The debut budget of the BJP government expresses deep commitment to continue the trajectory of reforms of benefiting foreign and domestic capital by emphasizing on larger FDI flows and enlarged avenues for PPP projects. Fiscal consolidation is sought to be effected through contraction of public expenditures and not by increasing revenues through taxing the rich. Thus it is a recipe for further enriching the rich and impoverishing the poor.
Given the backdrop of slow recovery in the global economy the budget was supposed to reflect initiatives that gear up domestic demand through planned investment on the one hand and check food inflation to increase purchasing power of the majority working people. The advanced estimates for the last quarter of 2013-14 released by Central Statistical Organisation reflects a bleak picture of overall growth rate (at constant 2004-05 prices) of 4.6 % and negative growth in manufacturing as well as in mining and quarrying and a massive decline in growth of construction and trade, hotel and restaurant sector. Despite the fact that there has been considerable decline in the ratio of investment to GDP since 2010-11 both in the public and private sectors this budget with its overriding concern to keep fiscal deficit in check and keeping revenue expenditure to GDP ratio more or less same has failed to address the required increase in total plan expenditure in real terms. Total of budgetary support for central plan and central assistance to states and UT declined in real terms comparing budget estimates. The figures on central assistance for state and UTs although increased but the states are left with very little authority to decide on central schemes and that goes against the federal structure of the country. The budget proposal heavily relies on public private partnership and FDI to gear up investment which is hardly going to happen going by past experience.
The budget proposes to reduce direct tax incurring a revenue loss of Rs. 22,200 crores while increases indirect taxes by Rs. 7525 crores which would obviously have regressive impact on the common people. The revenue generation proposed in the budget is high on expectations since there is no significant increase in tax rates and the revised estimates in revenues for the last two years fell short of the budget estimates which eventually prompted further cut in expenditures. The government depends on disinvestment tuned to Rs. 43425 crores which is higher than last year’s budgeted figure but the actual figures last year was much less than what was estimated.
The budget proposes drastic cut in central plan outlay in agriculture and allied sectors, rural development and social services and women and child development. There is no increase in allocation in MGNREGA, Indira Awas Yojna rather in real terms it has declined. The total plan allocation also declined in real terms roughly by 4 %. Moreover the share of SCs and STs in total plan expenditure is falling short by Rs. 47000 crores and Rs. 14000 crores according to planning commission guidelines based on proportion of population.
The budget also proposes a decline in subsidies to petroleum by Rs. 22054 crores which would impose more burdens on the people and further increase the inflationary pressure. Moreover the budget has no concrete proposal to check the double digit food inflation especially when there is a possibility of mounting pressure on food prices given the projections of bad monsoon.
The budget also fails to propose measures to increase employment growth through revamping manufacturing growth. Investments are low and there is no attempt to raise domestic demand rather the budget essentially relies on incentives to private investment through investment linked deductions that grossly failed to raise investment in the earlier years. Moreover the government announces to raise the cap of foreign investment in insurance, defence and real estate that the earlier government could not implement because of stiff opposition.
Therefore the budget essentially fails to chart a trajectory to increase growth and investment, create employment and check inflation that was needed in the current scenario. It is a budget relying more on privatisation and foreign investment and short on innovative ideas to increase revenue. The budget is grossly regressive and anti-people and would increase the burden on the common people