Capitalist orientation cannot provide for all

In a few weeks, Finance Minister Chidambaram will present the Union Budget for 2008-09 to the Parliament. This is probably the last budget of the UPA government before the next Lok Sabha elections. As the Finance Minister of a capitalist state and government, and a party soon to seek re-election, Chidambaram has to find a way to fulfill the claims of the big capitalists and at the same time announce sops to woo various vote banks. He has to find a way to preserve and strengthen the capitalist orientation while fooling the working people into thinking it is a budget that addresses their concerns.

If the economy and state of India were actually socialist, that is, oriented to serve the needs of the working people, then the Budget would be used to concentrate the social surplus generated annually and deploy it to meet the basic needs of the population. What happens each year in India is the exact opposite.Concessions and favours are handed out to the capitalists, to maximize the private profits they pocket. This capitalist orientation is sought to be justified by the perverse logic that only if the big businessmen reap maximum profits will they invest part of it and only then can the economy grow rapidly.

The various concessions and incentives granted to capitalist corporations over the years have grown to nearly 57% of the total revenue of the Government of India. A study by the Ministry of Finance has estimated that total revenue foregone in 2004-05 due to various tax exemptions was Rs 1,76,073 crore.

By 2006-07, the value of Corporate Tax exemptions, i.e., the exemptions given to companies on tax to be paid by them on their profits, is estimated to have grown to Rs. 83,300 crore, from 57,852 in 2004-05. Yet, the big corporate lobbies, including CII and FICCI, have started a campaign for reduction of Corporate tax rates in the 2008-09 budget.

The corporate tax rate is 34% on paper, but studies have revealed that the tax paid by Indian companies works out to less than 20% of their profits. Compare it with the tax that salaried people pay; any individual with income of more than Rs 4 lakh ends up paying more than 25% of income as tax.

Ambani’s Reliance Industries, the largest private sector company of the country, paid only 8.4% tax on profits of Rs. 10,704 crore in 2005-06. Bharti Airtel paid even less at the rate of only 7.3% on profits of Rs. 2,286 crore. The country’s second largest software company, Infosys, paid only 12.6% tax on profits of Rs. 2,736 crore.

Every year the Government of India borrows massive sums of money from banks and other financial institutions, to balance its expenditure with its receipts. Every year it pays huge interest on the money it borrowed in the previous years. The 2007-08 budget indicated that the government would borrow around Rs 1,51,000 crore to bridge the gap between its income and expenditure. The Budget also indicated that the government would be paying as much as Rs 1,59,000 crore of interest on money borrowed during the previous years.

The point to grasp is that Government of India is in fact paying the capitalists twice over. First, it hands out tax concessions worth Rs. 1,70,000 crore. Then it pays interest to the big banks and financial institutions of Rs. 1,59,000 crore. It incurs fresh borrowing of a similar magnitude, which ensures that the stranglehold of finance capital will continue in the future as well. If it had not handed out the concessions in the first place, it would have had no need to keep borrowing and paying enormous interest each year.

After paying the capitalists twice over, the Government of India pleads that its coffers are dry when it comes to addressing the basic needs of the working people such as education, health and public distribution of food and other essential articles of consumption. It claims that it cannot afford to keep increasing “subsidies”. But it refuses to withdraw the concessions to the capitalists, or suspend interest payments to the financiers, which would free up resources to meet the people’s needs as well as reduce the need to keep borrowing more. It is thus the capitalist orientation of the Indian state that prevents adequate money from being available for meeting the basic needs of the masses.

The ruling party or coalition announces various schemes from time to time, allegedly to address the needs of the working masses and reduce poverty. The revelations about the latest such schemes, including the National Rural Employment Guarantee Scheme, show that these schemes are only meant to cultivate vote banks while funneling public money into various private pockets of officials and elected representatives. Such schemes get announced under the intense pressure of the people’s demands, such as the demand for employment, but they are knowingly sabotaged during implementation.

Every union budget manages to find enough money to enhance the expenditure on defence and police, the arms of the state used to suppress people. India, which has the shameful distinction of having the largest number of poor in the world, is now one of the largest buyers of arms in the world market. Money does not seem to be a constraint here because the big capitalists want the country to have big and powerful armed forces. Only then can the imperialist aims of the big bourgeoisie of India be fulfilled.

A state works for the interests of the class it represents. The present capitalist state will work only in the interests of the capitalist class, headed by the big monopoly houses. The Left supporters of the UPA Government are spreading a very harmful illusion by suggesting that the present state can be made to work for the good of workers, peasants and other toilers. They are helping Chidambaram fool the working class and people.

Only a state of the workers, peasants and toilers will reorient the economy to work for their good; and budget its income and expenditure to achieve that socialist goal. People will be taxed as per their capacity to pay and people will decide the priorities as to where money should be spent and how. Establishing the state of the workers, peasants and toilers should therefore be the highest priority for the working class and people.