The Hindu Business Line : Forward movement in social spending

BUDGET 2005-06 was the first major test for the Finance Minister, Mr P. Chidambaram, to demonstrate his commitment to the National Common Minimum Programme. Though falling short of our expectations in terms of the quantum, we are happy that the Finance Minister has at least initiated a forward movement in funding the education and health sectors.

However, the same cannot be said of the funding of the employment generation programme. The allocation falls short by almost 50 per cent.

Similarly, the proposals related to agriculture are high on decibel but low on substance. With the continuing decline in per capita food availability the emphasis on food security is conspicuous by its absence.The Left parties had suggested a 1.5 per cent increase in the tax-GDP ratio. The Budget falls short of that.

Given that there has been a revenue shortfall of around Rs 11,000 crore in 2004-05, the optimistic tax mobilisation targets of the Finance Minister may turn out to be overestimates. Moreover, given the huge enhancement in the Defence Budget last year, the further enhancement of about Rs 6,000 crore seems to be on the high side. The other noteworthy aspect of the tax mobilisation effort is the Finance Minister's inability to touch the `hot' money flows by the FIIs, which is exacerbating the volatility of the capital market. Even while the Finance Minister has suggested some token anti-tax evasion measures, he has failed to extend the same principle to forex outflows.

The proposals on financial sector reforms, particularly on pension and banking reforms, are sources of concern. Whether allowing control of foreign entities over such huge resources involved in these sectors is a wise decision, is subject to question.

Finally, the Finance Minister was magnanimity personified when he announced a provision of Rs 1,200 crore for the USO Levy Fund in telecom.

But what he concealed is that he is sitting on Rs 5,000 crore on this account, which needed to be transferred long ago in keeping with his statutory obligations.

(The author is CPI(M) leader and Rajya Sabha member.)

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