Posted by: Manjeet Krpalani on February 29, 2008
Indian finance minister Mr. Chidambaram today presented his last budget to the Indian parliament. Next year, 2009, is an election year in India, and the ruling Congress coalition is desperate to be re-elected. So the budget is aimed at the masses, the big vote bank in India.
A few highlights are the 20% increased spending on both health and education, lower taxes for small cars, lower taxes on bulk drugs. But the centrepiece of the budget was a $15 billion waiver of loans to India’s 40 million small farmers. While the entire Parliament roared in approval, corporate India groaned, and the stock market sank.
We’ve seen this movie before.
It is very good that farmer debt has been forgiven. While most of India has benefitted from economic reform, the agricultural sector has seen very little change. The burden of that is carried by the small farmer, who owns a hectare or two of land, and ekes out a living in primitive conditions. His life has remained largely unimproved for the last five decades, and now, as the rest of India moves on, he is further removed from his countrymen. A poor income means taking more loans, either from the state or from ururious money lenders, for everything from fertilizer to building a habitat or family marriages. Crop failures are devastating, and usually result in farmer suicides.
So forgiving the farmers’ debt is necessary, an expense India should carry.
But the same old questions remain:
1. Who will pay for the $15 billion loss to the banks and state? Corporate India worries it will, though increased post-budget taxes, have to bear that burden - even though overall tax collections are up 30%.
2. Some debt is owed to the state - but there's a lot of informal debt, owed to money lenders who charge interest of 30% or more. Who will forgive that? These are people who live in the community - they are entitled to their repayment, but they are also feudal and extractive especially to the poor.
3. It's all very well to forgive debt - but that's like giving someone fish to eat, without teaching them how to fish. Where's the real reform? What's desperately needed is reform in the agri sector - land reform, corporatization of land, informal education for farmers, more agricultural colleges, modern techniques, research, connectivity, modern markets, ending price distortions, unfettered movement of food products from one state to another, a modern cold chain which contains waste...the list is endless.
4. Throwing money at the sector is not a solution. It never was. Implementation is the key in India - and it's the country's main problem. There is no shortage of money in the country, and there is more being thrown at poverty alleviation here than is invested in other sectors. Indeed, the state does not 'invest' in the agri sector; politicians cynically view farmers as a vote bank, and so they stay. So where are the implentation plans? Implementing the hundreds of farmer schemes, and making sure the funds actually reach the farmers is clearly too tough a task for the state. State agencies like the Food Corporation of India, through which large amounts of the country's food is funnelled, should be made accountable, and so should the agencies and local administrations which are responsible for distributing the various state schemes.
Instead, there are still massive leakages in the system, massive corruption and therefore massive sorrow.
More than 15 years ago, Rajiv Gandhi, former Indian prime minister, calculated that out of every rupee the government put out in schemes, just 15 paisa, or 15%, actually reached the intended recipient of the scheme.
Last month, Gandhi's son, Rahul Gandhi who is now secretary of the Congress Party, calculated that just 5 paisa, or 5%, reached the recipient of government largesse.
Yet this same Congress Party announces a budget where they give away money, without making anyone accountable, or focusing on the successful implementation of their poverty programmes.
As Indian voters have repeatedly shown, they are not fools. The previous Bharatiya Janata Party administration was booted out of office in 2004 for over-confidence in India's forward march which had left many behind. The Congress Party it seems, is over-confident about its hold over the poor masses of India and its ability to keep them stuck in their place. Unfortunately, the party has, with this budget, lost its last chance to show their countrymen true love and compassion. Because by now, everyone knows that charity doesn't get politicians elected; actual performance does.