Budget for Whom?
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THE union budget for 2023-24 is to be presented before parliament on February 1, 2023 at a time when both the Indian as well as world economies face a grim situation. Notwithstanding the tall claims of the Modi government, India’s economy is yet to recover from the crippling effects of the Covid pandemic and the disastrous way in which it was handled by the government of India.
Since the time the last budget was presented, the global economic context has also worsened with the outbreak of the military conflict in Ukraine and the sanctions imposed by western powers. India has to, however, be prepared for not merely a temporary world recession, but the possibility of a prolonged world capitalist crisis as the neoliberal ‘globalisation’ of the last few decades comes undone under the weight of its own contradictions. India’s economic development has also reflected these contradictions – with an agrarian crisis, wage stagnation and a growing problem of unemployment accompanying even phases of high growth, leading to intensive exploitation of even the employed working class and a vast increase in inequality. That the momentum of capitalist development based on these conditions was losing steam because of demand problems that the same conditions gave rise to, was visible even before the Covid pandemic struck.
India’s real per capita national income in 2022-23, as per the first advance estimates, is going to be barely 2.4 per cent higher than the pre-pandemic 2019-20 level – lower than even what an underlying trend growth rate of just 1 per cent per annum would have resulted in. This same period has also seen a sharp rise in inflation rates, so that over three quarters of the increase in nominal GDP between 2019-20 and 2022-23 is accounted for by increases in prices rather than in actual output. The industrial sector reflects the crisis in the most extreme fashion, with manufacturing estimated to grow by just 1.6 per cent in 2022-23 over the previous year. The class biased approach of the Modi government has also ensured that the ‘recovery’ has been extremely uneven. The proof of this is that revenues from corporate and income taxes have increased much more than the increase in nominal GDP between 2019-20 and 2022-23. The only way this can happen in a situation where rates of taxation have not been increased is if the share of corporate profits and high incomes in the total national income increases. By implication, given the overall stagnation in income, India’s working people have lost out. Through increased unemployment and lower wages, their earnings are on an average lower today than they were in 2019-20.
In addition to the ham handed lock-down, which in the end did not even prevent lakhs of Indians from dying of Covid, the Modi government has contributed to the crisis by ruthlessly pursuing a policy of curbing public expenditure. The trends in revenues and expenditures till November 2022 indicate that revenues from central taxes as a percentage of GDP in 2022-23 will be higher than in 2019-20. Further, the central government share in these will also be considerably greater because of a reduction in the states’ share in revenues from central taxes. Yet, central government expenditure as a percentage of GDP will be lower than in 2019-20 if the present trend continues for the remaining part of the financial year. Moreover, despite getting additional revenues from direct taxes, the previous increases in oil taxes have not been fully reversed as yet.
Thus, the Modi government’s fiscal policy has strengthened rather than counteracted the trend of increasing inequality, and failed to stimulate an economy facing a depressed demand situation. This blindness to economic realities was visible even earlier, but the persistence with it even in the face of a catastrophic human tragedy related to the pandemic and its economic effects has a particularly savage element to it. This has been accompanied by other measures like further privatisation of public assets and the national asset monetisation programme, the abortive attempt at introducing new farm laws, and allowing greater foreign investment in sectors like defence and insurance – all in the name of building an ‘Atmanirbhar Bharat’. These are all also symptoms of the Modi government’s blind commitment to being nothing more than an instrument for fostering the accumulation and centralisation of wealth by a few big capitalists, for which its communal politics serve as a cloak.
With prolonged disruption in the global economy being likely, India’s economic future depends on genuine atmanirbharta. Instead of trying to compete in a global economy and squeezing out profits by condemning the working masses to a state of perpetual poverty, their potential to provide a large domestic market has to be exploited for a more autonomous trajectory of development. For this, it is imperative that taxation and public expenditure be used to tilt distribution in their favour, improve incomes of farmers, trigger expansion of demand that generates employment, and enables them to attain improved health and educational outcomes. In the coming session of parliament, the Left is committed to fight for a union budget that reflects such priorities, and contest the myth that the government is constrained by lack of resources.
(January 25, 2023)
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