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Union budget will lead to 'slackened' demand, job loss, declining wages, rising prices

By Gautam Mody* 

For eight years now the Bharatiya Janata Party (BJP) government has promised “development for all” (sab ka saath, sab ka vikas) which would culminate in a grand three-year long celebration of the 75th year of our independence. 
The government canceled this plan for celebration while presenting the Budget of 2022-23 (BS), and passed on the burden of development on to the people by calling upon all to ‘strive hard’ (prayas) for the next 25 years so we can celebrate an Amrit Kaal (Golden Period) in the 100th year of our independence.
It is not surprising from a government that has been instrumental in leading India to the bottom of all global indices on development. 
India ranks 120 out of 167 countries according to the Sustainable Development Report (2021) ranking; we rank 131 (out of 189 countries) according to the Human Development Report (2020) which ranks countries based on parameters of life expectancy at birth, standard of living and education; and rank 140 (out of 156 countries) in the Global Gender Gap Report (2021).

The Budget – what is in it for us?

The Budget is just a play of words in the expectation that we will, intoxicated by the BJP’s religious nationalism, forget what was promised in the past, what is our present and remain captivated by the ‘possibilities’ for the future.
With the world and our country still struggling with the pandemic, and as of January 30, 2022, only 51% of our population fully vaccinated (as per World Health Organisation), for the BJP the pandemic has become a thing of the past. The BJP now wants us to believe that we are now a thriving economy and hence it is time to cut expenditure on people. The first cut has landed on expenditure on social protection.
In 2022-23, the budget plans to reduce expenditure on food security and the public distribution system by 28%, on Mahatma Gandhi National Rural Guarantee Act (MNREGA) by 26%. Expenditure on anganwadis and school mid-day meal will remain unchanged without accounting for inflation, expansion or improvement of the programmes.
The expenditure on rural development and agriculture too is virtually frozen. However, there is a marginal increases in the education budgets to make sure that the government is able to roll out their saffronised New Education Policy (NEP).
Most strikingly, still in the midst of the third wave of the pandemic, the BJP government has drastically cut their allocation on healthcare from Rs 75,000 crore to Rs 41,000 crore (by 45%). The coronavirus vaccine budget had been slashed from Rs 39,000 crore to Rs 5,000 crore. With almost close to half the population still waiting to be fully vaccinated, especially our children, this budget cut is clearly indicative that the government is not even willing to secure us and our children from this deadly disease?

How will the Government raise money?

Quoting the Mahabharata, the Budget states that it is the task of government to work for the welfare of people by collecting taxes. Using this mythological rhetoric, the government is celebrating its goods and service tax (GST) which taxes everyone, the working class and the poor more harshly than the rich. It is the tax on all basic necessities. It is a tax on medicines. It is a tax on even a cup of tea.
Further, the budget puts an additional duty on unblended petrol, which may trigger price rise of commodities across the board for the working class. But when it comes to taxing incomes and companies, the Finance Minister Nirmala Sitharaman said, after presenting the BS, that “Prime Minister Modi’s instructions were very clear – ‘no additional taxes’” for obviously the rich.
The BJP government knows that it cannot raise enough taxes by just taxing the poor, so it plans to borrow in order to spend. By 2023, government borrowings will be double its level from 2019. One out of every 3 rupees that the government will borrow will come from small savings.
Hence the poor and ordinary working people will not just bear the fiscal discipline of lower expenditure on social protection, they will also pay more indirect taxes, and it is on their back that the BJP government will indebt the country to become ‘self-reliant’ (atmanirbhar).
Of course the other source of meeting government expenditure will be from the proceeds of privatisation and ‘monetisation’ of public assets. The BJP has out done every previous government in running down the private sector. As we learnt from Air India, the BJP government will turn over the public sector for a pittance. The reduced expectations from privatisation proceeds in the BS, when compared to last year, is evidence of it.

All for the King’s horses and All for the King’s men

Private investment in India has been declining since 2016-17 when the economy experienced a sharp downturn in demand, in other words, consumption. This crisis of jobs and earnings was triggered by the note ban of 8 November 2016. Since then, the economy has been in a perpetual decline with low demand contributing to low investment, which in turn results in job loss and declining wages.
This cycle was accentuated with the introduction of the GST without adequate planning and preparation. In the misguided ideological understanding that low taxes on the private sector leads to higher investment, the BJP government reduced taxes on companies by 8-10% in September 2019.
This significant revenue loss further limited the government’s capacity to spend and pushing it to borrow more, whilst also reducing government expenditure in key areas that boost demand. Thus, even before the pandemic struck, our country had already entered an economic crisis of low demand, low investment, low employment and low wages. The pandemic has made the situation entirely unsustainable.
The Budget aims to spend more money than ever on capital expenditure. It will be increased by nearly 35% in 2022-23 compared to the last year and will be largely for infrastructure development. This the government states is necessary to encourage the private sector to invest. This is an admission of the BJP government that the capitalist class, that it has served on all counts for nearly eight years, is on strike.
Government's talk of self-reliance and mindless anti-China nationalist rhetoric has come with destruction of medium and small industries
While the BJP government wants to ban workers from striking for their rights, it has no power to persuade the rich and the large companies to withdraw their strike against investment in industry, manufacturing, basic services and infrastructure. Hence the government lures them to invest through public-private partnership in order for the rich to grow richer at the cost of the poor.
Both the Budget Statement and the Economic Survey 2021-22 show a complete absence of a policy perspective from the government. The government claims that the economy will grow between 8-9% in the year ahead but there is no pathway to take the economy there.
With no plan to direct government expenditure towards job creation that will in turn increase demand and lift the entire economy, the BJP government believes that just throwing numbers and words will take the country forward. The BJP government talks of India being the fastest growing economy in the world but does not state that high growth with high inflation equals not so high growth in real terms.
The BJP government also claims that we have the highest ever reserves of foreign exchange. As price of petroleum rises, which we largely import, along with other imports rising as well, the reserves, however high, will not last long.
The government’s rhetoric of self-reliance and mindless nationalist rhetoric against China has come with a destruction of medium and small industries, especially in manufacturing, wiping out jobs, livelihoods and indigenous manufacturing capabilities and capacities. In the last three years our imports from China have increased three-fold. This is how far we have moved from being atmanirbhar.
Today there can only be three immediate concerns – containing the impact of newer variations or further fallouts of coronavirus, creating jobs and maintaining inflation at an acceptable level. On the virus, the BS only talks of past achievement and speaks of no provisions for the future. There is no clear plan or framework in the BS on dealing with the jobs crisis when it is widely accepted that the country needs 20 crore jobs to go forward. On controlling price inflation, the BS is completely silent.
And finally, at the base of this all, is a much deeper crisis of the egregious inequality that has emerged in our country. Today the 100 richest Indians control as much wealth as nearly 55 crore people or 45 percent of the population. It is suggested that 84 percent of families in the country have faced a decline in their incomes since the start of the pandemic.
The present structure of our taxes will only make this worse further leading to continuing slack demand, job loss, declining wages and rising prices. The BJP government is contributing to rising misery in our country.
We deserve better. The working class must strengthen its resistance to the BJP government.
---
*General Secretary, New Trade Union Initiative

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