It was prominently reported in the media a few weeks ago that the Finance Ministry of the Government of India, was likely to mandate significant expenditure cuts across the board, ostensibly to rein in fiscal deficit and wasteful expenditure. Such a move raises several disturbing questions related to both to its underlying presumed economic wisdom and its procedural propriety.
We do not wish to get into a detailed discussion of the relevant issues here but would like to flag a few pertinent points in the following letter and urge the Government of India to rethink its reported move. In particular we strongly feel that the promise of universal old age pension for elderly workers from unorganised sector, which has been long overdue, should be fulfilled.
1. Such cuts typically occur in social sector ministries and schemes. As reported in the media, the Finance Ministry has already proposed expenditure cuts amounting to around Rs 15,000 crore for Rural Development Ministry and Rs 5,500 crore for the education sector which falls under the Ministry of Human Resources Development. In addition, ministries are reportedly being told to limit their last quarter spending to below the average of the first three quarters and a further cut of same by around 20 percent might be imposed.
2. Expenditure cuts have been specifically proposed for these sectors in light of surplus unspent funds that they had accumulated in the previous fiscal year. We must ask why unspent funds existed with these ministries and whether it relates to implementation failures by the government at various levels.
3. Further, in event of existing surplus funds, what is the rationale for not using same to address the urgent and pressing issue of universal old age pension across India which can benefit the elderly population coming from the unorganised sector?
4. The main reason for the present state of the fiscal deficit has been inadequate revenue mobilization in light of liberal taxation policies followed by the government. Therefore, reducing expenditure to match the declining revenues receipts on account of liberal taxation policies is tantamount to asking the poor to bear a disproportionate share of this fiscal consolidation burden. Also, it needs to be mentioned that projecting low revenue receipts on basis of low tax revenues before the end of the fiscal year might be misinformed as tax revenue collection increases considerably over the last few months of the fiscal year when many direct tax collections occur.
5. The Constitution explicitly mandates the democratic oversight of the raising of resources and spending by government, with the underlying principle for being that resource raising and spending patterns of the government must be subject to popular scrutiny through a broad consultative process. Thus, in addition, a consultative mechanism with concerned ministries is strongly desired before going for such policy measures.
6. We must remember that the incumbent UPA government, agreeing with thePension Parishad demands earlier this year had assured and promised to universalize (with exclusions) and upscale the monthly old age pension amount to a dignified level for ensuring economic independency to senior citizens.
7. Suggested policy measures, as reported in the media, also neglect previous statements by the Finance Minister who had assured a poor-friendly fiscal consolidation roadmap for the next five years.
8. Hence, in light of these observations it becomes pertinent to ask if the present fiscal consolidation strategy, at the cost of social sector expenditure and by neglect of old age pension, is at all a strategy of “inclusive growth” as emphasized by the government regularly. Also, it raises a serious doubt about government’s claim regarding insufficiency of funds and its concern regarding the welfare of elderly from the unorganized sector, many of whom did not even receive basic minimum wages during their productive years.
We urge you as the Prime Minister:
A. To ensure that no budget cuts are made from any social sector funds and that there is no reduction in the funds allocated for the social sector
B. To ensure that unspent balances and savings are used to fulfill the promises to universalize pensions and enhance pension amounts for the elderly with exclusions.
C. To institute a consultative process to deliberate measures for increasing revenues
D. To make sure that all such budgetary processes should henceforth be subjected to a pre budget consultative process
National Alliance for Peoples Movements (NAPM)
Kamayani Bali Mahabal
Ram Singh Parmar
Rted. Air Marshal PK Dey
SWARAJ group, Karnataka