In view of the fact that the actual outlays (revised estimates) in all sectors, except rural development and communications, were short of the Budget provisions in 2005-06, the current years insufficient increases are a cause for concern. The acute agrarian distress continues unabated. The National Commission on Farmers (NCF) had made concrete recommendations. The reduction in the short-run interest rate for farmers and the proposed increase in farm credit are welcome measures, but these are limited in relation to the scale of the problem. Most of the recommendations of the NCF have been ignored, such as the creation of a price stabilisation fund for agricultural commodities and extension of crop insurance to all farmers and crops.
The outlay for agriculture and allied activities has been increased by only Rs 1,400 crore. Moreover, no additional protection from imports has been provided for crops like cotton, which are experiencing price falls. The Economic Survey has already noted that the current agricultural growth rate at 2.3 % is far below the 10th Plan target of 4%. Foodgrains output continues to grow at a dismal rate. In this backdrop, the reduction of the budgetary allocation for the food subsidy by Rs 2,000 crore was unwarranted. This amount could have been spent to strengthen and expand the public distribution system.
The projected increases in health and education spending are also disappointing. The promise was to increase expenditure on education to 6% of GDP, but the projected expenditure will leave the total below 4%.
On the fiscal front, the increases in tax revenue in the current year are satisfactory. However, the additional resource mobilisation through new fiscal initiatives is meagre. The increases in the rates of the Service Tax (as well as its broadened scope) and the Securities Transaction Tax by 25% are welcome steps. But the failure to impose a long-term capital gains tax, especially on the capital market transactions, is glaring.
Increasing the ceiling on FII holding of government securities would make government finances vulnerable to speculative activities. Moreover, allowing Indian mutual funds to invest abroad would allow domestic savings to flow out of the country at a time when the government is claiming that huge amounts of foreign savings are required for domestic investment. These moves were avoidable.
The Budget shows the unwillingness of the government to mobilize more resources by taxing the rich. Inability to raise resources also mean the budgetary allocations for the priority areas are inadequate. From the Lefts point of view, the government has failed to utilise the opportunity to translate some of its commitments to the people in the Common Minimum Programme, because it has chosen to stick to its conventional neo-liberal framework.
The writer is general secretary, CPI(M)