In the name of the Aam Aadmi, this budget will actually benefit the Khas Aadmi. There was widespread expectations that the budget would take some steps in controlling the current runaway inflation in the prices of all essential commodities, particularly those of food articles. The measures announced in the budget, however, will result in the complete opposite. The decision to impose a Re 1 central excise duty on petrol and diesel, to re-impose a 5 per cent customs duty on the import of crude oil, and to slap a 7.5 per cent duty on petrol and diesel will substantially hike fuel prices. Additionally, the reduction in food subsidy by over Rs 400 crore and fertiliser subsidy by a massive Rs 3,000 crore will contribute further to the pressure on prices. Put together, these measures will have a cascading effect on the inflationary situation and impose further burdens on the people.
The people were looking for some relief from the excessive burden imposed by price rise. Much of this inflation is due to speculative trading that is taking place in the commodity exchanges. The value of monthly trading is reportedly to the tune of some lakhs of crores. A ban on futures/forward trading in all essential commodities would, to a large extent, have contained speculation that is pushing up the prices. Last year, major trading corporates have reported massive profits ranging from 150 to 300 per cent. The finance minister is fond of quoting Kautilya and his <Arthashasra>. He, however has overlooked Kautilya's prescription to heavily tax 'gambling houses' or speculation.
The Economic Survey states that as of January 10, 2010, as against the buffer norm of 200 lakh tons of foodgrains, the government had in its godowns 474.45 tons of rice and wheat. Instead of holding such a huge surplus above the norm and incurring high-carrying costs, the government should have released the excess amount to the states for distribution through the public distribution system (PDS). Instead, the UPA II government, mysteriously reduced the release of foodgrains last year to states for the 'Above Poverty Line' population by a massive 17 lakh tonnes. This release of this excessive buffer stocks now would have considerably eased the pressure on prices.
The tax proposals contained in the budget have provided a relief to sections of tax payers with the government earning Rs 26,000 crore less from direct taxes. This, however, is more made up through an additional revenue of Rs 43,500 crore through indirect taxes and Rs 3,000 crore through service taxes. Now, indirect taxes are inevitably passed on to the consumer in the form of higher prices. This will add to higher levels of inflation in the days to come.
So far from meeting the aspirations of the people on the price front, the finance minister and the UPA II government have imposed greater burdens on them.
Sitaram Yechury is CPI(M) Politburo member and Rajya Sabha MP