A budget to assist the big bourgeoisie to come out of the crisis with maximum profits

Finance Minister P Chidambaram presented the Union Budget 2008-2009 in conditions where the US economy is feared to have entered a period of recession triggering a slow down of the Indian economy. The big bourgeoisie is worried whether and how it will make the superprofits it has been reaping all along, in the coming year. The key budget proposals of Chidambaram were aimed at enabling the different sections of the big bourgeoisie to come out of this crisis with high rates of profit.

The Budget of a capitalist state is an exercise of redistributing the wealth of the society in favour of the bourgeoisie and an exercise in settling the claims of various bourgeois groups over the booty to be shared. At the same time, propaganda is carried out to mislead the working people into believing that it is to help them, cleverly hiding the real intent.

In the 2008-2009 Union Budget, two big “pro-people” measures are being trumpeted. These are the waiver of loans taken by small and marginal farmers totaling to Rs 60,000 crore and the reduction in personal income tax paid by people. It has been claimed that both the steps will benefit crores of people in the country.

The first proposal is to completely waive the loans taken from banks by farmers holding up to 2 hectares of farm land. For other farmers, there will be a rebate of 25 percent against 75 percent repayment of loan. The implementation of the waivers and relief would be completed by June 30 of this year so that farmers can be granted fresh loans for the kharif crop.

Out of Rs 60,000 crore debt waiver, Rs 12,000 crore is accounted for by the scheduled commercial banks while the share of cooperative and regional rural banks is Rs 37,000 crore and Rs 11,000 crore respectively. The finance ministry would make the funds available to the banks as and when required and compensate the banks for the loans waived by them. The total outstanding debt owed to the banks by the farmers is Rs 3.2 lakh crore.

Since the government is going to fully compensate the banks for waived loans, banks will not have to incur any loss due to un-recovered loans from farmers. Where is the Rs.60,000 crores going to come from? It is clear that this money will be paid for by the masses of working people, through inflation and taxation.

Who will really benefit by the loan waiver announced? Firstly, banks who will immediately get their hands on the Rs.60,000 crores which they would otherwise not have had, as farmers have been unable to pay them back. Not only that, these banks will now be able to lend a further Rs 60,000 crores to farmers and earn interest on the fresh loans.

Secondly, the disbursement of new loans to farmers will immediately spur the demand for fertilizers, seeds, agro-chemicals, farm equipments, etc. So all industries supplying various inputs to agriculture will see their sales and consequently profits soaring.

The waiver of loans is thus aimed at assisting the financial institutions, which have lent heavily to the farmers and can now recover their dues and interests, as well as, the industries that supply inputs like fertilizers, seeds, agro-chemicals, farm equipment etc.

It is claimed that the main problem facing agriculture is lack of credit. The solution offered by the bourgeoisie is more credits to the farmers, and the result is that farmers are caught in the debt trap. What is denied is that the farmer is squeezed between the high cost of inputs and the low prices for his produce in the market. He is also a victim of the vagaries of nature. To that is added the high interest rates of the banks or private money lenders. In other words, while the debt waiver may appear as a balm for a section of farmers, the reality is that the overall agrarian policy being pursued is going to deepen the crisis of agriculture. Small and medium farmers will get inevitably ruined and will have to part with their lands.

The second ‘pro-people’ measure of reduction in personal income tax announced by altering the income slabs for different tax rates will lead to a tax saving of around Rs 9,000 on an annual income of Rs 2,00,000. The saving will be Rs 45,000 on an annual income of Rs 5,00,000. The Finance Minister revealed his intention when he declared that he expected people to spend half the money they saved in tax relief. He wants to help the manufacturing and services sectors. There are clear signs of slowdown of the growth rate of manufacturing and services sectors. These sectors are required to be stimulated by encouraging demand for their goods and services for which people need money to buy them. Indirect taxes like excise duty have also been reduced in this Budget so that the prices become more affordable for people and people buy more goods than before.

So while pretending to help people by announcing the two measures, the real intention of the various tax changes and loan waiver announced is to ensure that the bumper profits of the big bourgeoisie keep growing year after year by averting the slowdown in various sectors of economy.

This Union Budget is no different from the previous Budgets of the UPA government in its orientation and objectives. Every Budget addresses the prevailing needs and concerns of the bourgeoisie. And like previous Budgets, this one too tries to create illusions and mislead people as if its intention is to benefit the people!