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India Today & Tommorow
   Dr. M K Choudhary, Director IIPM
Dr. Malay Chaudhuri
Founder - Director, IIPM & Author of the Best Seller 'The Great Indian Dream
[Feb 2006]

Humanizing The Budget. 2006 onwards

The Planning Commission was never given statutory status, though, the Prime Minister was always the Chairman of the Commission and its executive head, designated as the Vice Chairman, was given the rank of the Cabinet Minister. The other members were given the status of Minister of State. Let us be frank. It was for all practical purposes a glorified Debating Club, supported by enormous research papers (based on available, incomplete statistics and wisely covered up ignorance), unnecessarily marked 'confidential' to give them a hallow. Any way, its existence gave our economists and many other related experts enormous satisfaction that they were shaping up the life of our people. Experts knew which side the bread was buttered. Accordingly, their wise recommendations served their masters more than the impoverished masses. Of course, all these helped the ruling parties to keep alive the dream that India will soon belong to the category of developed nations with in-built measures of social welfare.

In the first 30 years of planning after independence, the national GDP grew by 3.5% (1.3% per capita, since population grew by around 2.2%). It was fashionable to describe 3.5% growth of GDP as the Hindu Rate of Growth. Actually, this rate of growThe Budgetth of GDP was quite comparable to typical capitalist growth rates as observed in USA / Europe. Our GDP grew slowly as we never cared to increase consciously the purchasing power of the people at large. The Planning Commission never seriously planned national economic growth and just distribution of fruits of economic growth, amongst different sections of people. In this sense, we never had National Economic Planning as understood in erstwhile people's 'democracies' in USSR and east European countries.

Our political masters found it convenient to name Programming Exercises to accelerate industrialization as Five Year Plans, borrowing socialist nomenclature from erstwhile USSR. The objective was the growth of industrial capital in private hands at the cost of public exchequer through transfer of potential profit to private sector from public sector (better called political sector). Policies were designed to privatize profit and nationalize all losses.

The ruling classes kept majority of masses illiterate and in abysmal poverty either leading to untimely death due to famine (as a result of lack of proper food or medicine) or to life immersed in indignities in caste infested rural belts or in urban slums.

For two generations, we have heaped inhuman indignities on helpless masses. Even today, when we have more than 70,000 crorepatis and 311 billionaires having a collective net worth of Rs. 3.64 trillion (Rs. 3,64,000 Cr), 170 million people (i.e., 17% of the population) is condemned to death before they reach 40 years (35 on an average), so that rest of us may leave 70 years. While India shines for the top 30% of the population, about 20% are condemned to die living half of normal life span for others. Though we have a few lac crores of rupees lying idle in our banks, more than Rs. 2 lac crores in public sector kitties, enormous cash reserves with our industrialists and foreign exchange reserves to the tune of $140 billion (which fetches hardly 1% return from American treasury taking inflation into account), we are averse to investment in human capital to make unemployed masses productive.

We are quite happy that we have now overcome the barrier of Hindu Growth Rate and have achieved 6-8% growth of GDP, in the last decade, but we tend to forget that in today's globalised world, a GDP growth rate of 14% (per capita annual income growth of 12%) is quite achievable, which could enable us to catch up with USA / Europe by 2025. The objective of our Alternate Budget Exercise is to realize this quite realistic and achievable target which will make life of our masses worth living. It is not only important that we achieve high GDP growth rate, but it is more important that the fruits of growth is distributed among masses through effective income distribution policies. Indeed, high growth rate is not sustainable over a longer period unless masses have the purchasing power to absorb flow of goods and commodities coming out of production processes.

The Planning Commission is dysfunctional for all practical purposes, even debates and discussions no longer exist after the dissolution of committees so carefully formed by Montek Singh Ahluwalia. The Left has achieved this by raising revolutionary objections against inclusion of a few members in Committees as they served international organizations like World Bank and IMF. The Left conveniently forgot that their erstwhile firebrand Finance Minister in West Bengal, under Jyoti Basu, had also worked in World Bank.

We have no option but to look to our kind hearted Finance Minister, who recently made an unsuccessful attempt to decrease subsidy on rice and wheat for people below the poverty line, though, incidentally it could have affected the middle class also, above the poverty line. Interestingly, he could not find any other alternative to mobilize resources for Rural Employment Guarantee Scheme! We were lucky that the lady with inner conscience intervened timely. Credit for this intervention cannot be given to our very strong Prime Minister as he himself approved of the step, chairing the Cabinet meeting.

The Prime Minister has announced the likely formation of a new Pay Commission, keeping in view the coming elections in some states and the necessity to keep the 99% of corrupt Babus in Bureaucracy quite happy by allowing them to take home increased pay packets from time to time, which incidentally causes increase in rate of bribe due to them. Our past experience indicates that increased pay and perks bestowed on Babus in Bureaucracy numbering 1.9 Cr. including Babus employed in state machineries (almost one out of every 50 Indian citizens or 10 Indian families) will have a ripple effect across the organized workers in state and private sectors. Our last strong and benevolent Prime Minister, I K Gujral, granted pay increase much more than what was necessitated by the recommendations of the Pay Commission. We shall not be surprised if something similar happens under our current strong Prime Minister, who is being constantly pushed by Left Front under CPM leadership. Indian managerial class is expected to obtain in 2006, globally the highest salary increase of 7.3% as indicated by Mercer Global Compensation Report, while the expected global pay rise is projected as 2.4% (after accounting for inflation). We have therefore a situation where the poverty stricken masses will hardly be left with any possibility of improving their conditions since all the fruits of increased GDP will be appropriated by the organized groups and their leaders.

If we have to humanize budget, we have to design policies to reverse the current trend as described by no other person than Sharad Pawar, the minister for agriculture, who pointed out in an interview (quoted by P Sainath in The Hindu, dt. 18th Nov 2005) that last year's budget allocation for agriculture (as distinct from rural development projects) was only 2% though, 65% of the population earns a living from it. [This can explain why India's country-wide average rice yield is merely 30 quintals a hectare (2003 data) which compares poorly with China's 60.7 quintals or Indonesia's 45.4 quintals. India produces pulses merely 5.5 quintals per hectare against 15 quintals in China.] The weakest section of population always gets the least. Even in revolutionary West Bengal, the allocation in the budget for SC / ST, is less than 7%, though the population belonging to these groups is 29%. In the present political climate, it is almost impossible for the Finance Minister to reverse the existing trend. Yet, hoping against hope, let us formulate a budget mobilizing resources needed to humanize budget allocation focusing on the well-being of the poorest and weakest member of society that is contained in Gandhi's talisman.

Additional Resource Mobilisation

1. Increase diesel price by at least Rs. 7.50 to raise Rs. 36,000 Cr. per annum. This will bring diesel price in line with price of petrol internationally. IIPM Think Tank has calculated that such an increase will hardly increase the price of 1 kg of a commodity by not more than 25 paise even when the commodity is transported from Mumbai to Delhi. Inflationary pressure in other areas is not expected since money raised by increase of diesel price will be invested to generate employment which will add to circulation of commodities.

2. Price kerosene at the same level as diesel and rebate purchases made by the poor on ration card. This will bring Rs. 18,000 Cr. per annum.

3. Increase tariff on electricity by Re. 1 per unit to collect Rs. 60,000 Cr. per annum.

4. Impose 20% tax on foreign exchange allowance of outbound tourists (6 million expected in 2006-07). This will bring Rs. 20,000 Cr.

5. Increase excise duty by 100% on alcohol and cigarette. This will fetch Rs. 22,500 Cr. per annum.

6. Impose an additional excise duty of Rs. 10,000 on 2-wheelers and Rs. 20,000 on cars to collect Rs. 10,000 Cr. per annum.

7. Impose cess of Rs. 10 per kg on edible oil to collect Rs. 12,500 Cr per annum.

8. Impose excise on bidi. Bidi outsells cigarette 4:1 and can contribute Rs. 12,000 Cr. per annum even if excise is one fourth of cigarette.

9. Impose cess of Rs. 5 per kg on sugar to collect Rs. 10,000 Cr. per annum. It will help reduce diabetes.

10.Impose capital gains tax of 15%, the same, as in USA to collect Rs. 5,000 Cr. We have thus mobilized Rs. 2,06,000 Cr.

Resource Allocation for additional measures

1. Rs. 7,400 Cr. per annum will be necessary to increase the number of judges ten times to bring number of judges at par with international standard. This will enable timely disposal of cases so that every time a new Chief Justice to the Supreme Court is appointed, he does not need to remind everybody that 'Justice Delayed is Justice Denied'. He also will not need to make the heroic promise that within the period he remains in chair, he will do his best to change the situation.

2. IIPM Think Tank has calculated that an investment of Rs. 20,000 is needed to create opportunity for employing one person in rural areas. In urban areas, the amount needed will be three times. Since unemployment in rural areas is six times than that of urban area, a composite figure of Rs. 25,000 is required to create employment opportunity for an average Indian. If 50% (and not around 40% as envisaged by Planning Commission) of the population is to be employed, taking into consideration age structure, student population, handicapped persons, urban rich housewives (who may not take up job, even when available), we need to create 140 million workplaces to liquidate unemployment. We suggest that unemployment maybe solved in a period of 5 years. We need to create 28 million working places each year. This will require an investment of Rs. 70,000 Cr. per annum. While offering job in the first year, we must give priority to under-trial prisoners to be released on personal bond, convicted prisoners released each year from jail, women forced to live in red-light areas and otherwise disadvantage groups like Dalits other backward castes, poor Muslims, Christians and upper caste Hindus.

3. Unemployment Benefit at Rs. 250 per month for rural areas and Rs. 400 per month for urban youth, till they are provided with jobs. This will require an additional outlay of Rs. 18,000 Cr. annually. We foresee a ripple effect of providing unemployment benefits, it would gradually lead to disappearance of child labour.

4. Rs. 22,000 Cr. annually to provide 30kg of food grain per family per month to the 8 Cr. families living around the poverty line.

5. There is a requirement of Rs. 22,500 Cr. per annum for liquidating urban slums in 5 years.

6. Rs. 21,000 Cr. per annum is foreseen for health insurance, AIDS care and sanitation. Details have been described in our book, The Great Indian Dream.

7. Rs. 12,000 Cr. annually for universal primary education up to class 8, engineering and medical studies totally free, so that the search for merit is not confined to the top 30% of the population. Qualified doctors studying with 100% subsidy will be required to serve in villages for a minimum period of 5 years before they are offered registration. This will mean one qualified doctor for every 10 villages.

We are still left with Rs. 33,100 Cr. to be jointly disbursed by our extra-ordinarily kind hearted duo the Prime Minister and the Finance Minister and also by the 'inner conscience' of the ruling party. We pray this ensures their place in history, just by their work for the poor in India.

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