Class bias revealed, again
A widely heard comment on Budget 2012-13 was that it has given increased attention to the social sectors. That, clearly, is a claim overstated. Further, the meagre rise in social sector expenditure has come at a cost; the expenditure on crucial economic sectors has been cut.
To understand the budget better, it is important to understand its broad fiscal contours. Given his government’s misplaced commitment to reduce budget deficits, Pranab Mukherjee had some medium-term fiscal targets to meet. He had to reduce his revenue deficit from 4.4 per cent in 2011-12 to 2 per cent in 2014-15. His fiscal deficit had to decline from 5.9 per cent in 2011-12 to 3.9 per cent in 2014-15. At the same time, his government is an utter failure in revenue generation, particularly from the corporates. As share of GDP, his gross tax revenue is set to rise from 10.1 per cent in 2011-12 to just 10.6 per cent in 2012-13, and further to 11.7 per cent in 2014-15.
Thus, Mukherjee was stuck between two dogmas, both of which mark the political economy of his government. He had to cut deficits to please international investors, even as he was unable to tax the holy corporate cows enough to be able to follow a revenue-led deficit-reduction path. Mukherjee, then, had to cut expenditure somewhere.