Ranjit Devraj:

Nine months after being voted into power on a wave of public anger against pro-rich polices, the Congress Party-led United Progressive Alliance (UPA) — backed by the communists — has proposed a budget that may actually give a human face to economic reforms.

The communist parties had only asked for an outlay of at least $12 billion to be spent on education, health care, mid-day meals in schools and farm development. But Finance Minister Palaniappan Chidambaram has proposed a social package worth $16 billion in his proposals made in Parliament on Monday. Prakash Karat, politburo member in the Communist Party of India -Marxist (CPI-M), which leads the Left Front, however, expressed apprehension that if tax revenue as estimated by Chidambaram is not fulfilled, the actual provisions for the long-neglected social sectors may suffer.

The communist parties, in pre-budget meetings with the finance minister and at public rallies had demanded that the government, to which it provides critical outside support, take steps to recover tax arrears from the well-off and also the vast amounts of money they owe public sector banks. Indeed the communist parties, which had joined hands with the ideologically dissimilar Congress party with the single purpose of defeating the right-wing Hindu fundamentalist Bharatiya Janata Party (BJP), have been giving fierce warnings that their support for the UPA coalition should not be taken for granted.

As a result the budget, which Chidambaram described as a ‘New Deal’, shows a 33 per cent hike in the allocation for rural development to $4.5 billion. An important, pro-active feature of the budget is the national food for work programme that started three months ago and which now has allocations worth $3 billion. The programme aims to alleviate poverty and pays the poor, for work done, partly in cash and food grains. The government plans to convert the programme into a full-fledged national rural employment guarantee scheme that has the potential of creating livelihoods for millions of poor people across India. This programme is also supported by a group of social activists who have for the first time enjoyed clout with the government.

Indeed the budget bowed most of all to what has become known as the ‘wish-list’ of Gandhi, who demanded major concessions in specific areas such as child nutrition and a $600 million package to build up road networks in the neglected north-eastern part of the country. While

economic reforms that were started almost 13 years ago have benefited the urban rich, two-thirds of India’s billion plus population living in poverty and in areas lacking decent infrastructure have been largely bypassed.

Chidambaram also took a stab at curbing India’s ‘parallel’ cash economy that is estimated to be as big as the formal one but works completely outside the budgetary system. He announced a nominal 0.1 per cent tax on all cash withdrawals from banks above 10,000 rupees. But this has drawn protests across the board.

Yashwant Sinha, who served as finance minister in the last government called the move ‘’silly if one takes note of the fact that that black money transactions rarely take place through banking channels’’. On the other hand Karat praised Chidambaram for not relying on the proceeds of disinvestment to fund social spending, as compared to what the BJP had done previously. But Karat and other left intellectuals like Prabhat Patnaik, who teaches economics at Jawaharlal Nehru University, are unhappy that the budget has been reluctant in taxing the rich. — IPS