Union Budget 2021-22 Plutocracy trumps democracy

Writen:- By Partha Sarkar

The mainstream press is going gaga over a budget which takes the pro-corporate reforms ahead even in times of distress without regard to popular demands or needs. Handing over of precious assets built over the years with public money to the corporate and financial interests without any hesitation is perceived to be a “bold” move and worthy of congratulations by the media. Actually it only reveals that our democracy has been emptied of its content and Dalal Street (our Wall Street) need not fear the mainstreet or the Delhi borders. Even the ongoing months-long mega protests by farmers against corporate interests have not held back the government from giving more to the kleptocracy. The budget brazenly dismissed all advice from many mainstream economists pleading for cash transfers to the distressed masses.This when the situation was so bad that the CMIE at one time called the job losses a “bloodbath”. The government has shown its mighty political will to the oligarchs of India that mass distress will not deter it from undertaking hard measures resulting in wealth transfers to the filthy rich. There was talk of a wealth tax in the wake of the covid crisis and a K-shaped recovery which showed heightened wealth inequality but that did not materialise in the budget. Neither was a covid cess imposed upon the higher income bracket. This when India has one of the lowest corporate tax rates in the world.  Instead a cess was announced on petrol and diesel in the name of agricultural infrastructure and development increasing the indirect tax burden though it would not impact directly as of now.  With no new direct taxes and privatisation moves Dalal Street soared with the NIFTY index on shares gaining as much as 647 points in one day. After all speculative excesses of the financial interests are so pandered to that stock markets keep levitating even in the wake of a weak economy – ‘irrational exuberance’ to borrow Alan Greenspan’s phrase.

Privatisation of almost all sectors of the economy, even some of the ‘strategic’ sectors like atomic energy, is on the anvil. The financial sector gets a huge slice of the booty with the privatisation of one general insurance company and two public sector banks. The insurance sector has been thrown open with FDI limit being increased to 74 percent from 49 percent. It is being hailed as a huge step forward in encouraging the sector grow with new products and financial innovation taking front stage. May we remind what happened to the financial monopolies of US in 2008? Where did financial innovation lead to but risk and fraud with the unravelling of the sub-prime crisis. May we point out that one of the biggest insurance companies of the world the American insurance giant, AIG had to be bailed out by the Federal Reserve Bank and it had to assume control! AIG’s failure was attributed to huge unhedged insurance. We want the same experience in India? We want our poor masses to be deprived of insurance claims or do we want backdoor nationalisation of losses brought about by such practices. The LIC not only caters to the poor but its huge kitty is used to finance infrastructure projects too. We have experience of the fraud perpetrated by private infrastructure companies like IILFS and its many subsidiaries something which still is adverely impacting infrastructure investment in India. But ideological commitment to the neo-liberal policies of our leaders and economic advisors make it appear that great benefits would accrue with such privatisation. May we remind our readers how public sector development financing institutions, ICICI and IDBI, were turned into private banks ? The wheel seems to have come full circle with the budget announcing the setting up of a development financial institution backed by the government. It will of course work on the principle of holding liabilities while profits accrue to the private sector. Corporate socialism of private profits and public losses! So it is with the NPAs of the banks and a bad bank has been proposed and a ‘Special Purpose Vehicle’ would be set up for it which is again innovating accounting only as it postpones the day of reckoning. The bad bank would only make the bank balance sheets look better but whether it would lead to greater lending by the banks is doubtful. As we have seen with the many Covid packages, inspite of liquidity infusion, banks were reluctant to grant loans in view of past experience and so were the many SMEs wary of taking fresh loans.

Asset monetization is another move which has been hailed by the mainstream media and neo-liberal economists. They hold that fallow assets would be converted into revenue streams with it and unlock resources for the public sector like railways etc. Asset monetization is another name of handing over precious resources of the public sector to the private sector through PPP projects and so on. It is common knowledge that how the private players give overestimates of revenue flow to corner projects and finally when the day of reckoning comes, when there is a shortfall in revenue, the government has to bail them out and turn these assets into public property once again. The experience of the ‘Airport line’ of the DMRC is well known from which Reliance left after incurring losses. So also with the toll plazas, the heavy “losses” of these toll plazas are a headache with the government following the covid crisis. This is PPP mode for you, this is the clever conversion of assets into revenue streams which asset monetization seeks to do. Even the selling of family silver by the government to shore up its finances has not been much of a success.Whereas in previous budgets they were introduced as window dressing as one PSU bought shares of another, in 2020-21 of the budgeted Rs. 1,75,000 crores from such moves only Rs. 32,000 crores has been received. This is the measure of failure of a government which is bent on selling everything from airlines, airports to railways.

What of the ‘welfare’ sectors which would directly impact the masses? We had a deep recession with GDP dipping by 24 percent in the first quarter of the current financial year following the covid crisis. Let us remind ourselves this came on top of an ongoing growth ‘slowdown’ and historically high unemployment rates. Consider the situation of the job losses and small business losses and the mass distress that it has brought. But the government seemed to be insensitive to all this and in its self-congratulatory mode has not only pandered to the corporates but made cuts in allocation to vital sectors. The migrant crisis showed the deep malaise in our economy and the poverty of the masses. To cope with massive unemployment following the lockdown crisis MNREGA allocations were increased to the tune of Rs. 1,11,500 crores in 2020-21 but it has been cut by a massive 34 percent to Rs. 73,000 crores in this budget! This when the economy is still in negative territory as far as growth is concerned and even growth would not lead to automatic restoration of jobs to the desired extent. Covid warriors like ASHA workers and others who bore a major responsibility in mitigating the crisis have not been compensated by increases in their entitlements. In fact the lack of entitlements in the budget has been widely praised as being bold and not populist! This is the abysmal level of callousness to which our economists and mainstream media have fallen! Education has been a big casualty in covid times with primary education being hit badly but allocation have been cut from Rs.99, 311 crores in 2020-21 to Rs.93,224 crores in this budget. In a year of farmers protests and distress’ allocation for PM Kisan has dropped from Rs.75,000 crores to Rs. 65,000 crores. That would mean reduced income support for farmers. Only the MUDRA scheme for micro businesses has seen an increase. Even MUDRA is slated to burden the balance sheet of banks with non-performing assets. This is how our economy is working, small business viability is at such a low level. The covid crisis revealed the state of our workers and informal workers in particular who had no savings to tide over even the period of the lockdown. The covid crisis has increased absolute poverty levels but the budget has no proposal to combat it except “growth” and the discredited “trickle down effect” of growth.

The budget has highlighted the massive increase in the health budget, an increase of 137 percent! This is again misleading as the main allocation on health and family welfare has increased by only 9.62 percent only. Further government health schemes are insurance based and such schemes are costly with poor outcomes. As far as epidemic control is concerned it is of little help. Public health schemes and public health infrastructure ought to be given a boost but experts hold that the allocation is measly as it is spread over six years. The covid crisis revealed the abysmal health infrastructure in our country and showed that the private sector is not to be trusted in such situations at all. Yet the realisation does not seem to have dawned upon the government wedded as it is to neo-liberal economics of privatisation and liberalisation. It is a budget which has revealed the class divide as never before with the government abdicating its responsibility to the people, the toiling masses and has shown the temerity to bypass all popular concerns in favour of the corporates. Yes, plutocracy has trumped democracy.

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