Saturday, June 4, 2016

Tangible Benefits to Rich & Intangible Benefits to the Rural Poor : A Comment on 2016-17 Union Budget

Veeraiah Konduri 

THE second full budget and third one by finance minister Arun Jaitley has been applauded for “revival of rural India”. In his budget speech, Jaitley said the buoyancy in tax income, an indicator of the market’s confidence in the Modi government, has helped them spend more than the earmarked amount while sticking to the fiscal discipline. The government blatantly concealed the fact that the buoyancy in tax income is only in terms of direct taxes which does not need any confidence of the market in the government of the day. Thus, the richest of the country retained their tangible benefits intact whereas rural India is lured with intangible benefits.
Real indicators of such confidence -- trends in corporate tax earnings and export earnings -- fell flat. Despite the fact that fiscal discipline and welfare spending are two swords that cannot fit-in together, it is only with the mastery of fudging the facts, true to their nature, they want us to believe so. The budget for 2016-17 got more favourable attention from media than the last budget of UPA-I which waived off farmers’ loan, the second such instance in independent India. As is evident, this is the first ever government that does not hesitate to tell a blatant lie on the floor of Parliament. One such lie is about allocation to rural job scheme MNREGA. When confronted by a vocal Shashi Tharoor, Jaitley stood up to defend his lie and said that this is the highest ever amount earmarked for MNREGA as, in the last decade, amounts that were allocated were not spent fully. On several occasions, BJP took credit, while referring to the revised estimates for the year 2015-16, that the spending surpassed the allotment, thereby concealing the fact that last year’s allotments were at dead storage level.
The key announcement that caught the eyeballs of analysts and media at large is the doubling farmers’ income in five years. This led the analysts to jump immediately to the conclusion that it is aimed at increasing non-farm opportunities rather than reviving the agricultural sector such as making cultivation sustainable. The latest NSSO findings define farmers as those who earn a monthly income of Rs 3,000 (which is far below the income limit that was set by some state governments to issue certificate that makes a student eligible for scholarship). The Economic Survey found the falling rate of productivity as the key reason for falling income of farmers. Though it looks correct dissection, it failed to read through the reasons for falling rate of productivity in agriculture. Unless the stagnation in irrigation infrastructure is addressed, it is impossible to increase the productivity rate and double the farmers’ income. After admitting the fact that 56 per cent of cultivable land is still dependant on rain, the budget announced a target of extending the irrigation facilities to another 28.5 lakh hectares. By keeping 140 lakh hectares out of irrigation facilities, how it is possible to double farmers’ income in five years, is only known to the government. Another scheme, Paramparagat Krishi Vikas Yojana (PKVY), announced in the name of encouraging traditional organic farming, does not fit in well with the fact that the farmers are constantly losing their Paramparagt rights over seed, soil and other indigenous resources of cultivation. The Indian farmers have become an unbridled market for multinational seed and fertiliser companies. Without addressing this issue, mere institution of PKVY would not be of much help to revive viable farming. There was hype about the allocation to animal husbandry which in fact spent less than Rs 113.5 crore in budget allocations and the so-called rise shown in 2016-17 is only Rs 295.35 crore. The allocation for research and extension, which is key to doubling farmers’ income in next five years, could not see any increase from the levels of 2015-16 budget estimates.
When we look at the budget from the point of view of welfare spending, the figures show that there is an overall increase of 6 per cent, due to the increased expenditure above the budget allocations for MNREGA and ICDS as well as some other welfare provisions. What the government left unsaid is that all allotments are contingent upon the global economic conditions. This is what the finance minister implied when he said in his initial section of the address that due to buoyancy in government earnings they could upwardly revise the allocations for several departments and ministries in their revised estimates. Another important aspect remains in the dark. That is the social welfare spending that has to come from the state government’s share. On the recommendations of the Fourteenth Finance Commission (FFC), the enhanced transfer of central funds supposed to be earmarked for welfare spending. Now the state governments are mandated to spend their 40 per cent share before starting to draw the central share. Thus, FFC not only transferred the funds but also put the burden of implementation of centrally-sponsored schemes on the shoulders of state governments. The so-called intended additional income that the state governments are supposed to have is nullified leaving little scope for improved spending on welfare schemes on account of FFC recommendations. Moreover with this current pattern, the state governments have to spend their matching amount of 40 per cent to avail the benefit of remaining 60 per cent from the central government. Thus, the states are forced to advance their expenditure which necessarily involves the drain from states’ resources. Only advantage of these recommendations is that with the amount, the state governments can coin their own schemes and can get credit as if they are spending for such schemes out of their pockets.
With regard to the over-all impact of the welfare expenditure, the budget confirms both the lack of vision as well as unwillingness on the part of the government. The government refused to gain from the field studies that have proved the limited role of JAM (Jandhan Yojana-Aadhar-Mobile trinity which was espoused during the last year budget) in universalising welfare spending impact. In fact, the latest study from Karnataka is an indictment of the government and unabashed supporters of this unrealisable trinity. Moreover, the budget announced a scheme for sanctioning free LPG connections at a time when the supply of LPG cylinders are being reduced and contingent upon working of JAM.
The National Rural Health Mission, which is conceived to focus on the rural health infrastructure, is clubbed with National Health Mission, thereby opening up possibilities of discrimination towards rural India. This also opens up possibilities for losing the gains, however limited, more than what the rural India achieved under the aegis of National Rural Health Mission at a time when rural poor are plagued with under-nutrition along side communicable deceases such as malaria and tuberculosis. The budget aimed at expanding the footprints of insurance tied up health services delivery rather than providing the services by the state, thus indicating a clear shift from state-led services to market-led health service delivery. Thus from the goal of achieving universal and free access to health services, there is a boost for the market facilitated health care system in 2016-17 budget. This needs to be seen in the background of failure of private health insurance firms, which are cleverly tied up with the banking services in rural India. With the presence of government-funded universal access to health care in rural India, with all its limitations, played a critical role in restricting the entry of private firms into health insurance business. With this budget, government wants to withdraw that cover which consequentially results in improving the opportunities for the market oriented health care delivery system. This implies crippling of state-backed health infrastructure which is already facing severe crunch that too when India is lagging behind in six out of ten health targets under Millennium Development Goals.
Let us look at another important foundation of social welfare expenditure, i.e. food subsidy, particularly allocations for the implementation of food security act. The Parliamentary Standing Committee on Consumer Affairs has already warned the government about the implications of meagre allocations for implementation of food security act. It seems, as in case of many other such warnings, it has not reached the ears of North Block. Though the allocations for department of consumer affairs increased four-fold from Rs 321.13 crore in revised estimates of 2015-16 to Rs 1257.11 crore in 2016-17, the key component of food security, allocations for food and public distribution witnessed considerable reduction of allocations. The revised allocations for 2015-16 budget stood at Rs 1,62,249.41 crore where as the budget estimates for 2016-17 are downwardly revised to Rs 1,52,704.11 crore. Almost down by Rs 10,000 crore. More than half of the states have not started the implementation of food security act which was passed by Parliament three years ago. It shows scant regard for enactments. There is no word about this lag in the budget speech. The so-called price stabilisation fund could not attract the attention of the government even at a time when the price of dal which was around Rs 40-60 per kg jumped to Rs 200 and stabilised around Rs 175 in very short span of time. Moreover, the allocations for pulses import are a clear signal to the market to ransack the consumers.
Last but not the least comes rural development. Rural development has multiple facets that are linked directly or indirectly with the lives of the rural poor. Drinking water and sanitation is one such key aspect of rural development. Though the budgetary allocations present a rosy picture of increase from Rs 10,906.53 crore in revised estimates to Rs 14,009.70 crore, the actual central component for these schemes saw meagre increases. The amount that is to be transferred to the states as part of 14th Finance Commission recommendations has been added to the totals and shown as an increase of about 100 per cent. The water supply and sanitation budget is increased from Rs 4,265 crore in revised estimates to Rs 5,000 crore. Rest of the allocations goes to Swachh Bharat Abhiyan. This clearly indicates the misplaced priorities of the government in a year which is experiencing 13 per cent overall deficit rainfall according to the finance minister himself. This kind of misplaced priority is going to put further stress on rural drinking water supply. Thus the budget, which is hyped as one of the best budget in terms of rural India’s needs, fails to meet their needs leaving them high and dry.

Model Land Leasing Act: Turning the Clock Backwards

Veeraiah Konduri
WHEN the BJP government announced, in its latest budget, that it is determined to double farmers’ income in next seven years, the nation looked with awe. Critiques pondered over how that could happen in such a short time. The analysts scanned the budget documents to find out the allocations for agrarian infrastructure. But the government silently worked its way to create a new agrarian structure that coerces the small and marginal farmers to part with their precious piece of land and become daily wage labourers in the by-lanes of urban landscape. This is what the expert committee appointed by the NITI Ayog, headed by former chairman of the Commission for Agricultural Costs and Prices T Haque, recommended in its report. The expert committee also  went a step ahead  not only by designing a Model Act of land leasing but also asking the state governments to amend their tenancy laws in tune with the proposed Model Act.  This will have serious implications to the protections the tenants won over a long period of struggles. The best model of such protection is before us in West Bengal which is under constant attack since the Trinmool Congress came to power five years ago. If this Model Act is adopted by Parliament, it is going to deal a big blow to the small and marginal tenants.
The timing of the report is interesting. The month of April is 100th anniversary of the famous Champaran Satyagrah which brought farmers and their issues to the center stage of the freedom movement after a brief period of lull. Champaran Satyagrah was for liberating the farmers from a kind of corporate farming prevalent then which forced the farmers to cultivate indigo. Similarly, after 100 years of struggle to liberate the farming community from the clutches of customised farming, the government is now determined to turn the clock of agrarian reforms to pre-independence era. Neither the report nor the recommendations are substantiated by the rigor that usually underlies a government policy. The report is a barometer to gauge the attitude of the government towards an issue that is a question of life and death for about two-thirds of the country’s population.
Constant efforts were made to create an understanding that the agrarian crisis is a crisis of productivity which is caused by the stringent tenancy laws. Turning the heat on existing tenancy laws is the running theme from mid-term review of 10th Five Year Plan to 12th Five Year Plan as well as in the Draft National Land Reforms Policy, 2013. The expert committee report is also harping on the same theme. All these reports failed to deal with the issue in detail. The experts committee provided a bird’s eye view of what are the features of tenancy laws of various states and then moved on to conclude that these features are forcing the landowners to keep their cultivable land fallow. This could be gathered neither from the Situation Assessment Survey reports of National Sample Survey nor from the Agricultural Census that tells us the size of land that was kept fallow due to various tenancy laws in different states. This kind of faking policies, without any rational is only to further the reforms and deepen them that will have serious repercussions on the nation at large, has become the hall mark of the central government.
The report relegated the historical context in which the tenancy laws came into existence. The land reforms package in India in the immediate years of independence is fueled by the ideals of equity and social justice which are the cornerstones of our Constitution. The salient features of land reforms programme in India consists of abolition of intermediaries, tenancy regulation, land ceiling laws and land consolidation. The first of them, abolition of intermediaries was done in the immediate aftermath of independence as it proved to be an impediment in the agricultural production. The tenancy reforms are basically aimed at protecting the tenants from eviction and rent exploitation. These aims led the states to enact tenancy laws according to their specific conditions and to whims of ruling classes. For example, the Hyderabad Tenancy and Agricultural Landholdings Act, 1950 was an immediate outcome of the heroic Telangana Armed Struggle. This act conferred rights to six lakh households over 75 lakh acres of land. Similarly, the Andhra Pradesh (Andhra Area) Tenancy Act, 1956 was aimed at protecting the tenants from eviction as well as regulating the rents. Similar provisions are evident in the tenancy laws adopted by several state governments. Certain states like those in the northeast altogether prohibited land lease. Similarly the tenancy reforms of West Bengal is the singular story of success that established linkage between the tenancy reforms and agricultural productivity and the same was revealed in agrarian research by many. Instead of considering the rich data available about the efficacy of properly worked out tenancy laws in enhancing productivity and protecting the stakeholders in lease agreement, the expert committee decided to be influenced by selective use of data which suits its predetermined conclusions.
While framing the Constitution, the question of land and land relations was left to the legislative and administrative jurisdiction of state governments. The state governments, whose class composition during the first three decades of independence was dominated by landlord class, the key collaborator of bourgeois class, made its fullest attempts to scuttle the implementation of land reforms across the country. The bourgeois class extended its tacit support to such subversions. The then Plannning Commission, in its report, realised this hiatus and noted that “lack of political will is amply demonstrated by the large gaps between policy and legislation and legislation and its implementation. In no sphere of public activity in our country since independence has the hiatus between perception and practice between policy pronouncements and actual execution been as great as in the domain of land reforms.” Without considering this fact, we are not going to do justice in dealing with this issue and the expert committee neither cared for considering this fact nor even bothered to inform the nation about the size of acreage which was kept fallow just because of these tenancy laws and how much land is kept fallow due to lack of irrigation facilities or viability of farming.
Disregarding these historical political factors that exacerbated the agrarian crisis is not going to resolve the root causes of this crisis but deepens them. The governments moved away from the idea of land reforms as they were visualised during the freedom movement and this hiatus is more evident since the country embarked upon the economic reforms programme. The key to reforms package is to leave every thing to the market and government playing only a facilitating role. Despite a quarter century of reforms programme, that is yet to be translated into reality in case of agrarian policies of the country. That is why successive governments are keen to prepare the ground for eventual structural break and that is being used by the BJP government to meet its goals of deepening the reforms. Once the market is allowed to play on its own rules on the question of land, the key source of direct and indirect living for two-thirds of the countrymen, it is going to create havoc in their lives. Small and marginal tenants, who are already on the verge of extinction, are going to completely disappear from the scene. Yes, it is a fact that the small and marginal farmers are not able to gain security or protection or advantage from the government’s various schemes and packages. Taking this as alibi and in the name of protecting the tenants’ rights, the central government is silently laying foundations for contract farming on national level in whose case, creating a safety net for ownership of absentee land owners/ landlords is the key. Thus, the whole discussion of the expert group focused mainly on this aspect.
The essence of reforms is to keep every thing to the discretionary authority of market from the authority of government that was elected by the people. The earlier tenancy reforms are government mediated whereas the landmark recommendation urges for market mediation in terms of land lease. That is the crux of its argument when it recommends that the land rent is to be determined by parties to the lease agreement, that is land owner and lessee mutually and the state would not have any role in this. This is nothing but transforming the formally or informally regulated land lease market into an unregulated one where the weaker partner is bound to suffer. Unlike the assumption that the ground rent rates are increasing because of the landless are competing for tenancy, recent studies reveals that the large tracts of land is being cultivated  by the upper layers of agrarian classes. What came out from a personal interaction during my latest visit to my village is to be noted here. A handful of farmers from a tiny village in Guntur district are cultivating more than 2,000 acres in Gadchiroli district. A similar experience from a far flung village in T Narsapur of West Godavari also vindicates the fact of increased reverse tenancy where a landlord who officially owns 80 acres as per revenue record, cultivates 100 acres of land as tenant.
The report says, “The objective of post-independence land reform for creating an agrarian economy with high levels of efficiency and equity has been achieved only partially. More particularly, restrictive tenancy laws enacted in the 1960s and 1970s seem to have affected agricultural growth, equity and investment in rural non-farm development adversely.” This is clear indication of assumption based conclusion rather than fact based conclusion. The report also categorically backs the absentee landownership which was the crux of land reforms adopted during the post independence days. Instead of ensuring the constitutional mandate under Article 39 which says (b) that the ownership and control of the material  resources of the community are so distributed as best to subserve the common good; (c) that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment. The proposed recommendations and the Model Act are going to ensure not only enormous concentration of land in the hands of a few but also concentration of tenancy in the hands of a few. This is one of the findings that came out in a recent study by Sundarayya Vignana Kendram. Among the tenant land, more than 50 per cent is being cultivated by landlords and rich farmers in coastal districts of Andhra Pradesh. The spurt in reverse tenancy particularly became a noted feature since 1990s. The recommendations of the expert committee also decided to give boost to this trend, which is initially promoted by various studies sponsored by the World Bank Group in India. As the report advises the small and marginal farmers to let out their small pieces of land under tenancy and opt for wage employment where as similar advice is offered to the large land owners to let their uncultivated land out on tenancy and opt for non-agricultural entrepreneurships. This is what the report recommends when it terms that the model leasing act will promote occupational mobility and reduces the share of population dependent upon cultivation and other agricultural economic activities back in the villages. This is how the BJP government wants to double farmers’ income by reducing the population dependent on agricultural economy by a half! (END)

Thursday, March 3, 2016

Globalisation and Social Exclusion : Experience from India

Globalisation and Social Exclusion : Experience from India
Veeraiah Konduri
The contrasting emergence of two Indias, quite opposite to each other, is clearly evident ever than before. Though the process of inequality accelerated along with the implementation of neoliberal economic reforms since way back in 1991, it started establishing itself its cruel face during the last few years. A series of reports released by international organizations including Forbes, Global Wealth Data Book captured this contrasting images of India. The share of  richest 1 % increased from 39 % to 49 % of total wealth produced and share of top 10 % increased from 66% to 74 % during this period. That means only 10 % of population commands 74 % of nation’s wealth and remaining 90 % of population distributes left over 36% of nations wealth, which shows magnitude of income inequalities. The world richest person Bill Gates and his family needs 218 years to spend all the wealth accumulated by him.
According to Oxfom, there are 153000 high net worth individuals in India in 2013 whose number is estimated to have gone up in 2014. A conservative estimation of world poor, on per capita income basis, is estimated to be 160 crores and out of that 44 crores are in India only. Thus, under the reforms era, India became home for about 40 % of world poor. Global wealth inequalities reached such a phenomenal proportion that a mere 1.5  % of tax imposed on the wealth owned by the world richest would yield $ 74 billion income for the governments, as estimated from Forbes data as on August 2014. This much of income would have helped UNESCO to bridge the education gap in the world poor countries, whose budget is falling short by an estimated $26 billion. Similarly World Health Organisation estimated that the world health budget is short by $37 billion. If the amount raised by imposing mere 1.5% of tax on the world richest is spent in income guarantee schemes for the poor, it is estimated that an average, 25 million families can be saved from poverty trap annually. This inequality is the result of finance capital induced globalization and the deepening intensity of globalization would result in much more deepening inequalities.
In sum, the reasons for such inequalities unseen in history  lies in the biased development model that is under implementation in the world. The policies of globalization favored market over the governments, capital over the labour, technology over human skills, skilled over unskilled, cities over villages, industries over agriculture, speculation over manufacturing. According to the  Asian Development Bank findings, the share of labour income in the net wealth produced declined from 36.5 % in 1993 to 21.8 % in 2012. The factors and process’ accelerating the over all inequality varies from country to country. In each country, these factors will be shaped according to their own political economy settings. Let us see how this process of inequality is being manufactured in India of late. Before that a brief presentation about the levels of inequalities in India
At the time of beginning of reforms in 1991, there are only two dollar billionaires in India and they owned only $ 3.2 billion net worth of assets. After two decades of economic reforms, their number increased to 46 and their combined net worth also rose to $ 176 billions. 85 people earning on an average 668 million a day where as 74 % percent of population that amounts to more than 100 crores having a person who earns Rs. 5000 a month. Net worth of billionaires in India increased by 15 times which is sufficient to eliminate poverty from India twice – that means about 70 crores of people can escape the poverty trap, if this inequality is contained. This is not an analysis  by a Left intellectual or a Communist Leader. The head of International Monetary Fund (IMF) said this while addressing a gathering during her latest visit to Delhi. The successive governments in India are following the policy footsteps of the same organization. Starting from Monteksingh Ahluwalia to Arvind Pangaria, who is heading the newly created Niti Ayog to Raghuram Rajan, Reserve Bank of India Governor, all did their apprenticeship by serving IMF in various capacities. They are the people who crafted the economic policy which deepened globalization policies in India as well as accelerated the inequality. Results of these policies crafted under the guidance of neoliberal think tanks are here to see.
At the time of economic reforms, the percentage of poor, who could not earn daily income of $ 1.25 in India hovered around 40% mark which jumped to 75 %. This phenomena is once again confirmed by the findings of Socio Economic and Caste Census released recently. Even according to the 70th round of National Sample Survey Organisation confirmed that for about 41.2 % of rural population, principle source of income is wage labour where as 57.8 % are rural agricultural households, whose incomes are less than Rs. 5000 per month. The SECC survey placed this figure at 74%. Not only that. The percentage of growth of per capita income slowed down from 25.75 % in 2013-14 to 21.61 % 2014-15, as stated on record by minister for statistics and program implementation on July 22nd 2015 in Parliament. This reply is based on the revised Central Statistical Organisation’s data, whose authenticity is in doubt. Even at this scaled up estimates, per capita daily income could not make out to be half of $ 1.25 norm. If we go by the unrevised estimates, it would be more verse. Thus the accelerating economic reforms and further market integration would result in increase of widespread inequalities.
Let us consider below, some more details. In India, over the last twenty years, the cost of production decreased by 6 % and net profit of companies increased by same level. That means, the income of employees decreased and income of corporate increased. In volume wise, this decreased cost of production resulted in saving of Rs. 2.06 lakh crore rupees. And interestingly, during the same period, the profit of selected companies have gone up by Rs. 1.50 lakh crores. That means, what ever the labours loss is the gain for capital during this period. This is one factor that perpetrates the economic inequality in the country. More over, it is only the collateral benefit of new economic policies for Indian corporate and they are in addition to direct benefit handed out to these very corporates. These direct benefits in the name of tax foregone, became an effective instrument of wealth transfer from crores of poor people to handful of corporate companies. Let us try to understand how this is happening and how this is deepening the growing inequalities from the data available in the budget documents themselves.
The government of India granted several benefits that helped the Indian companies establish their hegemony not only over the domestic market but also having their hold in much wider world market. Similarly to support corporate sector in the name of withstanding the ongoing global capitalist crisis, government of India designed an intelligent policy tool, that is its willingness to forego the tax income otherwise which should have accrued to the government. Over the last eight years from 2007-08 to 2014-15, a total of 39, 47,731 crores of tax concessions were showered on the richest individuals and firms in India. In the table given in this bulletin, composition of subsidies and tax concessions and their percentage in GDP clearly establishes the unequal distribution of wealth and benefits by the government itself. During the same period a total of 14,43,943 crores were spent on account of various subsidies. The amount spent on subsidies is less than half of what the government stashed in the accounts of corporate in the name of tax foregone. Similarly the table also establishes the unequal distribution in terms of percentage to GDP as well. The percentage of total major subsidies also stand one third of what it is given to the rich and corporates. All these subsidies are considered to be part of non plan expenditure. The share of major subsidies decreased by 1.6 percentage in GDP during this period.
As the government and economists are passionate to explain the policy implications in terms of per capita as proof of their success. This is the attempt through which the neoliberal intellectuals are garnering the support from middle class and other vocal sections to globalization.  We shall also try analyze per capita implications of major subsidies as well as the tax concessions by looking at the beneficiary base. According to official estimates itself, in India 40,38,05,000 are poor. This figure is derived basing on the Rangarajan committee estimates of poverty. . Though they are considered to be an underestimation, for the time being let us confine to this figure only for the sake of argument.  The number of companies that benefited by tax concessions year wise  data is also provided in the same table. For the year 2007-08, per capita benefit accrued to officially estimated poor in India through major subsidies stands at Rs. 1650.27 only. For the year 2014-15, the same stands at Rs. 6225.78. Where as for the same year, the benefit accrued per company due to tax concessions stands out to be Rs. 69,44,800, the same stands at Rs. 1,04,33,800 for the year 2014-15. In the year 2007-08, the poor could get only 0.000237th share of what the corporates benefited under tax concessions and the same stands at 0.000596th share for the year 2014-15. Because of this unequal distribution of nations’ wealth, the growth in per capita income also slowed down from 12.3 in 2013-14 to 10.1 in 2014-15.
Thus in 21st century, government became an effective instrument in the hands of neoliberals to ensure the reverse distribution of wealth  which is otherwise known as accumulation. The accumulation process explained above is nothing but part and parcel of primitive accumulation. And it is the same time the number of billionaires increased abnormally and India occupied 4th position in growth of number of billionaires. This clearly indicates the fact that a new section of billionaires that are emerging in India are only emerging with the government propup and enormous loot of nation’s resources at the cost of keeping people hungry, undernourished, stunted and illiterate, jobless and with out minimum standards of dignified living. The income of billionaires is not increasing because of the growth in size of production and there by profits. Their income is growing just because the successive governments adhered to neoliberal understanding of budget management. Due to this the inequality is not only increasing between rural and urban but also with in rural and urban households. Thus under the neoliberal reforms, the wealth and benefits are being shifted from rural and urban, poor to rich, peasantry to corporates, asset less agricultural workers to asset holding classes. This shift is causing irreparable stress on rural India and increasing intensity of rural distress.
The constitutional mandate for governments in India is clearly enshrined in preamble which mandates equality of opportunity and the directive principles which mandates the governments to strive for minimizing the inequalities and an egalitarian order. But the outcome of the two decades of neoliberal polices in India is in clear contravention to aims and objective of constitution, which should be resisted at any cost. Social protection is only the cushion the poor can have against such growing in equality. Social security schemes and policies will play an important role in reducing poverty as well as minimizing the negative effects of inequality. Right to food, right to work, right to shelter and right to health and education are the key components of social security. Land distribution confers an economic and social security for the poor. Sufficient leverage and proper implementation of social protection can promote economic and social development by ensuring that people enjoy income security, efficient access to health,  ability to manage risk  and empowers them to take advantage of economic  opportunities.
The global average on social security spending is on an average 8.8 % of GDP where as in India this is very low and is only 5.2 % of which includes 3.5 % spending by the state governments. The 12th Plan document recommended for increase in social security spending to 4.37% of Center’s GDP from existing levels. The demand for social security as right not as privilege must be widely canvassed. This is only the way to achieve the Millennium Development Goals by India. Unfortunately we are having a Niti Ayog members who terms these goals are unrealizable. This nothing but to disengage the government from its duty of achieving these goals. This is in tune with the Modi’s governance mantra – minimum government. The minimum government is going to hurt the rural poor and asset less class of agricultural workers more severely. The experiences of first year of Modi government is sufficient proof for that. That is why any struggle against the increasing inequalities must be organized around the slogan of social security to rural poor with enhanced public spending. This slogan shall work as basis for the mobilization of rural poor in coming days. Towards this end, we shall also mobilise the public opinion in support to the cause of rural poor.

2016-17 Central Budget : A Comment from Rural Perspective

Sunday, July 26, 2015

CSO’s New Growth Projections : Putting Credibility At Risk

CSO’s New Growth Projections : Putting Credibility At Risk
Veeraiah Konduri
India’s growth story is in news always. During the UPA- 2 tenure, it was in news for its so called ‘policy paralysis’. It was in news due to repeated downgrades of sovereign ratings by the so called guardians of international finance capital which forced the then Finance Minister Mr. Chidambarm to seek an exclusive audience to convince them that nothing is going wrong in country’s economy. He issued interim circulars to all the ministries and departments asking them to trim the public expenditure in the last quarter so that the fiscal deficit can be seen under control. It was every ones’ knowledge that the though India’s economy decoupled with the global economy and withstood the global financial crisis of 2008, but it came under the pressure due to the post crisis developments and consequences which had a profound impact on county’s growth trajectory. For about three years since 2011, the growth rate of economy crippled to mere 5 percent. All the sectors witnessed either stagnation or deceleration of growth.
Actually, for about 2 years, this decelerating growth rate became the punch bag for the opposition and neoliberal economic think tanks which was further fuelled by the Namo mantra of Gujrat model of development debate. This two year long debate undoubtedly helped the BJP to grab some focus on economic front and with elections in the offing kept the BJP in sound campaign basis. The results were there to see. Every one expected some turn around of economy under the new regime. But that did not happened. Even until January 30th, when the Central Statistical Organisation released its new series based estimates of national income and growth, all the international rating agencies and institutions like IMF pegged the growth rate for India at around 5 – 6 % only.
With the growth projections released by Central Statistical Organisation (CSO) basing on the new base year, the whole scenario has undergone a qualitative change. In the words of former economic adviser to Finance Minister, Shankar Acharya, “ Until two months, we thought we had pretty good idea (of country’s growth rate).Not, so after January 30,  2015, when the Central Statistical Organisation released its newly based estimates of national income and growth.”  The new growth projections are obviously welcomed by the ruling BJP and its Finance Minister, while presenting his full budget on February 28th 2015 in Parliament,  patted on his own back when he said, “based on the new series, real GDP growth is expected to accelerate to 7.4%, making India the fastest growing large economy in the world. The Central Statistics Office has recently released a new series for GDP, which involves a number of changes relative to the old series. Based on the new series, estimated GDP growth for 2014-15 is 7.4%.  Growth in 2015-16 is expected to be between 8 to 8.5%. Aiming for a double-digit rate seems feasible very soon.” Even some economists went to credit that India is only the country growing at the rate that surpasses even in China. As usual, all this was attributed to Modi’s minimum government and maximum governance.
Here the question is how far the few months old BJP government with Modi at the helm fueled the confidence to encourage the economy to run so fast and in fact what are the measures that are so different from its predecessors. Except policy announcements of allowing unbridled foreign direct investments across the economy, nothing much has changed since the elections. Then what prompted the CSO to come to such conclusion about country’s economy is the big news circulating through the policy makers and academics who are trying to interpret the new data sets to understand the structure and trends in country’s economy. The gap between the actual reality on the ground and the projected estimation sare not matching at all in any aspect. That led to the warning  by none other than Reserve Bank of India Governor who said except on the count of inflation, nothing seems believable in the CSO estimations.
Estimating nation’s economy has been underwent several changes over the period of time. As W.S Jevos (1835 – 1882) said, economics was calculus of pleasure and pain and mathematics was its method, for economic science dealt in quantities rather than qualities. Thus any study of economy includes it subjects – the people, their aspirations, well being and problems. To identify the problems and gauge the well being and estimate the aspirations, government needs bundles of statistical data grouped into quantities and decipher the trends. If the so called economic estimates are closer to the ground reality, would be well received and provides key inputs while government designs new policies. If the estimates are far from ground reality, not only the accounting agency’s credibility comes under risk but also the governments’ will be misguided while chalking out new policies. This is exactly what is happening in India today.
Before questioning the new estimates, let us understand the government’s accounting mechanism and practice. Government estimates basing on one particular year’s constant prices and that is generally known as base year.  As new conditions and situations keeps on emerging in dialectical interacting not only with the different components of economy but also with different players of international economy, the vanguards of nation’s accounting system keeps on upgrading their basis for estimations. Some times, such upgrades includes changes in base year and some times changes in weightages for different sectors keeping in mind the sectoral contribution to economy. To capture and factor the everlasting changes into accounting the base year is used to be changed once in a decade. The independent India started its own accounting of nation’s economy having 1948-1949 as its base year. Until then, the Indian economy’s levers were controlled from London by the colonial administration. By 1967 the collection of nations accounts became a structured and regular process. 1960-61 financial year considered as base year for estimates of 1967. Likewise for 1988 year’s economic estimates, 1970-71 year became the base year.  With on setting of new economic policies and closer integration of nation’s economy with international economy and change of sectoral composition of economy, the traditional weightage was modified to suit the changed situation. Accordingly for 1999 economic estimates 1993-94 was considered as the base year. In such a way for the current estimates of nation’s economy 2003-2004 economic year is being considered as the base year. For all accounting purposes, the accounts computed and compiled by the Reserve Bank of India, National Sample Survey and other related organizations
The current estimates of CSO were derived using 2011-12 as its base year. This change led to rise of eye brows in from several quarters. The CSO for a change, imputed the details from MAC 21 set of data relating to private corporate sector expenditure and consequential results. According to the new data released by CSO, though the economic growth stagnated around 5 % until 2012-13 financial years, it picked up and the growth rate reached 6.6 % surprisingly. Basing this estimation only the Finance Minister assured the nation that the growth in 2015-16 would be between 8 to 8.5%. But except the growth estimations, nothing is coming true, neither the industrial production nor the manufacturing sector growth, nor the primary sector growth, nor savings and investments. All the indicators such as exports, employment generation are continuing with their downward trend. Still the CSO is yet to come to terms with the criticism. The CSO is shielding itself by saying that this type of revision is required to adopt the changes as per the national accounting system adopted under the guidance of United Nations. Much light is yet to be shed on the actual condition of economy sans this hype generated by the CSO’s revised estimates. It is basing its estimates on the data furnished by the corporate sector to the Ministry of Corporate Affairs by way of voluntary disclosures. Though the new estimates expected the private sector investments would be around 6.89 crore but actually it did not exceeded 4 lakh crores, as per the newspaper reports. According to R. Nagaraj, who happened to be the non-official member, R. Nagarj, “ the revision of estimates between the two versions boosted investments for the same year by 34 percent”.

These new numbers would have had a different implications for economy as well as the policy making. Had that been the case this size of investment, there should have been growth in the manufacturing sector but the as latest as February’s index of industrial production failed to pass the test. The infrastructure sector stagnated and crippling. The economy is so entangled with the new type economy that the RBI under the chairmanship of none other than the poster boy of reforms, Raghuram Rajan warned the banks to lend to private sector involved in infrastructure sector. The service sector which became the back bone for the country’s economy saddled with the global developments. Despite the large scale privatization of precious national natural resources the mining sector which is key component of economy failed to take off. So called industrial hubs and SEZs confined themselves to amass the tax concessions and shoot up their reserves rather than shooting up economy, and employment. The private savings as well as spending touching a new low. The government spending, under the iron fist of fiscal fundamentalism, drastically decreased. This forced the votaries of neoliberal reforms to recommend for an escalated public spending, particularly government spending to shore up the confidence levels in economy. In such a situation, the figures and the data sets released by the nation’s premier accounting firm, CSO only puts its credibility at risk. 

The Modi Government and Rural Poor

The Modi Government and Rural Poor
Veeraiah Konduri
The Constitution of India guarantees socioeconomic security to the people of India. Directive Principles of State Policy elaborately prescribed the objectives of social security and prescribed measures for same. Since then, these directives guides the overall policies that are being implemented by the successive governments.

Article 38 of the Constitution mandates the governments, " (1) The State shall strive to promote
the welfare of the people by securing and protecting as effectively as it may a social order in which justice, social, economic and political, shall inform all the institutions of the national life. (2) The State shall, in particular, strive to minimize the inequalities in income, and endeavor to eliminate inequalities in status, facilities and opportunities not only amongst individuals but also amongst groups of people residing in different areas or engaged in different vocations." with an objective " to secure a social order for the promotion of welfare of the people." Similarly, Article 47 of the Constitution says that it is the duty of State to raise the level of nutrition, standards of living of its people and improve public health. Specifically, Article 45 of the Constitution establishes the guiding principle of Integrated Child Development Scheme when it says, "Provision for early childhood care and education to children below the age of six years. "Given the need for employment, the  Directive Principles have made a special mention of this. Article 41 focuses on Right to work as an important principle which should govern the policies of the States. Article 41 says, "The State shall, within the limits of its economic capacity and development, make effective provision for securing the right to work, to education and to public assistance in cases of unemployment, old age, sickness and disablement, and in other cases of undeserved want."

The governments since 1991 paid scanty attention towards the necessity of socio-economic security as envisaged by the Constitution. The Modi led BJP’s defiance of Gandhi whose ideals shaped the Directive Principles and Ambedkar who drafted these ideals into rights, is well known. The BJP government, in its first full budget started destroying the socio-economic security guaranteed by the Constitution of India.

The NDA Government presented its first full budget for 2015-16 financial year. The interim budget presented in June 2014 can be considered as joint venture between UPA-II and NDA. This budget is prepared solely after NDA had its fullest command over the finances of the country during last year. Reflecting its command over the economy, the budget presentation began by saying that under dynamic Modi leadership they could give new direction to the nation’s economy. The Central Statistical Organisation’s revised estimates are being shown as a proof for strong revival of economy. Also he announced that we are only the country that even surpassed China in growth rate and poised achieve 10 percent growth rate within no time. This the government wants to achieve this growth at the cost of its people. It is evident from the reduced allocations for almost all the social security schemes and programs. India, approaching it Amrit Mahotsav of independence in 2022 still predominantly lives in villages. Agriculture is back bone for the rural economy which is catering the bare minimum needs for morethan two thirds of its population. The policy makers with neoliberal mind set neglected the constitutional mandate of providing social security to its people. We are talking about the social security not merely in terms of welfare schemes such as pensions and PDS. The social security in our understanding includes food security, employment security and social security in traditional sense. Let us consider the budget implications and future policy directions in this budget on all these three counts.

The slogan of minimum government and maximum governance attracted several new segments including some sections of first time voters who had bitter experience with the government authorities on various occasions. But we need to remind that the rural India as a whole having bitter experiences with the authorities since independence. The roots of these bitter experiences are in the policy prescriptions of the government but not in the individual functioning styles of few officials. The same reflected even after the BJP government came to power. The focus of policy direction has been shifted from rural India to urban, that too cosmopolitan landscape to be more precise. Thus the present budget provides minimum attention both at the level of policy and in terms of budget to several several social security schemes. These schemes are intended to deliver minimum relief to the rural poor. The attention towards welfare schemes and subsidies meant for Integrated Child Development Scheme (ICDS), Public Distribution System(PDS), fertilizer subsidy, subsidized gas cylinders, national social assistance program, Indira Avas Yojana (IAY) , sanitation, rural drinking water, rural roads and other several other programs and schemes are being considered as non priority areas. It is unfortunate that at a time when nearly about 16 lakhs children under 5 years age group are dying due to malnutrition, the central government cut down the budget for Integrated Child Development Scheme (ICDS) to half from its last year allocations.

The government claims that due to 14th Finance Commission recommendations, large amounts of funds have been transferred to states, now the responsibility of implementing these schemes are left to the state governments. It is to be noted that even after such a high pitch campaign of center transferring more funds to state governments, the actual transfers have been reduced from 6.2 % of GDP to 5.9 % of GDP between 2014-15 and 2015-16. This in fact compounds the problems of state governments by imposing new burdens on them. The union government cancelled 8 schemes and reduced budgetary support for another 24 schemes. Implementation of remaining schemes becomes state government’s responsibility.

In the mean time the funds earmarked for such schemes will be transferred to state gvernment’s kitty where they will be having discretion in utilizing these funds. All these schemes were formulated after a well laid out thought process and expert consultation to bridge the gaps in development. But the government that does not care much for such gaps in development which will fuel inequality distancing itself from this responsibility of ensuring social security. Moreover after transferring these schemes and their funds to the shoulders of state governments, the central government is not going to share the cost of revenue expenditure such as staff salaries. For any social security scheme, the expenditure will be considered as plan expenditure at the conceptualization stage and for few years till the systems are in place for its proper implementation. Once the scheme is in place for some years, then majority of the expenditure on that particular scheme becomes revenue expenditure, a kind of recurring expenditure. As on now, meeting this expenditure is the responsibility of central government. Not sharing this recurring expenditure by center means, the burden of implementing or discontinuing the said scheme purely lies on the stat e governments. Now let us consider the three key pillars of social security and their allotments in the budget. The first pillar is job security for the rural poor. The government’s attitude towards this major flagship program had been kept on changing since its inception.

During the tenure of UPA – 2, the MNREGA’s potential impact became evident on the rural economy and also at the same time the ruling class that commands rural India started annoyed with the fact that the MNREGA became a powerful tool in granting self respect to agricultural workers. It also facilitated the agricultural workers to demand for their legal wages and the rich farmers are forced to increase a portion of wages for agricultural workers. Not only that. Before the introduction of MNREGA, the rural poor are forced to migrate to urban centers in search of work at sub-minimum wages just to save their children from half empty stomachs. Thus the urban economic actors used to get the uninterrupted supply of man power at cheapest rates. Because of this low cost of labour power only, the present government under Modi inviting foreign companies to come to India not only to exploit the rich natural resources but also to exploit numerically strong labour power at fraction of wages. This is the rational behind the Make in India slogan.

But this situation had undergone a change with the implementation of MNREGA. As the MNREGA guarantees the employment with in their home village, rural workers reluctant to work for paltry payments in far off locations. Thus those sectors which are banking on the cheapest labour power are now facing constraints on their profits. Thus the ruling class alliance, both in rural India and urban India came together to scuttle the job guarantee program. This is evident from official data itself. The Act generated employment for 5,25,30,453 households in 2009 where as the same came down to 3,94,76552 which means during the last five years, the number beneficiary households came down by a whopping 1, 30, 53, 901 ! Average days of employment generated for each household under the Act came down drastically from 53.99 in 2009-10 to 37.74 days in 2014-15. Similarly the percentage of SC beneficiaries came down from 30.48 % in 2009-10 to 22.52 % in 2014-15. More interestingly the Outcome budget submitted by the Ministry of Rural Development to Parliament indicates that of the total allocations, Rs. 18,333.95 crores left unspent in 2010-11 financial year where as the unspent amount from MNREGA allocations stood at Rs. 14,545.47 crores by 2012-13 financial year. Even in 2014-15 financial year Rs. 4406.31 crores left unspent. The number of person days generated came down from 230.41 crores in 2012-13 to 164.11 crore days in 2014-15. The number of villages with nill expenditure under MNREGA program also went up from 25,155 to 31939 during the same period. This is how the ruling class started scuttling and diluting the premier employment security providing program MNREGA.

Let us consider the food security aspect during the last five years. It is clear that the National Food Security Act (NFSA) is yet to deliver its intended benefits to the eligible poor despite it was adopted by the Parliament two years back. The Act is officially under implementation only in 11 states that too without proper infrastructure for successful delivery of services. Though the last two years’ annual budgets are having provision for fund to implement NFSA, on the ground already existing targeted public distribution system also getting a raw deal from the governments. According to the Department related Parliamentary Standing Committee on Food and Consumer Affairs, and Public Distribution system, the total coverage under targeted public distribution system is limited to mere 65 % of beneficiaries where as the officially recognized number of BPL families are fare more than that. To implement the NFSA needs budgetary allocation of Rs. 1,31,086 crore where as the allocations for the financial year 2014-15 stands at Rs. 100505 crore, which is almost 25 % less than the requirement. The fund shortage for food security during 2012-13 stood at Rs. 32,743 crores. The Standing Committee itself found that shortage of funds for food subsidy rose from Rs. 32,743 crore in 2012- 13 to Rs. 53,458 crore in 2013-14 and may go upto Rs. 60,730 crore in current year.  It is in this situation, the BJP government at the center appointed a high level committee under the chairmanship of former union minister for food and public distribution, Mr. Shanta Kumar who recommended for dismantling of the Food Corporation of India altogether, which is the back bone for country’s food security. The high level committee also recommended not to implement the National Food Security Act at its present form as it involves huge sums of subsidy. The WTO demands to de-regulate the agricultural produces market in third world countries. Accordingly the government preparing ground for meeting such commitments given to community of international financial capital. Financial constraint is not the real reason behind such recommendation. While on one hand, precious public money is being doled out to the corporate sector by way of tax concessions, it became a fashion for every one to criticize the social security schemes. With this kind of understanding towards the country’s food security, the government is trying its best to push the country to pre 1960’s era where in the nation experienced hunger deaths and roots of rural distress. This only will lead to dismantle the food security the country achieved at the cost of sweat and blood of farmers and agricultural workers of this country.

Finally let us consider third aspect of social security. This includes several schemes that are of income substitution and expenditure substitution in nature. The two key pillars above mentioned are completely different from the third set of schemes. Above mentioned two pillars are ensuring right to work and right to food irrespective of the caste, creed, gender, region and religion, APL/BPL differentiation. Also these two social and economic security measures are backed by law and the governments can not tweak at their will. Unlike these two, the income substituting and expenditure substituting schemes such as National Rural Livelihood Mission, formerly known as Sampoorn Gram Swarojgar Yojana, Indira Avas Yojana, Pradhan Mantri Gram Sadak Yojnana, National Old Age Pension schemes, Disability pension schemes and other such schemes. These are all being implemented at the will of governments’ of the day. The budgetary allocations are not being fully utilized. As we have shown in this bulletin, Rs. 9954 crores left unspent for the financial year 2010-11 for just three schemes, SGSY, IAY and PMGSY where as this amount went up to Rs. 12824 crores for the year 2012-13 and stands around Rs. 9516 crores left unutilized. Within this budget the allocations for old age pensions have been reduced by one thousand crores. Not only that. The government proposed to change IAY is being changed into repayment based model from subsidy/ grant based model. Thus the government is tweaking with all these income and expenditure substitution schemes which will impose larger burdens on the rural poor and agricultural workers. More over the government asking the  corporate sector to share its social responsibility by spending peanuts from their profits. Already 124 villages have been adopted by Tata Trust in Krishna districts of Andhra Pradesh. In such villages, the role of Panchayati Raj institutions becomes irrelevant.This is the dangerous trend that is creeping into the policy making and participatory democracy. Already the central government is shifting its constitutional responsibility to the discretionary authority of states. It is withdrawing itself from legally backed social security programs whose implementation solely lies on the shoulder of central government. Thus the government wants to dismantle the existing structures to mitigate the inequality. The programs such as MNREGA are primarily oriented towards addressing the structural inequalities and marginalization. All this is going for a toss under NDA government. Thus the BJP government laying foundations for triple insecurities – employment insecurity, food insecurity and social insecurity. This is in this context we need to build the movement for social security. The aims of this movement shall be to strengthen the legally backed rights for their fullest possible implementation and the expand the base of income/expenditure substitution based schemes with more funds.