The assumptions of pick-up in the growth rate of the economy back to 9-10 per cent, bearing down of inflationary pressures to a comfortable 4.5 per cent and foreign investment on massive scale on building infrastructure with public-private partnership are fanciful. The stimulus for the corporates, Indian and foreign, has become the largest call on the government's expenditure when the growth rate of the economy came down from 9 per cent a year to 6 per cent. It is now expected to record 7.2 per cent in the current fiscal and then go up to 7.5 per cent in 2010-11. The recovery from slowdown has been only because the stimulus did not allow a measure of working of established manufacturing for crediting additional capacity in the manufacturing sector of the economy.

Further progress is bound to be difficult if there is no fresh investment for raising additional capacity in manufacturing as well as infrastructure which, the private enterprise, both Indian and foreign, is not in a mood to undertake. It is interested only in getting tax concessions, fiscal assistance, increasing profits and intensifying labour exploitation.

As far as financing of “stimulus” is concerned, the government policy is not to raise resources by direct taxation on rising incomes and profits but resort to indirect taxation on goods and services which means through inflationary measures. Alternately, the government will continue to also create paper money with the help of the Reserve Bank of India to cover its fiscal deficit. The Finance Minister's claim that fiscal deficit will be reduced by one per cent is not likely to hold good, considering the resource mobilising policy it has gone for. There will also be a further push up of prices of goods and services in the market. Food inflation is already spreading to industrial goods and services so that the wholesale price index has increased to 8 per cent at the end of the February. It is bound to go up further.

The claim that fiscal deficit will be brought down by one per cent from 6.5 to 5.5 per cent of GDP is unlikely to fructify with the kind of fiscal consolidation measures Mr. Mukherjee has devised. The government will still have to borrow heavily from market with the assistance of RBI and nationalised banks. It will have to be more strict in financing its expenditure side on agriculture, education and health services which have been made, in practice, not to spend allocations in the budget. They too will not yield the desired results because of inefficiency and corruption. Worse still, much of the expenditure in these areas too goes into elitist channels and does not percolate down to the needy and the vulnerable.

The linkage of market-driven economic growth and improvement in the living standards of the mass of the people has indeed snapped. The working people have also been pushed out of jobs in the organised sectors in the economy into casual part-time “self-employment”. The much-advertised rural employment guarantee scheme provides only part-time employment in rural areas. It too is riddled with inefficient implementation and corruption. Employment generation has shrunk because of the market-driven economic growth policy. Apart from managerial and marketing professionals, who may have found lucrative jobs in the so-called reform era, the work force in India has suffered loss of jobs and income.

The self-styled economic reformers applaud this position as a rise in the efficiency of corporate business as well as labour productivity. Side by side, however, the prices of essential commodities and services have risen. The organised industry and services provide jobs to hardly 10 per cent of India's working people. Unless there is a steady shift of work force from employment at less than subsistence earnings at a rate faster than the growth of the working population, there can be no reduction in mass poverty. A sustained campaign has, however, been carried forward by the owners of capital with support of official policies and even judicial verdicts for accumulation of profits and extravagant and vulgar consumption.

It is suggested that the domestic market must be opened up for external economic, political and cultural inputs to usher in modernisation. The supposedly benevolent external force in the scheme of things is direct investment by transnational Corporations and international financial institutions. The structural adjustment of the Indian economy initiated in 1991 is so oriented that private business enterprise has to find maximum scope in speculative investment and extravagant consumption rather than the mass market in India. There has not been, therefore, steady and equitable economic growth and social development. The claim of the UPA government that the Indian economy will be back to high growth rate after a brief period of facing adverse impact of global recession, cannot be taken seriously. The fact is that trade-off between price inflation and growth is difficult to manage in the developing countries such as India.

The economic reform process actually needs to be redefined in the Indian context. For instance, any revival of public sector divestment will depend on how well its priority role is accepted in the growth process. Private investment will have to be regulated to be in step with pubic investment. The UPA government is bound to move away from the gradualist approach of the past to the potentially contentious areas of labour laws and capital account convertibility. Economic recovery can be sustained only by sound financial position of the government.

The budget for 2010-11 should have provided the lead by drawing up a time-table for fiscal consolidation to build sound infrastructure for economic development and social welfare. Managing the trade-off between short-term compulsions and long-term sustainability were challenges before the government. They have been missed in the budget presented by Pranab Mukherjee. According to the Finance Minister, additional stimulus measures have been decided after the assessment by government that the impact of the three stimulus packages has been positive. The cost of the stimulus packages has, however, been too heavy, and they have yielded gains only for big corporate business and imposed an intolerable burden on the poor in terms of inflation and escalating prices.

There is still considerable scope for banks to lower the cost of credit and lend more for agriculture and small industry. Monetary and fiscal policies will necessarily have to go hand in hand. The revenue and fiscal deficits estimated at over 6 per cent of the GDP must be brought down by direct taxation and pricing management. The consolidated fiscal deficit of the Centre and the States is much higher and should be brought down by serious resources mobilization, and not aggravated by cuts in direct taxes. The excess capacities in many sectors would help in containing inflationary pressures. There are no soft options before the UPA government. It will have to ensure revival of the economy with radical policy corrections and their efficient implementation.

It is unacceptable that income tax on high-income individuals should be cut and the loss of revenue on that account recovered by across-the-board increase in excise duties in the name of bringing down fiscal deficit. It is really scandalous that low-income categories of tax payers should be barred form the cuts in the tax liability and the top three categories enjoy this benefit to boost consumption, demand for sophisticated and high priced goods, specially of imported goods.

The budget presented by Pranab Mukherjee has indeed exposed the Aam Aadmi hoax perpetrated on the electorate by the Congress. It has also laid bare the real profile of its social support base — the incomes of big corporate business and their high-income managers. (IPA Service)