Given the adverse global and domestic economic environment, particularly the economic and food crises, Budget 2010-11 had a number of expectations attached to it. First, it was expected to protect the Indian people from the adverse consequences of the crisis, by way of strengthening the social security system and raising social sector expenditures. Secondly, it was expected, particularly in the wake of double-digit food inflation, to put in place a universal system of food security. Thirdly, it was expected to sustain and further expand the fiscal stimulus package as a demand booster.
On all the three counts, the budget is a major disappointment. In fact, the budget begins with the statement that it is not the state’s responsibility to provide social services to its citizens. According to the Minister, the role of the government is only that of an enabler in the period after economic reforms. Indeed, this confused world view consistently guides the recommendations in the budget.
To begin with, the total revenue expenditure is slated to rise by only 5.8 per cent between 2009-10 and 2010-11. Between 2008-09 and 2009-10, the revenue expenditure had risen by 12.8 per cent. This reduction in the growth of spending is in line with the calibrated exit strategy from the stimulus package suggested by the 13th Finance Commission (FC). Thus, the budget has begun the process of returning to the neo-liberal dogma of reducing deficits by cutting expenditures. The FC recommendation for States to return to their fiscal correction path by 2011-12 has already ended the possibilities of fiscal expansion at the State-level.
Given this overall context of stagnant revenue expenditure, the Minister left for himself little room to raise social sector expenditures in any substantive way. Thus, if the revenue expenditure on social services grew at 13.3 per cent between 2008-09 and 2009-10, it grew at a slower rate of 11.2 per cent between 2009-10 and 2010-11.
There are variations across sectors in the distribution of this reduced growth of expenditure. The growth of expenditure on ‘General Education’ shows a rise from 6.3 per cent between 2008-09 and 2009-10 to 21.6 per cent between 2009-10 and 2010-11. However, this rise appears to be an illusion. In 2009-10, the actual expenditure was about Rs 3000 crore less than what was budgeted for General Education; the higher growth between 2009-10 and 2010-11 appears to be a result of the lower base year expenditure than a real increase. On the other hand, the growth of expenditure on ‘Medical and Public Health’ shows a fall from 21.6 per cent to 13.4 per cent. Similarly, for Water Supply and Sanitation, the growth of expenditure fell from 102 per cent to 39 per cent.
If we consider the flagship schemes of the central government in the social sector, the slow and inadequate rise of expenditures become clearer. For NREGS, there has only been a meager increase of Rs 1000 crore (or 2.5 per cent) in allocation over 2009-10. The insignificant additional expenditure for NREGA appears specious, since the recent Presidents’ Address actually held the scheme responsible for higher food prices. Was additional expenditure on NREGA held back to control food prices?
Similarly, for the National Rural Health Mission, the increase is only of Rs 1500 crore. For the Sarva Shiksha Abhiyan, the increase is of Rs 1900 crore, an amount hardly adequate for meeting the requirements of right to education for all children. Given these trends, the delays in reaching the investment targets of 6 per cent of GDP in education and 3 per cent of GDP in health are going to be inordinately large.
The lack of seriousness in raising social sector expenditures is also clear from the various tax exemptions given away. The total revenue foregone of the government (by way of various tax exemptions) has risen from Rs 4.1 lakh crore in 2008-09 to Rs 5 lakh crore in 2009-10. In 2010-11, about Rs 26,000 crore is to be lost by way of direct tax exemptions to the urban elite and real estate companies. Ironically, the same budget thrusts new indirect taxes – that are considered regressive and against the poor – worth Rs 60,000 crore on the people.
Food security is another critical area totally sidelined in the budget. This is surprising, given the background of high food prices. The expenditure on food subsidy, so essential in sustaining the PDS for the poor, has actually been cut in absolute terms by Rs 424 crore. The Minister, in the speech, had given great emphasis on introducing a food security bill. In the light of the absolute cut in spending, the sincerity of the UPA government in bringing in a meaningful food security bill stands in serious doubt.
It is not just that the PDS is sought to be weakened in the times of high food prices. The budget also contributes to the upward pressure on food prices by raising indirect taxes on petroleum products. There is to be a 5 per cent increase in the customs duty on crude petroleum and Rs 1 per litre increase in the central excise duty on petrol and diesel. In para 18 of the budget speech, the Minister actually accepts the fact that the “gradual hardening of the fuel product prices” is getting increasingly transmitted to not just food prices but also non-food prices. The raising of fuel prices in the same budget speech shows nothing but a callous attitude to the problem of food prices.
In sum, the union budget for 2010-11 misses the grade on most counts that matter to the poor. The overconfidence that it displays in having addressed the global slowdown, even in the face of a negative growth rate in agriculture, is misplaced. In the midst of the crisis, the poor have been left to fend for themselves. Far from protecting the standards of living of the poor, the “enabling government” is increasingly disabling their capabilities to protect livelihoods.