some years now, the Budget Speeches of the Finance Minister
have been impressive exercises in the art of rhetoric,
that is, of verbal persuasion without reference to reality.
It has often been the case that the more Mr Chidambaram
talked about a particular issue in his speech, the less
money was provided in terms of the budget allocation.
This year’s speech was no exception, except that the
rhetoric was if anything even more flamboyant and declamatory
than before, possibly declaring the UPA government’s
intention to face the electorate in the near future.
But rhetoric has rarely, if ever, won elections in India.
Indeed, voting patterns show that Indian electorates
have been remarkably mature in several ways, especially
in terms of voting out governments that have failed
to deliver on their promises. That is why, whenever
there is a sense that elections are in the offing, the
attention of the government shifts even if briefly from
the reactions of stock market analysts and businessmen,
and there is a scramble among policy makers at least
to be seen to be delivering on some important fronts.
So it is worth asking what the economic strategy of
the government, and especially the intentions as signalled
in this year’s Budget proposals, have actually provided
in terms of improving the social and material conditions
of most of the people. The crucial areas that matter
are still the issues that dominated the previous general
election. Therefore, they are still the issues that
formed the core of the Congress party’s manifesto in
the 2004 general elections, and that became important
elements of the promises made in the UPA government’s
National Common Minimum Programme.
These are the bread and butter issues of employment,
the agrarian crisis, nutrition and food security, education,
health and social security. In each of these areas,
the UPA government promised much. And in most of these,
the delivery has not only been far below the promises,
but in some cases even worse than the previous government.
major exception is in the field of employment generation,
since the enactment and putting into place of the National
Rural Employment Guarantee Act was a significant advance.
It is clearly only a first step and much remains to
be done, not simply in extending the scheme to the whole
country, but ensuring that it is implemented in the
desired way with much more local public involvement.
Even so, there is no doubt that this was and remains
an important achievement, that may rank as the most
important economic contribution of this government to
the future well being of a large section of the population
and a means of reviving the depressed rural economy.
However, while Mr. Chidambaram has promised to provide
resources as required to the states for this demand-driven
scheme, the budgetary allocation he has made for its
expansion is small. This suggests that the Finance Ministry
may continue to impose the financial restraints and
inflexibilities that have already prevented state governments
from accessing central resources in ways that would
result in more rapid and effective implementation.
In the context of a continuing agrarian crisis, a debt
relief package was widely expected, and the Finance
Minister did announce one, with much fanfare and declarations
of concern for the plight of farmers. But the package
appears to have been put together in a hurry, without
adequate thought and without the elements necessary
to have any real beneficial effects for the areas and
cultivators that are the worst affected by agrarian
The package has a number of important exclusions. It
excludes from full benefits all the farmers on dry land
and poor quality land who hold more than 2 hectares,
even though they are among the worst affected from the
agrarian crisis. Thus, most of the distressed farmers
of the Vidharbha region of Maharashtra or Rayalseema
in Andhra Pradesh or South Karnataka, will not get the
debt cancellation. In fact, they will probably also
not even benefit from the one-time settlement, since
if they could repay 75 per cent of the outstanding loan
they would not be in distress in the first place!
The package also excludes the majority of farmers who
have taken debt from private sources, since there has
been no attempt to deal with the private outstanding
debt. Yet more than three-fourths of farmers hold private
debt, especially small tenants, women farmers and cultivators
without clear land titles in their own names, who are
already among the most disadvantaged agriculturalists.
Since the debt relief package includes loans due to
co-operative banks, it will supersede the efforts being
made to recapitalise co-operative banks to make them
more viable and start lending more, that followed from
the Vaidyanathan Commission report. This may leave rural
credit co-operatives in more of a mess than before,
if the matter is not properly handled.
If the central government were really serious about
providing debt relief to distressed farmers, it should
have established a Debt Relief Commission, along the
lines of that which has recently been established by
the state government of Kerala. This would identify
the pockets and categories of severe agrarian distress
and provide relief accordingly, including to those holding
private debt by refinancing the moneylenders. Such Commissions
were even established by the colonial government of
British India, so they are not administratively that
difficult to manage. Of course, this would necessarily
mean that the central government make available real
finance for this purpose, instead of the book transfer
between government and banks that is probably going
to be used to finance the proposed scheme.
In all the publicity being accorded to this debt relief
package, what is being ignored is that this Budget has
very little directed towards making cultivation a viable
or profitable activity once again. There is no budgetary
allocation for various kinds of public intervention
such as input provision or price stabilisation schemes
that would protect farmers from crop price volatility.
There is no attempt to expand and improve the crop insurance
scheme is ways that would make it genuinely useful to
farmers. Total Central Plan spending on agriculture
and allied activities is projected to increase by only
Rs. 1530 crore, and total irrigation spending is actually
to fall to a paltry Rs. 414 crore.
Given all this, it is really surprising to see that
this is being presented by the Government as a “farmer-friendly
Budget”. Either the government has been misled by its
own propaganda, or it cynically believes that it does
not matter how farmers actually fare, as long as they
can be convinced that the government cares about them.
It was even more surprising to read a newspaper report
ascribing to the Finance Minister the view that the
debt relief package is a measure to improve food security
in the country! He appears not to know that most of
the farmers in distress are those who have been producing
cash crops, rather than food, or that the current problem
in food security stem largely from the mess the government
has made of the domestic procurement and distribution
In this context it is worth remembering the promise
made in the NCMP: “The UPA will work out, in the next
three months, a comprehensive medium-term strategy for
food and nutrition security. The objective will be to
move towards universal food security over time, if found
feasible. The UPA government will strengthen the public
distribution system (PDS) particularly in the poorest
and backward blocks of the country.”
Instead of this, the PDS has continued to be run down
during the tenure of this government. Allowing large
corporate players into the food grain market has reduced
the Food Corporation of India’s capacity to procure
the required amounts of grain. Food price inflation
has already emerged as a major area of concern in the
current year, and it is likely to get worse rather than
better in the near future. Global prices of essential
food grains are rising and domestic procurement prices
will have to rise accordingly if the government is to
be in a position to procure food grain for the PDS and
other uses like the Mid-day Meals Scheme.
Therefore, there will have to be a rise in food subsidy
to ensure adequate procurement and prevent basic food
prices from going up too much for retail consumers.
However, the allocation for the food subsidy shows hardly
any increase, from Rs. 31,546 crore in the current fiscal
year to a proposed outlay of Rs. 32,667 crore in the
coming year. This is even less than the government’s
own inflation projections for the coming year, which
means there will be a decline in real terms. A pathetically
small amount of Rs. 48 crore is all that is allocated
for strengthening and expanding the PDS system!
A major aspect of nutrition and health relates to the
Integrated Child Development Scheme (ICDS) which is
absolutely crucial for ensuring minimum access to health
and nutrition facilities of pregnant and lactating mothers,
infants and young children. The ICDS has been operating
on the underpaid labour of women in an undesirable and
unsustainable fashion. The Finance Minister has now
consented to increase the remuneration of anganwadi
workers to Rs. 1500 per month and that of anganwadi
helpers to Rs. 750 per month. This is an improvement,
but still leaves them receiving less than minimum wages!
Further, the Supreme Court has repeatedly instructed
the government to make the scheme universal to all habitations,
but the small increase in budgetary allocation to the
ICDS (only Rs. 852 crore) ensures that this will not
happen even in the coming year.
The National Rural Health Mission is a flagship programme
of the UPA government, launched with much fanfare. However,
it too runs on the underpaid labour of women (the ASHAs
who are the backbone of the scheme receive at best Rs.
800 per month) because of the very small allocations
that have been made to it. Even in this Budget, the
total spending on NRHM is slated to be less than Rs.
11,000 crore, and the increased spending will barely
keep pace with inflation. Certainly the promise to “raise
public spending on health to at least 2-3 per cent of
GDP over the next five years with focus on primary health
care” appears to have been forgotten.
Education was supposed to be a major area of concern
for this government, and the NCMP pledged to “raise
public education spending to at least 6 per cent of
GDP, with at least half this amount being spent on primary
and secondary sectors.” This undertaking was certainly
not kept last year – the government’s own Economic Survey
showed that it was less than 3 per cent – but even in
the current year the allocations suggest that it will
remain in this region. That is less than the NDA government
spent as a share of GDP!
What is most shocking of all is the reduced commitment
to elementary education. The total proposed outlay on
elementary education has increased by only Rs. 1337
crore, or around 7 per cent. That is barely above the
projected inflation rate for the coming year (6.4 per
cent) which means that there will be hardly any increase
in real spending on elementary education in the coming
year. This is despite the fact that school education
is hugely underfunded, that recent increases in enrolment
have been achieved at the cost of minimum quality with
“schools” being set up without even the most basic infrastructure
and huge shortage of teachers. Allocations to the Sarva
Shiksha Abhiyan have actually fallen, as the central
government moves to pass more of the burden to state
governments. This makes a mockery of the government’s
commitment to ensuring the right to education, and casts
doubt on its commitment to pass a meaningful central
legislation on this.
There are welcome increases in budgetary allocations
for secondary and higher education, but even here the
increases are nowhere near what is necessary. The desired
expansion in secondary schooling, higher and technical
education demands a manifold increase in public spending
on these: instead, the total increase in such expenditure
is projected to go up by just above Rs. 6,000 crore,
which is simply not enough to deal with the unmet and
Yet the Finance Minister cannot claim that there is
a shortage of fiscal resources to provide for these
crucial areas of education spending. His own budget
estimates project an increase in revenue receipts of
17.5 per cent, while total spending is to increase by
less than 6 per cent. Surely, the crucial and necessary
demand to ensuring quality school education for all
should not be sacrificed to mistaken notions of fiscal
All in all, therefore, this is a Budget that is marked
by a continuing fiscal neglect of the social sectors
even as conditions in these sectors are reaching crisis
point for the general population. Quite apart from injustice
and development concerns, the political stupidity of
such an approach is startling.