succeeded in providing work to 27.7 million people this year. No doubt, its implementation needs to be streamlined and the monitoring mechanism improved. However, this should not come in the way of expanding the employment guarantee to all rural districts and also to urban areas. This is the single biggest welfare measure adopted by the UPA government, and has offered relief to the poorest and most vulnerable. This safety net must be strengthened under all circumstances. The revenue buoyancy seen over the past few years should help mobilise resources for increased welfare expenditure and public investments. Efforts to widen the tax base should continue. The last Budget contained a study of corporate tax, which showed that the effective tax rate for Companies in 2006-07 was 19.2% against the scheduled tax rate of 33.6%. Tax concessions to corporate taxpayers increased from Rs 34,618 crore in 2005-06 to Rs 50,075 crore in 2006-07. Budget 2008-09 should take steps to bring down these tax expenditures. The burgeoning foreign exchange reserves built up on the basis of FII inflows have turned into a liability. Rupee appreciation is hurting export sectors and efforts to buy up foreign exchange followed by sterilisation are also leading to additional fiscal costs. Reintroduction of long-term capital gains tax and increasing the rate of the short-term capital gains tax and the STT would help stanch the inflow of speculative capital, curb equity market volatility and raise resources. Budget 2008 also offers the opportunity to initiate the long pending restructuring of the indirect tax structure on petroleum products