The Hindu Business Line : Clouds gathering for February 28

Whatever the UPA's second budget holds for the corporate sector, it offers little hope for the agricultural sector and the farmer. — G.R.N Somashekar.

WHAT will the Budget that the Finance Minister, Mr P. Chidambaram, presents on February 28 look like? Will he produce another "Dream Budget"? One only hopes that it would, at least, not be a "nightmare budget". If there are some silver linings to the 2005-06 Budget, it might be confined to the corporate sector. The representatives of the corporate sector have had extensive confabulations with the Finance Minister, who would certainly not like the soaring market to collapse.

The United Progressive Alliance Government's second Budget would necessarily be a coalition exercise with notable influence from all the three major components of the UPA. Whatever that means for the corporate sector, it offers little hope for agriculture and the farmer.

Successive Congress governments have followed policies of low-cost economy, which effectively means keeping the prices of foodgrains and raw materials depressed. This was supposed to be good for the consumer; though it was even better for the industrialists who could keep the wage rates low thanks to the low food prices and also make profits on account of the availability of cheap raw materials.

The second major influential element of the UPA is the Left, particularly the Communists. The Left's thinking on agriculture is based on the premise that agriculture is a hugely profitable business and that those who had large land holdings were essentially moneyed landlords who fleeced the masses of landless labourers. The Left's single-point programme has been confiscation of the land of the landlords and their redistribution among the small holders and the landless. Pending such revolution, they insist on two more things. First, massive facilities for education and health for the farm labour and their families; and second, a punitive income-tax on the so-called agricultural "haves". So insistent are some of the Left parties on the idea of an agricultural income-tax that they have apparently even threatened to quit the UPA if the Finance Minister does not accept it in this very Budget.

The third element of the UPA consisting of cow-belt communalists is unlikely to try and disturb the precarious balance between the land-owners and the peasant masses.

The agriculturists have already got two ominous signals. The Agriculture Minister, who also happens to be in charge of the Consumer Affairs, appears to have swung wholly in favour of the consumers, though they are by no means as badly placed as the farmers many of whom are on the threshold of committing suicide. The Minister has banned export of foodgrains, though India still has substantial stocks, on the plea that there have been reports of malnutrition and starvation from various parts of the country. Experience shows that banning of export or import of agricultural commodities has never improved the availability in the domestic market. On the contrary, free exports have always promoted a buoyant commodity market and higher production levels.

Farmers have never really opposed the imposition of income-tax. In fact, they would welcome the privilege of paying the income-tax provided they have the income to do so. If there is no income-tax on agriculture, it should not be forgotten that it suffers under a massive transaction tax in the form of negative subsidies. The real reason why no Finance Minister has so far thought of imposing an income-tax on agriculture is that the bureaucracy in the income-tax department opposes it. Used to getting income-tax returns at their doorsteps, the officialdom cannot countenance the idea of going to remote villages and work out the actual income farm-by-farm. In fact, the whole controversy is pointless.

An income-tax on agriculture can bring about a major change in the economy if the proceeds are given directly to the village panchayats instead of keeping the local bodies dependent on handouts from the Central and State governments. With a stroke of pen, one can do away with difference between agricultural and non-agricultural incomes and make every assessee pay tax on the basis of his taxable income.

The Left is trying to deepen the divide between the poor and the less poor in the countryside. It appears more interested in scoring points against its traditional enemy — the village well-to-do. No farmer would grudge the farm labour being provided life insurance, housing, medical facilities and free education. However, if one expects that in the closed economy and society of village it is possible to make such perks available to farm labour when the farmers' families themselves are nowhere near enjoying them, one is only playing politics.

The Left continues to emphasise land reforms. It argues that the land reform legislation has been entirely futile. This may partly be true in some States. But it cannot be denied that it has been amply effective in several major States.

In fact, the States that are relatively more advanced in agriculture are the ones where land reforms have succeeded and the rifts in village society have disappeared.

During Emergency, large tracts of land were handed over to the landless. Before that tenancy legislation saw massive shift of ownership of agricultural land.

The fact remains that the landless who received land have hardly shown any interest in cultivation, much less in improving productivity. Most Leftists are wary of the idea of paying any compensation to the landholders for the land taken away from them. Confiscating land without compensation would be politically impossible.

There is, however, a sensible and easy way of bringing about land reforms so that the land is transferred from the inefficient and the reluctant cultivators to the more efficient producers. If the government takes measures to develop a land market which enables quick selling and buying of land, it would not only bring about a better distribution of holdings but also boost the long-sagging investments in agriculture.

Faced with such difficult problems, the Finance Minister is more than likely to bypass them. He is certain to bypass all measures to reduce expenditure and improve the productivity of the working force. Tax restructuring is easier and gains a Finance Minister more brownie points and international accolades.

A Finance Minister who introduces VAT is more likely to go into history books than the one who slashes dramatically the governmental expenditure.

(The author, Founder, Shetkari Sanghatana, is a Rajya Sabha MP. He can be contacted at sharadj@pn2.vsnl.net.in)

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Justified fears

For a farm-friendly Budget

Clouds gathering for February 28

Budget making — an unenviable task

Making government's accounts as intelligible as a merchant's books

Vicious attack

TSI: `A good measure of how blood flows in an economy' — Mr Kajal Lahiri, Professor of Economics, State University of New York

Rail Budget: Populism or pragmatism?

Budget expectations

EPF needs reform