Union Budget 2017-18

Measures to fulfil Capitalist Greed

The Finance Minister announced the intention of the government to initiate legislative reforms to simplify, rationalize and amalgamate existing labour laws into four codes. All such reforms have so far only meant depriving workers of the rights they have won through 3hard and prolonged struggles, so that capitalists can reap higher rates of profit in India than anywhere else in the world.

The Budget announced further support of Rs. 10,000 crore to public sector banks, towards making up for losses incurred by them by writing off loans given to capitalists. Mr. Jaitley announced the abolition of the Foreign Investment Promotion Board, thereby expanding the freedom for foreign capitalist companies to invest in India. The policy on foreign investment in the areas of insurance, pension funds, asset reconstruction companies and stock exchanges is planned to be further liberalised. It is proposed to allow 100% foreign ownership in marketing of food products produced in India.

The privatization of public sector companies will be further intensified. The highest ever divestment target of Rs. 72,500 crore has been set for the coming year as against Rs. 45,000 crore estimated to have been done in the current year.

There is a proposal to partially privatize three companies of Indian Railways — Indian Railway Catering and Tourism Corporation, Indian Railway Finance Corporation and Ircon International Ltd; and to list General Insurance Companies on the stock market. The Motor Vehicles Act will be amended to open up the road transport sector in the passenger segment further for private operators. Selected airports in Tier 2 cities will be offered to capitalists for operation and maintenance under the PPP model.

Looting the public quietly while talking loudly about “concessions”

Finance Minister Jaitley said in his budget speech that “India’s tax to GDP ratio is very low, and the proportion of direct tax to indirect tax is not optimal from the view point of social justice.”

Indirect taxes add to the market prices of consumption articles which poor working families regularly purchase. Taxing the working people heavily while collecting too little from the super-rich is certainly not optimal. To address the problem requires reducing the burden of indirect taxes, which fall heavily on poorer families. However, the government’s intention is only to raise more from direct taxes, and not to reduce the burden of indirect taxes.

As shown in the figure, the Union Budget sets the target for 2017-18 to collect Rs. 88,000 crore more than in the current year from Personal Income Tax, Rs. 75,000 crore more from central Indirect Taxes and only Rs. 45,000 crore more from Corporate Taxes collected from capitalist companies.

Indirect taxes levied by the Central Government include customs, excise duty and service tax. State governments levy and collect VAT and other indirect taxes. The burden of indirect taxation, relative to family income, is higher for poorer families. This is because those with lower incomes generally spend a larger share of their income on consumption goods and services. Higher income families typically save much of their incomes in the form of shares, bonds, deposits, gold, etc., which do not attract indirect taxes.

The targeted increase in collections from Income Tax is expected to come largely from an increase in the number of people receiving incomes by cheque and filing income tax returns. The increase in corporate tax is expected to come from increased profits to be made by capitalist companies in the coming year.

Finance Minister Jaitley announced the lowering of the rate of Income Tax from 10% to 5% for the income slab of Rs. 2,50,000 to 5,00,000 per year. The estimated revenue foregone is Rs. 15,500 crore. The resulting tax saving will be Rs. 12,500 per year for tax payers earning Rs. 5,00,000 or more per year. A large part of this gain will be eaten away by the increased burden of indirect taxation.

False pretensions about addressing the needs of peasants

For all the big talk by Mr. Jaitley about addressing the concerns of peasants and the rural population, the allocations for agriculture and allied activities remains abysmally low.

As usual, the unproductive expenditure on interest payments and militarisation absorbs the lion’s share of central government resources. The biggest increase in allocations for productive investments is in infrastructure – including energy, transport and communications (Figure 2). This reflects the government’s commitment to fulfil the demands of Indian and foreign monopoly capitalists who are eager to achieve a rapid recovery and rise in their profit rates. As usual, there is “too little left” for fulfilling the basic needs of workers and peasants.

The expenditure on various schemes, including Crop Insurance and Pradhan Mantri Mudra Yojana in the 2017-18 budget is actually reduced instead of being raised. The funds for Pradhan Mantri Mudra Yojana has been cut to Rs. 1,040 crore from Rs. 2,135 crore. The expenditure for Crop Insurance Scheme is reduced to Rs. 9,000 crore in 2017-18 budget from Rs. 13,240 crore (RE). While the allocation of Rs. 48,000 crore for the Mahatma Gandhi Rural Employment Guarantee Scheme (MGNREGS) was presented by the Finance Minister as a big jump compared to last year’s budget target, it is actually almost the same as the amount estimated to have been actually spent in 2016-17. 

The Finance Minister has promised to increase agricultural credit to Rs. 10 lakh crore next year. Increase in bank loans is only going to push peasants into greater indebtedness and misery. A grossly inadequate provision of only Rs. 15000 crore has been made for reducing the loan burden on farmers.

Attempts to digitize corruption in the name of “cleaning up” party funding!

In his budget speech the Finance Minister announced measures to allegedly clean up the system of funding of political parties. One measure is the lowering of the limit for parties to receive cash donations from undocumented sources, from Rs. 20,000 to Rs. 2000 per donation. Another measure is the creation of a new financial instrument of “electoral bonds”, which a capitalist can purchase from designated banks and donate to a political party.

A major problem with the existing system is the high degree of inequality of money power influencing electoral outcomes. Parties backed by big capitalists, who contribute hundreds of crores of rupees and own several TV channels, enjoy an enormous unfair advantage over those fighting for the interests of workers and peasants.

The measures being taken are not aimed at solving this major problem. They are aimed at making it convenient for capitalist corporations to contribute large amounts of money to political parties and their electoral campaigns legally and without cash, and claim tax benefits on such donations. The creation of electoral bonds is aimed at enabling capitalists to make such contributions without publicly revealing which party they support.