show that it would be much less than 6%. This has led to the large-scale slowing down of the economy accompanied by the natural consequences of greater unemployment and lower levels of incomes. On top of this, the real earnings of the people continue to be significantly devalued because of the relentless rise in the prices of all commodities, particularly food items. It is only natural, under these conditions, people hope for some relief leading to better levels of livelihood.
Given the contraction of growth in all developed economies, last quarter, the International Monetary Fund (IMF) expects that these economies will grow just by 1.4% this year. Under these circumstances, international finance capital seeks to prise open our economy further for profit maximisation. This UPA 2 government is more than willing to bend over backwards to satisfy international finance capital and Indian big business. Already FDI in retail trade has been permitted despite widespread opposition. Banking reforms have been legislated which completely undo the gains of bank nationalisation and pave the way for foreign banks to take over private Indian banks. The FDI cap in the insurance sector is slated to be raised and FDI permitted to access India's huge pension fund. The General Anti-Avoidance Rules (Gaar), introduced in the last budget, have been deferred by two years. This deferment has come as a great relief to foreign and domestic investors coming through the Mauritius route to escape all taxes on profit that they make in our country. Exemption of the participatory note route, where individuals or companies need not divulge their identities, encourages large-scale money laundering and tax avoidance.
By making these announcements prior to the budget, the finance minister has signaled the strengthening of the neo-liberal reform trajectory which is bound to increase the hiatus between the two Indias even further. It will not be surprising to see the budget having more such proposals that appease international foreign capital.
The UPA government justifies such a reform course on the basis of a misleading and deceptive understanding that greater flow of foreign capital will increase the availability of funds for investment which, in turn, would lead to a higher growth rate and general prosperity of our people. Even if such funds were made available, the consequent investment can lead to a higher growth only on the condition that the produce of such investment is purchased by the people for consumption. In a situation where the purchasing power in the hands of the Indian people is declining, such hopes of growth are mere illusions. Thus, this strategy will only increase the profits of those who are already rich while imposing greater economic burdens on the vast mass of the people.
As a part of such a strategy, the government may well continue with the massive tax concessions that it has put in place during the past few years. The last year's budget papers show that such concessions amounted to a whopping R5.28 lakh crore. The unprecedently high fiscal deficit of 6.9% of the GDP translates into R5.22 lakh crore, ie, R6,000 crore less than the legitimate tax foregone by the government.
Now, in the name of fiscal discipline, in order to reduce this high level of deficit, the government has mercilessly hiked the prices of petroleum products and cut subsidies across the board. The prime minister mocked at those who oppose such blatant injustice of impoverishing the poor at the expense of enriching the rich by saying that "money does not grow on trees".
The worst sufferers of such a policy direction are the vast majority of our people in rural India. The agrarian distress continues and so does farmers' distress suicides. Studies show that 40% of the farmers are in heavy debt. The government has not been able to provide crop insurance to more than 10% of crops during the past 20 years. The cost of inputs is growing faster than what farmers get as price for their produce.
Ironically, today the government is sitting on a food stock of 665 lakh tonne or three times the buffer requirement at this time of the year. With the market prices of rice and wheat rising, imposing a severe burden on the people, the government refuses to release this excess stock at BPL prices to the states which would have had a sobering effect on the open market prices. Every month, storing a tonne of grain in the godowns costs the exchequer R200. The government is thus spending R15,960 crore for holding this stock. It is expected that another bumper wheat harvest is in the offing. This will further add to the carrying costs and, therefore, to the food subsidy without benefiting the people.
Clearly, with such huge food stocks, the government can achieve universal food security by providing 35 kg of foodgrains for every family (both BPL and APL) in the country at R2 per kg.
This budget, for the sake of the aam aadmi, must reverse the current policy trajectory of providing greater tax concessions for the rich and, instead, collect these legitimate taxes and use this revenue to substantially increase the levels of public investment to build our much-needed infrastructure and simultaneously provide large-scale fresh employment which, in turn, will lead to higher levels of domestic demand and, hence, a sustainable growth trajectory.
Sitaram Yechury is CPI(M) Politburo member and Rajya Sabha MP
The views expressed by the author are personal