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HVK Archives: Left with no option

Left with no option - Mid-day

Praful Bidwai ()
27 March 1997

Title : Left with no option
Author : Praful Bidwai
Publication : Mid-day
Date : March 27, 1997

The Communist Party of India (Marxist) seems bent upon scoring a
'self-goal'. Take the Bhandari episode. Although this has seemingly
been eclipsed by the Bharatiya Janata Party-Bahujan Samaj Party
alliance (to be discussed in the next column), it remains relevant.

Indrajit Gupta was correct both m raising an alarm over rising
crime in Uttar Pradesh, and in asserting his authority over
Governor Romesh Bhandari. But he found himself hemmed in by
Parliament, which in an extraordinary move set up a committee to
monitor the UP situation. This amounted to interference in the
Home ministry's working. Gupta found he suddenly had to defer to
Prime Minister Deve Gowda.

The CPM went along with all this. Instead of backing Gupta
strongly, party general secretary A B Bardhan on Home TV channel
blamed Gupta and asked him "to change over from being a leader of
the Opposition benches... into someone who now has to run me
country.....

The CPM has evidently decided to stay on in the Gowda ministry at a
high cost to its dignity, a great but rare political asset. Thus,
it was soft on P Chidambaram's latest budget, which it has
described as "realistic", "balanced" and good "under the
circumstances". However, the party should change its stand - just
as the CPM should move cut motions.

The budget is arguably the most right-wing fiscal so far. If
Manmohan Singh's 1991 budget dismantled a whole industrial policy,
Budget 19917-98 has ushered in what Dr Raja Chelliah terms
"capitalism without any safeguards".

Chelliah is a self-avowed neo-liberal, and authored some of our
recent fiscal policies. Even he has lambasted Chidambaram for
dispensing with equity altogether. "You have to take risks if you
have to be bold. But if I were to be bold, the risks would be
mine. In this case, the risks are not for Chidambaram, but for the
country."

One must agree. Chidambaram's tax give-aways add up Rs 12,500
crores. And yet, he projects that tax revenues will remain at 10.5
per cent of GDP and the fiscal deficit will fall to 4.5 per cent.

This can happen only if tax revenues increase by about 35 per cent
- doubling the past trend. The projection is not based on
experience, but on the highly ideological 'Laffer Curve' thesis.
This, named after an undistinguished economist, holds that beyond a
stage, tax revenues go up as tax rates fall.

The Latter Curve was used by Reagan and Thatcher to dole out huge
tax cuts to the rich and to cut public spending on health and
social security. Among economists, the Laffer Curve is-
discredited. Paul Samuelson, the MIT Nobel laureate, describes it
as a 'snake-oil' remedy, worthy only of quacks.

The budget has cut the maximum rate of income taxation to a mere 30
per cent (lower than in much richer Europe, where it is 50 to 70
per cent). But unless our rich suddenly become scrupulously
honest, and tax administration improves dramatically, revenue
projections would remain a mirage. We could then have a huge jump
in the fiscal deficit, and a first-rate economic crisis.

The signals emanating from New Delhi, with honest income-tax
officials being transferred, do not suggest improvements in tax
administration, but just the opposite.

It is unlikely that the ethically questionable amnesty scheme will
bring back a good chunk of the $100 billion that our rich have
stashed abroad. Our amnesty schemes yield little money while
undermining the authority of the state.

Businessmen can bring in loot from abroad through the global
depository receipt route or non-resident deposits. Why should they
declare it and pay 30 per cent tax, when enforcement is anything
but strict?

The budget is strongly anti-poor. Its inflationary potential spells
a heavy burden for them. They will be hit more directly by falling
commitments to the social sector. In 1996-97, the revised
estimates for spending on this sector were 12 per cent lower dm the
budget estimates.

As much as 11 per cent allocated to the Jawahar Rozgar Yojana
remained unused. The unused percentages for rural development
education and 'million wells' scheme were as high as 10, 17 and 25
respectively. This is altogether shocking in a situation of
widespread want and deprivation.

Chidambaram's budget does little to redress this shameful trend,
Indeed, even the JRY target is now only 520 million person-days,
compared to 1,400 million three years ago. This means each of our
380 million poor people will get work for precisely one-and-a-half
days in a year! It is ludicrous to think that this can make a dent
in poverty.

"To claim that this is acceptable under the circumstances" is to
apologise for a bad budget. It is also to accept existing
"circumstances" as unchangeable. But the Left is meant to change
circumstances for the better. That is why it must oppose the
budget. If it fails to do so, it risks losing credibility and
identifying itself with unpopular elitist policies.

This course is fraught with the possibility that the Left will have
to quit the government. If push comes to shove, it should not
hesitate to do so. It is more honourable to go down fighting for
principles than to survive in ignominy.

(Praful Bidwai comments on political and other issues)


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