Tax-and-spend policies killing rural India

According to all indications the Union Budget for the year 2008-09 scheduled to be presented to Parliament and the people almost a week before this March issue of EducationWorld hits the newsstands, will offer a large number of sops and concessions to Indiaƒšžs 700 million heavily indebted and suicide-prone farmers who to all intents and purposes seem to have been entirely bypassed by shining Indiaƒšžs miracle economic growth story of the past 15 years. The new fiscal year beginning April 1 is a general election year. And when itƒšžs time to go to the hustings, the countryƒšžs forgotten farmers who constitute over two-thirds of the electorate, loom large in the minds of all politicians. The standard response of governments at the Centre and in the states to the spate of farmer suicides across the country is to proclaim new credit packages, reschedule bank loans and offer loan waiver schemes in badly hit parts of the country. But these standard responses are of limited value because largely illiterate farmers shun paperwork-intensive nationalised banks. Surprisingly Indiaƒšžs famous economists of international repute seem unable to grasp the self-evident structural problems of rural India ƒš‚ mass distress selling of farm produce because of the lack of storage facilities, poor rural-urban connectivity, and high transport and farm input costs. The utter insensitivity of the Delhi durbar, notable for its conspicuous consumption and waste of taxpayers money, to the impact of its tax-and-spend policies upon the silent majority in rural India, is highlighted by the recent decision of the Union cabinet to raise the price of diesel and petrol by Rs.2 and Re.1 with effect from February 15. This ill-advised hike in the prices of motor fuels rationalised by the rise in price of crude oil in the international market to $100 per barrel, has been silently accepted ƒš‚ even welcomed ƒš‚ by shining Indiaƒšžs prosperous urban middle class without care for its effect upon the countryƒšžs already over-burdened rural majority. The plain truth glossed over by the glamour-obsessed middle class media is that even at currently ruling crude oil prices, shorn of all taxes and imposts, the ex-refinery, pump-site cost of petrol priced at Rs.54 per litre (in Bangalore) is a mere Rs.20. The remainder of motor spirit prices payable by hapless citizens accrue to the Central and state governments by way of customs, excise, sales tax, and sundry cesses aggregating a humungous Rs.155,000 crore per year (exclusive of additional revenue accrual following the latest price hike). Instead of raising petrol/diesel prices to protect their revenue, most of which is recklessly spent on non-productive establishment expenses, why canƒšžt the Central and state governments cut down their revenue expenditure, i.e on foreign junkets, motor-car cavalcades, lavish perquisites of office, support to loss-making public sector enterprises etc? Why should budgetary adjustments to accommodate higher motor fuel prices be made only by citizens, particularly the poor? The answer to this question provides the explanation for the pitiable condition of the overwhelming majority of rural Indiaƒšžs 160 million suicide-prone…