Indian economy has withstood the torrential economic crisis of 2007-9. That is what the Government wants us to believe. Double dip growth cruve, we are at the fag end of the curve, and what remains is an inclined growth. It is raining cats and dogs, and our agricultural growth looks promising. In the end of the last fiscal, contrary to the Planning Commission’s expected growth of (-) 0.20% while, the agricultural growth posted (+) 0.20%. Quite often, planning commission’s growth figures are not only wrong but goes astray notwithstanding that they are only supposed to Plan, write the guidelines, question the achievable or nonachievables, after including it in the funding, unable to ear-mark actual funds due to funds volatility or shortage. Like sure sciences, economic planning is subject to rational or irrational human behaviour which can be contradictory to what could have been imagined. What are Plans? Mere estimates or one’s real assessment of growth, development in mathematical form.
The Union Finance Minister when he unveiled the budget, pictured a scenario of modest to good growth based on his premise that the world economy was growing, blooming, and zooming. However, in view of the carry over of the crisis-riddled economy, he had to impose certain taxes, increase certain surcharges, maintain the equilibrium in some areas, be considerate in some other areas, and be tight fisted in areas where lot of help has been given. The first step was when the prices of petroleum products were increased in March. The feeble voice of the Opposition, who became men of straw, did not have the vigour to shout. Hence kept quiet. Emboldened by this silence, again, on June 25, the Group of Minsiters (like the proverbial monkeys- see me not, hear me not, no speak) decided to increase the petroleum prices at the rate of Rs 3.50 per petrol, Rs 2.00 per diesel, Rs 3/- per kerosene and Rs 35 per LPG Cyclinder. Government’s argument was, though the oil companies showed profit in their balance sheets, it was factoring the subsidy given by government, which was causing a drain on the exchequer. Why not use it for some more productive exercises. And even after this added pricing, the inflation would enhance by less than 1%. Headline inflation was 10.16%, which government corrected as 11%, while food inflation touched 12.92% falling from 16%. No doubt, ONGC got a whopping Rs 5,400 Cr by way of bonanza because of this raise while Oil India’s additional income is expected to rise by Rs 800 Cr. In addition government got a share of central levies at the raised prices. The Railways would incur heavy losses while gas based power would have to incur an additional of Re 1/ unit (kWh).
The Fiscal deficit envisaged by the Finance Minister was 5.5% of GDP. He had budgeted an expenditure of Rs 11.09 lakh crore, while tax and non tax revenue was expected to yield Rs 6.82 lakh Cr. He had to resort to borrowing of Rs 3.81 lakh Crore. He was on a strong wicket, as his deficit pitched at 5.5%, while 2009-10 (6.8%) (revised 6.9%). The Finance Minister had proudly announced that the rolling targets for fiscal deficit was plugged at 4.8 %( 2011-12) & (2012-13). Finance Minister is in a tearing hurry to jump the fence.
The first casualty of the guillotine of the stimulus was the Technology Upgradation Fund of the Textiles Ministry which has been withheld temporarily. He may cut down DEPB, reduce DDB, and other fiscal stimulus offered to various segments of Exports which did exceptionally well in spite of several shortcomings.
Under the targeted Public Distribution System, only 57% of the 652.03 lakh BPL families (up from 596.23 lakh) are covered by it. The amount of subsidies for food, fertilizer and petroleum is expected to be Rs 64,929 Cr. Central Issue price (CPI) for Above Poverty Line will be 100% of the commercial FCI’s commercial cost, while 50% subsidy was provided for Below Poverty Line people. The difference between APL and BPL prices provide strong incentives for illegal diversions to the market. The Government had identified BPL families through select geographical targeting which they found unrealistic.
Dr Montek Singh Ahluwalia, Dy Chairman, Plg Commission when questioned the rationale, replied that the Government is not supposed to subsidies the oil companies. Somebody has got to pay for it (cheaper kerosene and LPG)- either through general revenues or from jacking up petrol prices. Subsidies need to be utilized for building schools, education, hospital, etc. He candidly said that people building roads should build roads, while Planning Commission members provided guidelines, econometrics, and implementation strategy. But the implementation was by some other body. He concurred that the Planning Commission had targeted 7000 Kms of National Highways @ 20 kms per day. But funds have to be found for it. He said regarding building of Delhi Airport, the role of the Commission selecting the Operator.
Regarding the point that under Road Transport, Planning Commission had targeted 7000 Kms of national highways without allocating funds would mean, that the non availability of planned allocation would halt the project. There cannot be discussions on it. Secondly, the Planning Commission deputy chief should be aware that around Rs 70,000 Cr were pumped to the Government account by the Spectrum auction. The expected and anticipated bringing down of stimulus for sectors which had done well last year, would yield another Rs 50,000 Cr. Already the announcement of ‘base rate’ would help the Banks to mobilize more money and more income, which would be pro rata given back to the Government as dividend. If Indian Oil Corporation has been patronized through subsidies and if they had made profits to the extent of Rs 10,220 Cr in 2009-10, how much of it was granted to government by way of dividend. In Rs 10,220 Cr, what was the percentage of subsidy that the Government shelled out? Dr B K Chaturvedi Committee appointed by the Plg Commission has clearly pointed out that subsidy for BPL families in 100% electrified villages found way to black market, and 26% of the total kerosene was used to adulterate diesel, what action did the Planning Commission or Government of India do?
Government had serious concern for Indian labour. If they had, why EPF interest is still retained at 8.5%. Why don't you make it 10%.
If the Plg Commission was so concerned for money, why is Indian Government importing Crude Palm oil at ‘nil’ Customs duties and edible palm oil at 7.5% which account for a loss of income to the tune of Rs 24,000 Cr. Further 3 lakh tones of Palmoil is distributed through PDS by subsidizing 1 litre of Palm oil by Rs 15/- which amounts to around Rs 4000 Cr. Planning Commission targets a growth rate, then mid-course changes it, and at the end of the year alters it, and what is achieved is a different percentage? How does Planning Commission Chairman endorse this? Accountability rests with the Commission. It cannot absolve/abdicate itself of the responsibility.
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