Bharatiya Janata Party - The Party with a Difference - Brief talking points of Speech made by Shri Arun Jaitely, Leader of Opposition while Initiating the debate on the General Budget in Rajya Sabha

The Budget has been presented in the backdrop of the world emerging out of the slowdown. It needed big ideas to accelerate growth. Sadly, the same are lacking. The country faces an acute agriculture crisis both on account of low production, non-increase of acreage and a near stagnant productivity. There is an unprecedented inflation, particularly food inflation. The Budget was expected to be a policy statement and not merely an accounting exercise, which would offer a corrective to these challenges.

Inflation

The Whole Sale Price Index (WPI) inflation has already touched 8.56 percent. The Consumer Price Index(CPI) inflation, in various categories, ranges from 14 to 17 percent. Food price inflation is 19 percent. The Economic Survey (p.65) clearly mentions that onions, potatoes, vegetables, rice and wheat, which are the essential commodities were shortage items. There was no crackdown on hoarding in the UPA ruled states. The Government did not release adequately from the buffer stocks to intervene in the market. Nor were the imports made in time to correct the market shortage. The Survey (p.201) clearly states that the stock position of food grains on January 1, 2010 was 47.4 million tonnes. It was almost twice the norm of buffer stock and yet the government was slow in market interventions. What did the Budget do to correct this inflation? It increased the excise duty across the board by 2 percent. It made a further increase in cement and vehicles, which are necessary for kick starting the economy. It imposed additional custom duty and excise on crude, petrol and diesel. The net effect is that these alone will shoot the prices of entire agriculture, food, real estate and virtually all commodities. The increase in service taxes is a cruel joke on the people.

Service Tax

Your service tax covers healthcare. Why should private health care be costlier? Salaried employees will have to pay 10 percent more on health checks undertaken by them. The rich can pay hospital bills without service tax. And those relying on insurance will have the service tax component added to their bills. This is in addition to the premium on the insurance policy already being paid by them. Air Passenger transport, particularly low cost airlines, are today becoming popular. They are necessary even for the middle classes and have an encouraging effect on tourism. Service tax makes them costlier by 10 percent. All IT and IT-related services are now within the service tax compass. Service tax on educational training institute will make education costlier. Those purchasing apartments in one go, are exempted from service tax. But the middle and lower middle class, which rely on installments, will have to pay the developers with service tax added to it.

Property rentals, both residential and commercial, will now be leviable to service tax with retrospective effect June 1, 2007. But the striking blow comes from imposition of 10 percent service tax on transport of goods by the railways. The entire freight by the railways, barring some food grain exemptions are now leviable to service tax. The Budget does not give an accurate figure when it says that the service tax burden is only Rs. 3,000 crores. In fact, the railway freight, which has been levied to tax itself, will bring about Rs. 6,000 crores. The net impact of service tax is far more. An abatement (concession) of 70 percent was promised on railway freight. Unfortunately, in the notification no. 9/2010 dtd 27.02.2010, the entire rail freight is leviable to service tax. The net effect is that this becomes a high tax budget. It is an inflationary budget. Taxes on petrol products are only contributing to the revenue. A second installment to compensate the oil companies is now soon awaited.

Food Shortage

Our population continues to increase. By 2026, it was expected to stabilize. The reality is that we may defy that date. Our food productivity is not increasing. The acreage of cultivation also is shrinking. Should not the Budget, as an economic policy statement, give some indication of how to correct this shrinking acreage?

Has not the time come for India to debate a housing policy with higher FSI and a shift to apartment living as against luxury housing, resorts and farm houses? The Economic Survey (pp.68-69) clearly mentions the depletion of cultivation and shortage of pulses, sugar, rice, wheat, vegetable and milk, which are so essential for survival.

Page 207 of the Economic Survey paints a dismal picture of farm productivity and further decline of private sector investment in agriculture. Does the Budget address all this? It claims to take significant steps to bring in a second Green revolution. The seven states of the East will witness a Green revolution triggered with only Rs. 400 Crores, 60,000 villages will have Pulses and Oilseed revolution with Rs. 300 Crores, and Soil health and Water conservation and preservation of Bio Diversity will take place with Rs. 200 crores.

The Prime Minister mentioned while replying to the Debate on Motion of Thanks to the President’s address “ In November 2009, India exported sugar worth Rs. 7.94 Crores, whereas it imported sugar worth Rs. 611.4 Crores. In December 2009, export of sugar was worth Rs. 12.34 Crores whereas import of sugar was worth Rs. 216.90 Crores.” Statistics can camouflage the truth. The truth is that from 1.10.2009 to 10.3.2010 the Government has exported sugar totaling 5,80,498 tonnes of sugar. Why should India export 6 lakh tonnes of sugar in less than 5 months at the peak of this national crisis. To say that we imported sugar in high quantities does not resolve the problem because international prices being much higher, you obviously imported inflation into the economy.

Fiscal Deficit

The fiscal deficit figures in the Budget are a dream wish. The current year’s deficit of 6.7% is hoped to be reduced to 5.5%. The basis appears to be erroneous because of the following reasons:

a.	Disinvestment is not likely to yield Rs. 40,000 crores. Your dilution of Public Sector shares is only 10%. There is no transfer of management control. The interest of the average investor in buying Public Sector shares is inadequate. Therefore without any additional reduction, no sizeable revenue can be raised. When only 10% of Public sector shares are off loaded, its only the institutional investors who will buy these shares.
b.	I only hope and pray that Rs. 35,000 Crores can be raised from 3G spectrum auctions. This Country has already lost over Rs. 60,000 Crores from the arbitrary and fraudulent auction of 2G spectrum. 2G spectrum in 2008 has been allotted on the 2001 prices of Rs. 1651 Crores. Overnight those who got 2G spectrum at 1651 crores valued their shell companies at USD 2 Billion and offloaded a part of their shareholding at Rs. 7000 Crores. For 9 Indian licenses, the loss to the exchequer is Rs. 63,000 Crores. Today the spectrum allocation through 3G licensing is paralyzed. The telecom Ministry is resisting any transparent transactions. There will be no more takers of 3G spectrum except those who already possess 2G spectrum. You have restricted the market through fraudulent allotment of 2G spectrum. The lack of interest of international players will be more than evident.
c.	The expenditure in the current year appears to be understated. The Receipts Budget at Page 37 shows that the actual increase in 2008-09 was 24.03%. In 2009-10, it is likely to be 15.56%. The Budget assumes that in the current year where GDP is likely to grow, economic activities will be higher, the increase in expenditures would be only 8.53%. It’s a wish not likely to come true. The Budget hopes that the revenue receipts would increase by 18% in the next year. You cannot reduce India’s fiscal deficit through a hope that the expenditure will reduce and the tax receipts will increase.
d.	Your off-balance sheet items , when added to the Budget will offset your fiscal deficit. The Medium term Fiscal Policy Statement at page 32 refers to two items i.e net accretions to the National Small Savings Fund (NSSF) and borrowings under the Marketing Stabilization Scheme (MSS) not being factored in the calculation of the Fiscal Deficit. Similarly, the CAG has reported clear inconsistency between the Finance Accounts of the Budget Department by not including several off-balance sheet items.