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Distributive justice in budget - Outside View by S.S. TARAPORE

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Distributive justice in budget
Jan 25, 2016

The Union Budget in India is by far the most important document of the government which sets out the broad contours of the government's intended raising of revenue and the pattern of expenditure. Various interest groups would strongly articulate their predilections. The government has attempted to reach out to the marginalised segments. In the jostling by powerful groups, the interests of the weaker segments get swept aside in the formulation of the budget. It is in this context that that distributive justice must be brought to the forefront of the debate.

Growth versus inflation

The stronger elements of society invariably argue for pushing the limits for growth using a persuasive argument that while a higher growth may result in higher inflation, as output goes up there would be more jobs for the weaker elements. The fact, however, is that the weaker elements have no defences against inflation and given that the level of prices is already high the weaker elements dread any acceleration of inflation. Thus in the final trade-off between growth and inflation it is imperative that distributive justice is given a prominent place in budgetary decisions. This is the main reason why there should not be any upward adjustment of the inflation trajectory set out in the agreement between the government and the Reserve Bank of India (RBI).

Pattern of government expenditure

The elitist argument is that socio-economic expenditures to redress income inequalities are by and large wasteful and that it is more effective if government expenditure is oriented to public investments which would encourage the corporate sector to increase its investment. There is, however, an overriding need to give greater attention to distributive justice. Given two years of drought, there is a strong rationale to give the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNRES), Food Security, Sarva Shiksha Abhiyan, National Rural/Urban Health Mission, National Rural Drinking Water Programme and other special schemes a strong thrust to make them more effective. We need to move away from the elitist view that these schemes are a waste of resources. Admittedly there are leakages and concerns about these expenditures reaching the target groups but the response should be to plug the drawbacks rather than move funds away from these schemes.

Oxfam highlight on increasing inequality

The recent Oxfam study has underlined that internationally, there is growing inequality of wealth with 62 people owning as much wealth as the poorest half of the world population and the richest one per cent own more than the other 99 per cent put together. While this is an international phenomenon, it could well be surmised that India would also be afflicted by this international trend. Since India reflects some of the most extremes of poverty, it is imperative that the government does take effective action to lead a direct assault on poverty. Attempts to reduce inequalities of income and wealth would no doubt be stoutly opposed by the elitist segments of Indian society, but the wider good of the country would be better served by a gradual reduction in inequalities. A few steps in this direction in the Budget of February 2016 would be commendable.

Pulses: India's shame

It has been known for decades that the per capita consumption of protein in India has witnessed a drastic secular decline. The bulk of the population depends on pulses for meeting its protein requirement. With the per capita availability of pulses going down there is widespread stunting of physical and mental development. Added to the woes of the vulnerable segments has been the massive increase in prices of pulses (in many cases a doubling in a year). It is unconscionable that the problem has been allowed to grow to such a gigantic proportion. Pulses are India's national shame. It is here that the Budget of February 2016 could be a game changer. With the move over of the food subsidy to a Direct Benefit Transfer (DBT) it is estimated that there would be a saving of Rs 25,000 crore. There would no doubt be many claimants for these funds but the government should earmark this entire amount to finance the consumption of pulses by the deprived segments of society. The government should undertake massive import of pulses and distribute it at nominal prices which would also curb unreasonable prices in the domestic market. There would no doubt be heavy leakages with the end use of the subsidy going to segments of the population which clearly do not deserve it but it would be best to pay this price to wipe out India's shame.

Basic exemption limit for income tax

As already indicated in earlier columns, the basic exemption limit for income tax should be raised substantially. But powerful lobbies would eloquently argue against this on grounds of revenue loss. The least that should be done is to at least raise the present limit of Rs 2.5 lakh to Rs 3 lakh.

Need for a compassionate society

In recent years there has been an impressive coverage of the population with the Aadhaar Scheme and the Jan Dhan and related schemes for accidental disability, death and a contributory pension scheme. In addition, for quite some time, there has been a universal pension scheme for senior citizens meant to be available to all senior citizens who fulfill a means test. Access to the scheme is, however, extremely difficult. With the opening of Jan Dhan Accounts it should be possible to provide these pensions to eligible senior citizens via direct transfers to the Jan Dhan Accounts. The forthcoming Budget should make a clear provision for this universal pension scheme.

Please Note: This article was first published in The Freepress Journal on January 25, 2016. Syndicated.

This column, Common Voice is authored by Savak Sohrab Tarapore. Mr. Tarapore, is an economist and he runs his own Multi-Language Syndicated Column. Mr. Tarapore's other column, which appears in The Hindu Business Line, is titled Maverick View.


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