1) Mr. Deputy Chairman, Sir, I rise to oppose the General Budget, 2013-14, for various reasons which I will enumerate during the course of my speech. Though Maharashtra is reeling under the worst drought conditions for the first time in the last forty years, neither there has been any mention about it in the speech of the Finance Minister nor any allocation to tackle the gravity of the situation. People are not asking water for irrigation but for drinking purposes. Many villagers have locked their houses in the villages and have migrated to cities and towns. I am deeply disappointed with the speech of the Finance Minister. It is insipid and uninspiring.
2) Maharashtra was sidelined in the Railway Budget and now Finance Minister has done more injustice to the State. Our contribution towards central taxes is the highest. We were expecting a special package due to drought but we have been ignored.
As we all know, Mumbai is the commercial capital of India. It is also one of the world's top ten centres of commerce in terms of the global financial flow, generating five per cent of India's GDP, and accounting for 25 per cent of industrial output, 70 per cent of maritime trade in India (Mumbai Port Trust and JNPT); and 70 per cent of capital transactions to India's economy. It is undenying the fact that Mumbai is the largest contributor of revenue to the Central exchequer. However, it gets step motherly treatment and ignored in the allocation of adequate funds in this Budget.
4) This Budget is yet another example of the UPA's disconnecting with the people of the country. The FM tried to be populist at the cost of the aam aadmi. They do not know what the people want. . There is no direction for improving the growth rate of the country. There is also no linkage of the Budget with the 12th Five Year Plan nor is there any commitment to reduce the fiscal deficit which is as high as 5.9 per cent and going up and up over the years. I am sorry to say that there is also no direction for skill development or employment generation for the youth.
5) The Budget fails to signal a stable, friendly tax regime. The FM has failed to take any major steps to improve India's tax regime in keeping with global best practices. He also has not sent any signal that India's tax regime will be stable and friendly and, instead, has introduced measures that would last just one year.
6) Unfortunately, there is nothing significant in this Budget for the healthcare sector as such. Increased Budgetary allocation for the National Rural and Urban Health Mission may improve access. However, a planned allocation on Universal Health Coverage initiative was highly expected. The industry also expected that the Government will take measures to make all imported life saving drugs more affordable to the patients by eliminating import duty, unfortunately, this has not happened.
Thus, in our view, the healthcare concerns of the country have not been given adequate importance in the Budget proposals to help improving the healthcare needs of the nation.
7) The Budget is high on rhetoric, low on funds for food security. For all the talk of the UPA Government about the seminal step the proposed National Food Security Bill will be on eradicating hunger and malnutrition. The FM's Budgetary allocation for it is meagre. The FM said he will be setting aside an extra Rs.10,000 crore, apart from the usual provision for food subsidy, towards the " incremental cost" likely, once the legislation is enacted.
8) The FM has not said how he is going to fund various social welfare schemes.
This Budget falls flat on offering measures to curb inflationary pressures on the economy.
How much has FM provided? Part-II of the Expenditure Budget documents show it is Rs.90,000 crore. The document clarifies: "The provision of Rs.90,000 crore for food subsidy, and also includes a provision of Rs.10,000 crore for implementing the National Food Security Act."
How much was the food subsidy Budgeted in the last Budget, 2012-13? It was Rs.75,000 crore, and the Revised Estimate was above Rs.85,000. But this estimate, as the Government itself has said -- was based on population statistics of the year, 2000. In short, therefore, the actual provision is Rs.5,000 crore which is very meagre.
9) Does the Budget stimulate savings? There have been only feeble attempts to take in savings through the Rajiv Gandhi Equity Savings Scheme even though a lot has been spoken about the need to increase financial savings and move households away from gold. We do not see anything on increasing the tax limit on savings under 80C Section and therefore the Budget has not really addressed this issue which it could have done if it wanted.
10) This Budget is neither populist nor pragmatic. It can be interpreted either way depending on how one looks at it. Given the commitment to inclusive growth, spending on MGNREGA cannot be contested nor can the expense on food subsidy related with the Food Security Bill. These are also necessities since we have, at least, 325 million poor people. It becomes the prime responsibility of the Government to provide support.
11) India's Information Technology (IT) industry has little to cheer about because the FM has ignored most of the sector's direct tax requests in his Budget for 2013-14. For instance, the sector had been asking for companies located within the Special Economic Zones to be exempted from paying the Minimum Alternate Tax. There was no mention of it in the Budget speech of the FM.
In order to attract new investment and speed up project implementation, the FM had introduced an investment allowance for new high value investments in manufacturing, but ignored the IT.
Companies engaged in manufacturing which invest Rs.100 crore or more in plant and machinery will be entitled to deduct an investment allowance of 15 per cent of the investment.
The second negative relates to Section 80JJAA of the Income Tax Act, ÏT companies could claim 30 per cent deduction of additional wages paid to the new employees. The new proposal nullifies this Section and this deduction is now applicable for manufacturing of goods in a factory."
12) The Government, it appears, is committed to promote chip manufacturing, an area where India is far behind countries such as Taiwan and China. Experts in India have been pointing out to the country's huge electronics import bill. The FM said in his Budget speech, "we recognise the pivotal role of semi-conductor wafer fabs in the ecosystem of manufacture of electronics."He has also said, Ï propose to provide appropriate incentives to the semi-conductor wafer fab manufacturing facilities, including zero customs duty for plant and machinery."
The other hardware piece is the encouragement "for domestic production of Set Top Boxes". The FM proposed to increase the import duty from five to ten per cent. Though well-intentioned, it is meant to keep Chinese and other Asian players at bay, but it could easily backfire on consumers.
13) The UPA Government is bogged down by mega scams like 2G spectrum, Commonwealth Games, Bofors, IPL, Chopper scam and now another scam, that is, CAG report on loan waiver scheme to the BPL farmers. Is the UPA Government sincere to control corruption is a million dollar question?
To conclude, I would say that the UPA Budget for 2013-14 is a disappointing Budget. It has failed to address the issues related to boosting the economic growth, cutting down inflation, usher investments, creating skills and jobs and building infrastructure.
In short, the common man, aam aadmi will continue to feel the pinch of the price rise, the unemployment of the youth will continue, and the investors will experience economic uncertainty. Thus, this Budget lacks vision and is devoid of any strategy for growth of the nation and welfare of the people.
Currently the economy is going through a tough phase. Not only has growth slowed down to one of the lowest in the last ten years with industrial production turning negative, there is also the added burden of inflation which has continued at very high levels for the last five years. The mismanagement of the economy in the last five years is also obvious from the fact that the country is currently faced with the twin deficits of fiscal deficit and the current account deficit. An immediate impact of this has been the decline in growth of consumption expenditure which is now growing at only 4% as against more than 8% earlier. This is partly because of the decline in real incomes due to inflation but also due to low availability of employment in the economy.
At this juncture, the Finance Minister was expected to boost consumption in the economy through public expenditure. On the other hand, the Finance Minister has given tax sops (revenue forgone) to the tune of Rs. 5,73,630 crore which is not only higher than the fiscal deficit of Rs. 5,20,925 crore but also a significant increase compared to last year. The notional increase in surcharge on the households with income of more than Rs. 1 crore (which is going to affect less than 43000 households) is not only a drop in the ocean but also insignificant compared to total tax generated. In nutshell, the Finance Minister has failed to use this opportunity to generate taxes from those who can pay despite his own admission in the Budget that the tax-GDP ratio has not only declined but is lower than what it was 10 years ago.
The entire burden of fiscal management has been shifted on the poor where there has been massive reduction in subsidies as well as other public expenditure. The revised estimates also show that the actual
Expenditure last year was 4% lower than the Budgeted. So the finance Minster issuing Budgetary as well as non-Budgetary measures to cut down essential expenditures including NREGA for which the actual expenditure is 4000 crores lower than Budgeted. This is despite the fact that wages have gone up. Effectively, he has Budgeted for lower number of person days to be created in BREGA than what was there last year. This is worrisome considering that many parts of the country are going through drought and food production is expected to decline by 10 million tonnes.
The worst apart of the Budget is the miniscule provision of 5000 crores extra compared to last years expenditure on food security which is the poll promise of the UPA Government. The total food subsidy is not only lower in real terms but also lower than the amount projected by the standing committee for effective roll out of food security act.
The fact that the economic survey has recognised job creation and quality of employment as the centre piece of economic reforms is a belated but bold ad welcome recognition of the structural issues affecting the economy. It is indeed the key to any revival of the economy and this revival is very much contingent on how the economy absorbs the new entrants in the labour force as part of the growth process. But a crucial point highlighted by the economic survey is also the low productivity of existing employment, particularly in agriculture and rural areas. With the economic survey predicting a shift of almost 10% of workforce out of agriculture joining the pool of job seekers in the non-farm sector, the challenge is not only creating more jobs but also creating meaningful, decent and remunerative employment.
Unfortunately, there seems to be a mismatch between the stated objectives in the economic survey and the thinking of the Finance Minister, if one has to go by the announcements of this year's Budget. Part of the reason is the Finance Minister's belief that jobs are going to be created by the high capital intensive infrastructure sector alone. But more than that Budget 2013 misses the real issue which is that the process of revival of the economy has to be started at the bottom of the pyramid.
And this bottom of the pyramid is the workforce in rural areas, particularly those engaged in low productive agriculture. It is this huge work-force which amounts to more than half of total workforce which has seen deceleration in growth rates of incomes. While the drought in 2009 and 2012 have exposed the vulnerability of the agricultural sector to the vegaries of monsoon, the issues are not merely restricted to the decline in public investment in agriculture. As the second advance estimates for this year have reported, the food grain production is expected to decline by almost 10 million tonnes. The decline is not only restricted foodgrains alone with sugarcane production expected to decline by 7%, cotton by 4% and groundnut by 16%. Clearly, insulating the farmer from the erratic rainfall by investing more in irrigation infrastructure should have been the first priority.
Unfortunately, as the economic survey notes, the total investment in agriculture as a percentage of total investment at 6.8% is certainly much lower than even the share of agriculture in GDP at 14%. But these look appalling considering that only 6.8% of investment goes to a sector which accounts for more than half of total workers. What is worrying is that despite the agrarian sector slipping into crisis, there has not been any step-up in public investment. Whatever little increase in investment is observed in the recent years is accounted by the increase in private investment.
While the neglect of investment in agriculture is definitely worrying for the long term sustainability of the agricultural sector, what is worrying in the immediate present is the worsening of the profitability in agriculture. This has also been highlighted with as much seriousness in the various reports of the Commission for Agricultural Costs and Prices (CACP). Not only has there been a deceleration in income growth in the last four years but in case of some crops in some states, the net returns are negative. This is worrying since this is certainly going to affect the consumption demand in rural areas.
The obvious question is why incomes turned negative. Answer to this lies not in blaming the rain gods but our own policies for the agricultural sector. While the biggest increase in costs has been on account of rising wges probably as a response to the rising inflation thus starting a wage - inflation spiral, the second biggest increase been the costs of fertilisers and pesticide. Unfortunately, this has happened because of the introduction of nutrient based subsidy (NBS) regime in 2010. The result has been that the prices of non-urea fertilisers have trebled. This has led to many farmers shifting to urea which has created further pressure on supply and prices of urea. Net result has been an increase in urea as well as non-urea fertilisers. This Budget continues with the same measures and instead of correcting the imbalance between urea and non-urea fertilisers, it has ended up reducing the total fertiliser subsidy in real terms. Suffice it to note that the introduction of NBS has not led to any significant increase in domestic production which in any case was stagnant since 2001.
While the big-ticket reforms certainly did not materialize, even the existing promises which were meant to boost demand in rural areas received only cursory mention. While the economic survey mentioned leveraging MGNREGA to create infrastructure in the rural areas, this seems unlikely with the overall Budget of MGNREGA remaining constant. In fact, this translates into lower allocation considering that wages have gone up since the last Budget. But the biggest disappointment has been the token increase of food subsidy which is certainly not enough to roll out the ambitious national food security act. Even the idea of strengthening the farmer producer organization, an idea emphasised in the 12th plan has only received a token attention with an outlay of 100 crores as the corpus grant.
But the real problem with this Budget is the approach to the agricultural sector. Unlike the economic survey which in some ways has at the least acknowledged the importance of employment and the need to shift workers out of agriculture, this Budget seems to be at variance with the broader vision of reform. Because the only way to shift workers from a low productive agriculture to high productivity non-farm sector is not by ignoring agriculture but by improving incomes and generating demand.
Dalits and Adivasis have been suffering from two-fold discriminations of social exclusion and economic exploitation for many years and this continues. This year again, as per the SCSP and TSP, meant to be a mechanism for the economic empowerment of SCs and STs, the quantum of allocation is very inadequate, which account to only 9.92% to SCSP and only 5.7% to TSP.
The Finance Minister has completely failed to identify the disease and root cause of disease of Indian Economy. He has tried, through Budget to treat only the symptoms not the disease.
Invoking the names of Stizler, Vivekananda and Thiruvallanvas will not help. FM cannot hoodwink people. People have understood the lip service to youth, poor and women.
CPI will continue fight the neo liberal economic policies pursued by the Government.
DR. BARUN MUKHERJI (WEST BENGAL):
The Hon'ble Finance Minister has presented the Budget 2013-2014 in a situation when the Indian economy is passing 'through a crisis'. The Hon'ble FM affirms that it has happened in the context when 'global economic growth slowed from 3.9 per cent in 2011 to 3.2 per cent in 2012'. He further argues __ 'we are not unaffected by what happens in the rest of the world and our economy too slowed after 2010-11. In the current year----- the RBI has estimated growth at 5.5 per cent, -------- which is below India's potential growth rate of 8 per cent'. But the Government's own Economic Survey 2013-14 indicates that domestic factors are also no less responsible for slowdown.
All these years were under UPA Government. Still no adequate explanation is given as to the reason for this economic slowdown, particularly when, against the world trend, China and Indonesia could grow at faster rate. It is interesting to note the Government's claim that 'the average for the 11th Plan period, entirely under the UPA Government, was over 8 per cent.' But the question remains whether the Government admits that with this growth - it has achieved its "mulmantra" of "inclusive and sustainable development", whether the GDP growth percolates to the poor and downtrodden people. In fact, deplorable inequality is the biggest tragedy of our present day society. There is no such indication in the Budget as to how to reach the goal of inclusive growth.
The other acute problem that haunts the people constantly is 'food inflation'. It is admitted in the Budget: "It is food inflation that is worrying, and we shall take all possible steps to augment the supply side to meet the growing demand for food items." But the allocation of Rs. 27,049 crore to Ministry of Agriculture may not be adequate for the purpose. Moreover, if the standard of living of the millions of poor & marginal farmers is not improved, agricultural productivity can not be improved. When thousands of debt-trapped farmers are compelled to commit suicide, how can we expect to improve the agricultural productivity? Unfortunately, the Budget does not emphasize on this point.
In response to a Calling Attention Motion at Rajya Sabha on 15th March, 2013, Mallikarjun Kharge, Minister of Labour & Employment has said in a written statement: "The challenge of employment, especially quality and remunerative employment in today's circumstances is truly formidable. There is no National level umbrella policy so far to address employment related issues." But the current Budget of the same Government does not provide any provision to properly address this vital national problem.
Another such regrettable omission is the issue of Black Money. The Hon'ble Finance Minister has carefully avoided this gigantic issue of unearthing the huge amount of Black Money, no less than several lakhs crore of Rupees, which otherwise could have funded several social development projects for the 'aam admi'. In view of the distressing deficit Budget can we afford to ignore this huge hidden wealth?
In fact, while meeting the formidable challenge of achieving the higher GDP growth of at least 8 per cent, we expected some innovative plans and schemes from the learned F.M. But excepting one public sector women's bank, with Rs. 1,000 crore as initial capital, no other new scheme is offered. Of course, women's banks in cooperative sector are already operating for quite some years. The main emphasis of the Budget is to encourage foreign investment as much as possible, Hon'ble Finance Minister confirms __ "If I may be frank, foreign investment is an imperative." The very high current account deficit (CAD) is proposed to be financed through FDI, FII or External Commercial Borrowing (ECB). The other large volumes of investment for infrastructure sector (Rs. 55,00,000 crore) are proposed to be met through Infrastructure Debt Funds (IDF) registered with SEBI or India Infrastructure Finance Corporation, in partnership with Asian Development Bank, or Multilateral Development Banks with assistance of World Bank and others. We are afraid, this extraordinary confidence and dependence in foreign investment and loan may eventually harm the development and growth of Indian economy.