budget. Indian planning increasingly sees itself playing a classical Keynesian role of stimulating free enterprise growth and is dropping even its pretensions of seeking to redistribute income and help resolve the basic problem of the masses, poverty. That government planning has been able to do this is undoubtedly due to the favorable shift in the relationship of forces for the bourgeoisie, reflected primarily in the aftermath of the Emergency. Class imperatives of the Emergency The post-emergency political imperatives have been translated into the economic imperatives of the budget.
INDIA: BUDGET by M. NAVEED The JP (Jayaprakash Narayan) movement* revealed certain conflicts and contradictions within the bourgeoisie, albeit of a secondary character basically related to what would be the best political arrangements for providing unhampered capitalist growth. The swift action of the state in imposing the Emergency resolved the problem for the bourgeoisie, Conflicts and contradictions among the monopoly houses that had reflected themselves in separate political backings (for example, Goenkas's backing of JP and the support of the regional/middle bourgeoisies in many cases for the anti-Congress components of the JP coalition) disappeared overnight. The whole bourgeoisie has rallied to the support of Indira's Congress government, recognizing her success in pulling off the Emergency. To stabilize and consolidate this support and to take advantage of the conjunctural political and economic factors (reversal of inflation), the budget has granted widespread fiscal relief to the bourgeoisie in the hope of stimulating capitalist investment and growth. Apart from the big and middle/regional bourgeoisie, the regime has an important base in the urban petty bourgeoisie. This base act as a buffer between the ruling elite and the working classes. Prior to the Emergency, its support had been going to parties like the Jan Sangh (J5 - a fascist-type party based on Hindu culture and national chauvinism), whose chief potential was its trouble-making capacity for the ruling classes. This party, whose social base is the urban petty bourgeoisie, had been gaining strength and even making some inroads into the urban working class. Admittedly it offered no clear program, but then neither did any non-Congress party of the right or left. At least the Jan Sangh, along with the SP (a wing of which is engaged in underground terrorist activities) represented some form of organized opposition to the state. Its destabilizing and mischiefmaking capacity was clearly recognized, and this is *The Jayaprakash Narayan Movement, named after its founder and principal spokesman, was launched in 1974 in an attempt to build a massive opposition to the Congress party government of Indira Gandhi. In fact, the movement was a coalition of the Communist party (Marxist), the Socialist party, some splitoffs from the Maoist Communist party, the Jan Sangh, and sectors of a split from the Congress party. It aimed at overtaking the government among the population by basing itself on the discontent of the masses.
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INDIA why the post-Emergency, period has been primarily characterized by the imprisonment and hounding of the militants of the Jan Sangh/RSS (military wing) and the SP. The Emergency was welcomed by the social base of the JS - the urban petty bourgeoisie. But this welcome was based primarily on the "return to law and order," time, " and so on. The economic interests of the urban "no strikes, * the fact that "the trains are running on petty bourgeoisie had been marginally improved by efficient transport of goods for shopkeepers, etc., but they had not been directly influenced. The budget, therefore, had also to consolidate the gains among the petty bourgeoisie by economic handouts. This, too, was an economic imperative of the budget. Now let us look at the budget Itself. Taxation The most visibly striking feature of the budget is the dramatic reductions in direct taxation rates on personal income and in wealth tax. The reductions are of a progressive nature in that the better off one is the more one benefits. The maximum marginal rate of income tax has come down from 77% to 66%, and its level of application has been raised from 70, 000 rupees to 100, -000 rupees per year. For wealth tax, the highest rate is fixed at 2.5% and additional wealth taxes on urban lands and buildings have been discontinued. The measure of the new blatent orientation toward the rich and the middle class is best reflected in the fact that in the two years from 1974 to 1976, the MMR (maximum marginal rate) has been brought down from 97.75% to 66% and the wealth tax from 8% to 2.5%, with threshold levels raised in each case. The rationale provided for these cuts is that a more "realistic" tax structure will reduce tax evasion and lead to incentives for saving. What can one make of this rafionale? In one sense, it is obvious that the amount of tax evasion will fall. After all, if there are no taxes, there will be no tax evasion! The key concept here is the marginal propensity to evade taxes. For a higher collection of taxes to come about one has to assume that this propensity will decrease by a sufficiently large degree to counter the lower overall volume of taxes to be collected. The correctness of such an assumption lone must remember that it will not do if there is merely a fall in the marginal propensity to evade; the fall has to be of a sufficiently large amount) is purely speculative; given the whole trend of tax collection, it is a poor speculation at that.
Similarly, changes in corporate taxes are intended to provide incentives for savings and investments for growth.
These include:
1) An IA (Investment Allowance) of 25% for acquiring plant and machinery. The IA is to be granted to an extended range of industries comprising both a number of heavy industry core sectors and a number of consumer and small-scale industries.
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2) A previous surtax of 5% on companies to finance the Bangladesh excursion has been replaced by a scheme whereby the equivalent is paid by companies into the Industrial Development Bank of India (IDBI), which then has increased funds available for industry as a whole.
3) The threshold for surtax is raised by 5%.
4) Capital gains tax is reduced from 45% to 40%. Recent business delegations from West Germany and the United States have returned home highly satisfied with the talks they have had about the tax structure on foreign investment. The new budget has attempted to clear the decks for increased foreign investment and collaboration. Among its incentives are:
1) Negotiability of clauses concerning fixed proportions of output for export by foreign firms producing in India. Their export obligations (30% of output) can be negotiated downward so os not to compete with their exports from the mother country. Similarly, more profits can now be repatriated.
2) In order to attract foreign assets and investments of Indian residents abroad, wealth-tax exemptions and free clauses on loans, etc. have been created. Indirect taxes already bear the heaviest burden in filling the state treasury. Reductions in direct taxes have shifted the burden further onto indirect taxation, which by its nature fundamentally discriminates against the majority of poor people. Where excise duties have been reduced, they have been in durable consumer goods, which are luxuries for the vast majority. These are industries that cater to the urban elites of India and have been hit by declines in demand. Thus, automobiles, televisions, refrigerators, and so on have been granted significant cuts in excise duties so as to stimulate rich/ middle class consumption and thereby production in these industrial sectors. The government's overall strategy in reforming the tax structure in favor of greater inequality is evident: To increase the share of national income appropriated by the bourgeoisie and the middle classes. But this increasing of the share of the bourgeoisie and the petty bourgeoisie has two different aims. For the petty bourgeoisie, the budget is favorable in regard to consumption, that is, in providing a greater amount of disposable income, which will lead to a greater demand for durable consumer goods. Private savings among this layer is not considered the key basis for further investment.
For the bourgeoisie, both big and middle, the new tax structure has a twofold purpose: first, to increase disposable incomes and wealth holdings so as to provide incentives for furthering capitalist prosperity; second, to increase corporate savings and private investments, primarily through the medium of corporate taxation. In this context the most important measure is the 25% investment allowance, which will seek to promote rapid capital-intensive investment in plant and equipment
(since the lA is to come from increased profits). That this will only exacerbate the unemployment in this period of already high unemplayment is not a consideration of importance to the state.
It is on the expenditure side, however, that we begin to see the impact of the budget on the working class. Expenditure The planned expenditure is budgeted at 78, 520 million rupees. This is 32% higher than last year and represents the highest increment in any single year in Indian postwar financial history. But how has this increase of roughly Rs17, 000 million been covered, since additional taxation is bringing in only Rs4, 800 million? Well, the budgeted deficit is Rs3, 200 million, which, if the past two years is anything to go by, will in reality be doubled or trebled. There is another Rs4, 800 million that will come from impounding the Dearness Allowances of wage earners for another year. (The DA is a payment to wage earners indexed to inflationary rises in the general price level.) But in the case of Defense personnel, the DA was increased and paid out from September 1975, resulting in a deficit of Ral, 360 million in the defense budget, almost wholly due to the increases in DA and other allowances, This has been done at the same time that wage workers have been deprived of their DA and seen their bonuses slashed by half. The remaining deficit is to be financed by increased reliance on market loans, net profits of state enterprises, and increased dependence on foreign inflows. During the past three years, foreign inflows have gone up sixfold, to about Rs9, 400 million for 1975-76. So much for the alleged drive toward self-reliance! Examining the pattern of public expenditure provides further insights into government strategy. While the tax reliefs of the government's budget have been aimed at providing incentives to the bourgeoisie as a whole, the expenditure has been geared specifically to the needs of the big bourgeoisie. If planned expenditure for Defense (R$25, 440 million), petroleum (Rs4, -850 million), steel (Rs4,020 million), transport and communication (Rs5, 970 million), coal (Rs2,770 million), and fertilizers (Rs4, 340 million) are added up, we find that two-thirds of total expenditure hai been allocated to Defense and the primary sector. In other words, state expenditure has been geared above all to providing a market for the private sector industries producing heavy "capital goods" required by the state. The government has sought to ensure that profits will accrue to the big bourgeoisie and that some of the excess capacity in the capital goods sector will be utilized When it is remembered that agriculture is the base of the Indian economy and that Indian poverty cannot be eradicated without agricultural prosperity, the orientation toward industry is a blatant abdication of the government's professed responsibilities to the masses. Agriculture is the basis for prosperity, and what is the government's record? Examination of statistics shows that the rate of growth of agricultural production has decreased in both aggregate and per capita terms. Aggregate percentage increases per annum have fallen from 3.2% for the pe 1951-52 to 1963-64, to 2.3% for the years 1963-64
1975-76. Per capita increases over the same period have fallen from 1.2% to 0.4% per year. When the growing inequalities are taken into account, it is not surprising that relative and absolute levels of poverty have increased. How has the budget followed up the much-vaunted 20-point program with regard to the tasks in agriculture? The budget's key idea in this sphere is its "Strategy for Integrated Rural Development. " What is this "bold, decisive initiative" hailed by bourgeois commentators? More rhetoric about radical transformations? Partly, but not entirely. The rhetoric about the need for "radical practices and radical transformations" is there, but it belies even its name in that no specific strategic policies have been put on paper. What this "Strategy for Integrated Rural Development" amounts to is to provide a new approach to formulation of strategies for better utilization of resources and to evolve new techniques - nothing more than the hoary story of governmentsponsored research into development strategies cloaked in a new garb to justify the umpteenth repetition of the exercise. How much has the budget allocated for this "breakthrough"? Rs150 million, or one-tenth of one percent of total government expenditure! Naturally, the only concrete benefit of this allocation will be to provide incomes for middle class intellectuals and bureaucrats engaged in this research. An interesting point in the budget is its almost total orientation to the urban rich and middle classes and the virtually complete neglect of the rural area. While the government has not ceased its policy of trying to woo the middle peasantry as a buffer against the poor peasantry and the landless laborers, this budget has not made any significant allocation to cover the needs of the rich and middle peasantry. It was expected that rich peasants might gripe over the recent fall in food-grain prices, although the government maintains a level of grain procurement prices. But no solutions have been put forward specifically and directly to help the rich and middle peasantry. There is a minimal allocation for rural-based and small-scale labor-intensive industries, but they are minimal and the government has apparently made a conscious decision to maintain high unemployment levels in villages and towns as a hedge against further inflation. Government strategy is now more clear. It has opted for industrial growth through low agricultural prices, with exports and higher urban incomes providing the main markets for this increase in production. The strategy with regard to the rural elites is a combination of 1) credit policies of the 20-point agricultural program and the nationalized banking system to provide funds for capitalist investment and increases in rural incomes through increased production rather than higher prices; 2) Increased production of durable consumer goods to attract the incomes of the rural rich. But since the government is aware that an internal market cannot be sufficiently enlarged without rodical income redistribution, it has re-emphasized exports as the way to utilize excess industrial capacity. The orientation of the budget
can be said to confirm and indeed strengthen a shift of power toward the industrial bourgeoisie in its alliance with the rural rich peasantry and landlords. Prospects The major doubt in the minds of the bourgeoisie and the state as they seek to capitalize on the temporary passivIty of the mass movement centers on inflation. The government's success in reversing inflation was due to two factors, neither of which will necessarily persist: First, the accidental factor of exceptionally good weather and lack of monsoons led to record levels of output; second and most important, as the bourgeois Acting Director of the Bombay University Economics Department, Professor Brahmananda, said, "It was the immobilization of the growth rate of money incomes of about 20 million workers predominantly in the organized secfor that has done the trick." The shrinkage in the real incomes of wage earners had two effects. First, by reducing capitalists' outlay on variable capital it increased the amount of surplus value at their disposal. Second, the shrinkage necessarily affected the prices of wage goods, indirectly cheapening the costs of reproduction of labor-power and partly reconciling the mass of workers to their present conditions. Thus, the bourgeoisie hos a class interest in preventing rising inflation and possible rumblings of the mass of workers, even in an unorganized spontaneous manner. The maintenance of high unemployment levels, regular retrenchements and layoffs (more than 150, 000 layoffs in West Bengal between June and December 1975) is their chief weapon against the rising militancy of workers in response to future inflationary rises. These inflationary tendencies are built into the budget, Government expenditure can be covered by non-inflationary means only if adequate savings are generated. Moreover, the emphasis on reducing imports means that even this "leakage" is to be stopped up. A little arithmetic will clarify the issue. Goverment expenditures of R$78,000 million must be covered by domestic savings and foreign transfers. Assuming that injected foreign resources will be R$18, 000 million (which means increased aid with all its distorting effects on the economy), then Rs60, 000 million must still be covered. If we postulate a 5-6% growth rate in national income (to Rs670, 000 million), then Rs60, -000 million is 9% of this. Private corporate savings are of course separate. Therefore, public savings and financial savings of the household sector must total 9%. For this, agricultural production must increase by 5%, or double the yearly average for the last decade, and industrial production by 8% per year. But as we have already seen, agriculture has been entirely ignored. Any shortfalls will have to be filled in by the other important pillar in the government's growth strategy: the inflow of foreign resources through aid and investment to cover an estimated 20% of savings/investment needs through joint ventures, collaborations, etc. Hence the new open- door policy to the West, which accounts for an overwhelming majority of aid and investment (the Soviet
Union and India are involved in increased trade, but not aid and investment).
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This striking confirmation of the increasing interpenetrotion of foreign and domestic copital, with the state as an ever more benevolent overseer, is further proof of the bankruptcy of any theory that seeks to distinguish • "progressive" national bourgeoisie from a pro-Soviet state dominated by "social imperialism. " Polifical namecalling has not prevented India and the United States from strengthening their economic fies in the post-Emergency period. The government's non-inflationary hopes thus rest on five assumptions: 1. That the overall growth rate in the economy will be on the order of 5 or 6%.
2. That agricultural production will be double the yearly average for the last decade at 5%.
3. Industrial production to grow at 8%.
4. Injection of foreign resources to the tune of 20% of the budget's expected outlay.
5. Continuing passivity of the mass movement, particularly the workers of the organized industrial sector. To this end, the government, apart from maintaining high unemployment levels, is embarking on a direct confrontation with the trade-union organizations of the workers that are outside the control of the Congress party. In this maneuver it is operating on both the legal and the extralegal level. On the legal level it is about to promulgate legislation withholding the right of recognition to any trade union that does not meet arbitrary conditions laid down by the government. On the extralegal front, the Congress youth, in alliance with openly reactionary parties, like the Shiv Sena in Maharashtra, is acting os a battering ram in physically intimidating and destroying trade unions not controlled by the government.
In conclusion, the prospects for the state's helping to consolidate bourgeois rule for a prolonged period of capitalist growth depend on a combination of structural and conjunctural factors. Among the key structural factors are, first, a period of world capitalist prosperity without fear of a serious downturn during the next couple of years so as to provide the necessary market for increasing exports and opportunities for outside capital to flow into the country in response to a rising rate of profit. Second, that the passivity of the mass movement continues out of fear of unemployment and the widespread repression now going on. Among the other factors the most important is the bourgeoisie's hope that the rampant inflation of the previous decade will not rear its head to imperil the gains that have been newly acquired.
For revolutionary Marxists the organization of the proletariat around demands for the restoration of basic democratic rights to organize, strike, and hold meetings, along with demands for wage increases, will be the first step in the march to generalize the struggles of the working classes and their allies, to throw off once and for all the burden of repression that has descended onto their shoulders. O
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