Finance Minister Nirmala Sitharaman presented the budget for 2020-21 on 1st February in the backdrop of a sharp slowdown in the economy. The slowdown was caused by the fall in purchasing power of working people and peasants year after year due to pursuit of capitalist policies. She claimed, while presenting the budget, that “this budget will boost their incomes and enhance their purchasing power”.
The budget announcement, however, boosted profit of capitalists instead of income of workers and peasants. The abolition of tax on dividends paid by companies will lead to additional annual profit of Rs. 25,000 crore for corporates. This step was further to the big reduction in corporate taxes announced in September 2019 amounting to Rs.1,44,000 crore. Thus, within a matter of six months, capitalists have been doled out Rs.1,69,000 crore tax concession, while the while the food subsidy was cut by Rs. 69, 000 crore in the budget for 2020-21.
The programmes and changes she presented in her budget speech were thus aimed at ensuring maximum profits for big Indian and foreign capitalists.
Her budget speech claimed that the focus of her government during 2014-19 was inclusive growth. In reality, the first stint of the NDA government saw very rapid growth in the wealth of the biggest capitalists of the country on one hand and pauperization of workers and peasants on the other. This is evident in the fact that the nine biggest capitalists own as much wealth as the bottom 50 percent people of the country. The result of the policies of the NDA government saw the wealth of the biggest capitalist of the country, Ambani, grow by nearly 50 percent in 2019 when the economy grew at the slowest rate in last fifteen years.
The Finance Minister’s concern for the Tatas, Ambanis, Birlas, Adanis and other capitalists of the country could be seen in her announcement that “wealth creators will be respected in the country” and will not face tax harassment. She was turning the truth upside down by implying that wealth is created by capitalists and not by the sweat and labour of workers and peasants, who are the ones really worthy of respect in a society.
Serious Economic Slowdown
The Finance Minister had no concern for lakhs of workers who have lost their jobs due to the economic slowdown and anti-labour policies. She had no concern for crores of peasants who are incurring loss due to unremunerative prices for what they produce. The steady fall in purchasing power of people is further deepening the economic crisis and misery of working people. The crisis is reflected in growing unemployment, stagnation or even reduction in real wages of workers, and reduced consumption of goods by the working people. (See Box 1)
Indian and foreign capitalists know that working people have little savings to spend on buying new goods. That is why, despite the numerous incentives and relaxations in the interest rate of finance capital, announced by the Modi government since coming to power, they have not come forward to risk their capital for creating new production capacities. So, monopoly capitalists wanted the Government of India to borrow more and step up public investment in infrastructure and other projects, to make up for the lack of growth in private investment.
Capitalists tried to convince the Modi government, before the budget was presented, that the state should incur more debt to finance investments in infrastructure that private capital needs. Their demand was that the government should not cut its expenditure for the time being, as demanded by foreign capitalists and rating agencies.
“Fiscal responsibility” is a concept that has been created by the biggest finance capital institutions of the world. Its aim is to provide a guaranteed source of income for the finance capital institutions. According to this concept, the State should be a “responsible” borrower. It should service its debt promptly. The State should not get so highly indebted that it is unable to repay but it should not also stop borrowing altogether. It should stick to an agreed level of deficit, an agreed level of borrowing every year. In other words, the concept of “fiscal responsibility” is based on the anti-people outlook that the State’s primary responsibility is not to provide for its citizens but to satisfy the money-lenders.
The Indian government enacted, Fiscal Responsibility & Budget Management Act, in 2003 to be seen as a ‘fiscally responsible” borrower.
On the other hand, foreign capital wanted the Government of India to avoid excessive borrowing and maintain “fiscal responsibility” to ensure stable exchange rate. This required further cuts in the already insufficient allocations for education, health and other basic needs of the people. It also required an increase of monies raised through privatization and disinvestment. It is only through such measures that the Government could fulfil the demand for stepping up public investments and the demand to maintain fiscal responsibility. (See Box on this page.)
The budget tried to satisfy both these claimants by proposing higher fiscal deficit of 3.5 percent of GDP for 2020-21 than the 3.3 percent budgeted for 2019-20 but lower than the revised estimate of fiscal deficit of 3.8 percent for 2019-20.
On top of the cut in food subsidy, the budget announced increase in custom duty on a host of goods which will increase prices of many durable goods consumed by people. The total burden on people is estimated to be around Rs. 20,000 crore.
The budget pretended to show concern for working people and other tax-payers by reducing income tax rate for annual income below Rs. 15 lakh. However while giving the benefit of reduced rate with one hand, it took away tax concessions on various savings and on purchase of house by the other hand. It gave the option to tax-payers to choose between old higher tax rates with concessions or new lower rates without concessions. Though the government claimed that it will lead to benefit of Rs 40,000 crore to people, many people will not avail of new reduced rates as they will end up paying more tax than before, so the total gain to people is likely to be much less.
This proposal is misleading and devious. In the absence of the state providing any social security people, particularly for old age, people have to regularly keep aside some savings. By withdrawing the tax concession on such savings, state is discouraging people to save for old age. It wants people to use that money to buy goods to help capitalists to overcome the crisis of falling demand.
The budget announced further incentives to foreign capital to invest in India, but had no proposal to address the crisis crores of peasants are facing in the country. The Finance Minister again referred to the empty promise of doubling farmers’ income by 2022 while their income has actually been falling. The budget announced a set of measures related to agriculture which will further boost capitalist farming and not address the real concerns of farmers.
The absence of regular jobs at liveable wages is the biggest concern of cores of youth of the country. The budget had nothing to offer to youth because the underlying philosophy of the budget is the trickle-down theory of capitalism. This theory claims that as the wealth of capitalist is increased some of it will trickle down to people.
Finance Minister claimed that the budget aims to address aspirations and hopes of youth, every member of scheduled castes and scheduled tribes, every woman, every member of minority sections of our society. However, her budget has actually addressed the aspirations and hopes of the ruling class of capitalists of our country.
The crisis faced by peasants, youth and working people has been worsened during the last few months by the rise in food inflation which has been more than 10 percent. The budget did not even recognize the problem, leave aside addressing it.
On the contrary, in line with the demand of Indian and foreign capitalists, the sale of government’s assets built with public money is planned to be accelerated. More and more sectors are being thrown open to Indian and foreign capitalists. The budget announced the plan to initiate the privatisation of the Life Insurance Corporation (LIC). This has created anxiety among crores of people who have been putting their savings in LIC to take care of any untimely death. The amount of people’s deposits with LIC exceed Rs. 27 lakh crore, nearly as must as the total deposits with the largest bank of the country, State Bank of India. The budget has set the highest ever target for the privatisation of over Rs. 2,10,000 crore which is double the target set last year. Privatisation is being pursued despite the opposition by workers’ unions, communist parties and other concerned citizens. Public private partnership (PPP) will be the preferred mode of investment in roads, railways, hospitals, and warehouse sectors.
The Modi government had announced that every Indian will have a house by 2022. The budget did not even refer to the promise, like so many other forgotten promises of the government.
Like in previous years, more than half the tax revenue of the Central Government will be spent on two items which add no value to the society – paying interest to financial institutions (Rs. 7,00,000 crore) and defence expenditure (Rs. 4,70,000 crore).
Modi government has been making a lot of tall claims like ”Together we grow. Together we prosper. Together we will build a strong and inclusive India.” But as long there is no change in the capital-centred orientation of the budget, these are but hollow claims. Capitalist prescriptions of the budget cannot pull the Indian economy out of crisis. The budget does not address the root cause of the economic slowdown – fall in real wages of workers and income of peasants. The truth is that the capitalist class, headed by the monopoly houses, has neither the interest nor the capacity to prevent workers and peasants from growing poorer. Their entire economic strategy is based on maintaining the wages of labour and procurement prices of agricultural commodities as low as possible. They want to attract the world’s biggest multinationals to invest in our country, by offering Indian labour power and the fruits of peasant toil at dirt cheap rates.
The annual budget of the Government of India is a tool to advance the interests of a wealthy minority, headed by the capitalist monopoly houses, at the expense of the majority of people. As long as the means of large-scale production remain under private ownership of monopoly capitalists, all decisions are taken with the aim of maximizing their profits. The real aim of the Budget is to further rob workers and peasants while pretending to help them. The budget also tries to resolve conflicting claims on the share of loot by various Indian and foreign monopoly capitalist groups. The budget 2020 has done exactly that. It has used the crisis of low economic growth to fulfil various capitalists’ demands, opposed by people.