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a rise in prices and upsetting the economic apple-cart. The internal debt is of the order of Rs. 2.4 lakh crores. This takes aways a lot of our revenue by way of interest payments. The external debt is of the order of Rs. 1.4 crores. This takes away 30 percent of our export earning towards interest payment. There is unemployment and about five crores of people are unemployed in our country. All our plans for employment generation have been futile. We have not been able to solve this problem at all. There is poverty. According to one estimate, nearly 30 crores of people are living below the poverty line. With the rise n prices, fall in value of the rupee and fall in real income, more and more people are being pushed below the poverty line. Finally, there is balance of payment crisis. Our exports are rising at the rate of 18 percent; the imports are rising at the rate of 22 percent and this gap causes the balance of payment crisis. The foreign exchange reserves are not sufficent to meet even three weeks import bill.

Therefore, the country has to go to the IMF for a loan surrendering our soverignty, selling our soul

Sir, the Finance Minister was also pleased to pledge our precious gold to the Bank of England to get money to meet our balance of payment crisis. So, these are the problems the country is facing now.

Will the Budget be able to solve this crisis? The answer is 'no'. How ? The Budget deficit is of the order of Rs. 7,700 crores. This deficit will not be contained at this figure. This deficit will, I am sure, bulge into at least Rs. 10,000 crores by the end of the financial year. This deficit is to be financed by money creation and by domestic borrowings. When money is created, surplus money expands. Again real balance effect comes into operation causing excess demand and rise in prices. Secondly, the Government borrows money to finance its deficits. This is also inflationary because fiscal theorists have said that domestic borrowing causes rise in interest payments. That causes rise in expenditure; that widens the deficit which is again inflationary.

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Therefore, on the side of money creation and on the side of interest payment of public debt, there is inflationary effect on the economy.

Can we resolve the unemployment crisis ? I do not think so. In spite of the several plans of generating employment, those plans have not touched even the fringe of the problem. That is because, there is excessive supply of labour, due to population growth. There is surplus labour which is expanding at a faster rate. Therefore, due to excessive supply of labour, employment-generating plans for removing unemployment have proved a failure.

Despite our plans like garibi hatao,bekari hatao poverty still persists in the country. As I told you, the number of people below the poverty line is in the neighbourhood of 30 crores. With the rise in prices, fall in the value of money, With fall in real income, more and more people are coming below the poverty line. They constitute the weakest sections of the society leading a life of misery, deprivation and starvation. The Budget is not able to solve this problem also.

What about balance of payment position ? The country has gone in for devaluation twice. The question is, can devaluation solve the balance of payment crisis ? I do not think so. Devaluation is a highly technical subject and it cannot be expressed in simplistic terms. When the currency is devalued, it is assumed that in theory, exports rise and imports fall. For this reason, when currency is devalued, the quantum of import falls, if demand is elastic. In the same manner, export prices fall and the volume of export rises, foreign demand being elastic. But in the case of India, India being capital goods importing country, technology importing country, India being essential raw materials importing country which are not available in the country, India being petroleum products importing country as those products are not available in sufficient quantity, the demands for these goods are inelastic. Therefore, when the currency is devalued, what

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happens is that the demand for import will not fall but the value of imports rises, even though the quantum is constant. There will be a rise in import value and consequent price rise.

On the export front, exporters do not export to the extent expected because our export goods lack quality and price competitiveness. In the short-term, they are not able to stand international competition also. In Economics,it is called J-Curve effect.When the currency is devalued, trade gap widens before the position improves and in the short-term, the consequence of this effect is Jeficit in the balance of payment. Therefore, the Budget does not bring down the supply of money. The supply of money rather expands. It does not bring down the price level. It does not help to eradicate black money. It does not alleviate poverty; it does not alieviate unemployment and so on.

The Finance Minister has used the ingenious skills for controlling black money operations. In 1990-91 Budget, Prof. Madhu Dandavate gave the same scheme. This is a re-designed scheme of the old one. The scheme is that those who are holding black money are induced to invest that black money in housing activities. Now how would you induce them to do it ? In the first place, if the black money holders are given an assurance that they would not be penalised for holding black money, they will do it. But where is the guarantee that the next Government-which may be BJP Government-would not take action against them. In the second place, even if the Government does not take any action against them, there is the danger of charging the black money holders as thugs. Are they prepare to face those charges ?

Even if they invest the black money, the induction of black money into the economy will raise the level of prices. Black money is idle and its velocity is zero. When it comes into circulation, its velocity becomes positive. Therefore, the rise in velocity will have the same effect on the price level as a rise in the supply of money. It will raise

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the price level. Therefore, induction of black money into the economy will have an inflationary effect.

Now, the Budget in all these aspects has got an in-built inflationary potential in spite of the fact that the Government is giving assurance that the object is to reduce the level of prices.

Now the Finance Minister talks of the Nehruvian line of development. The Prime Minister also said some time ago that his Government would pursue the Nehruvian line of development. What is this line? In my opinion, Nehruvian line has led the country to a great disaster. It is responsible for all the ills which the country is facing now. I will tell you how.

The First Five Year Plan was a grand success. It was a farm- oriented Plan. There was a fall in prices. There was also a surplus in the balance of payments during the First Plan period. In 1954, Mr.

Chow Enlai visited India and spent about ten days in India and while going back invited Panditji to visit China. The following year.

Panditji to visited China and he was taken round the Chinese industrial complexes. Nehru was deeply impressed with the Chinese economic advance. Nehru was told that the Chinese Plan was based on the Russian Plan which was based on Feldman model. On his return to India, Mr. Nehru called his Economic Adviser Mr. Mahalanobis and asked him to prepare the Second Five Year Plan on the lines of the Soviet model and the Chinese model. The Plan was prepared and it was foisted on the nation. At that time, Shri Jayaprakash Narain said "The Plan was prepared behind the iron curtain". Whatever it was, the Plan created the inflationary crisis and balance of payment crisis when it was half-way through and, therefore, the Plan had to be pruned. That was because of the fact that the Plan was heavy industry-oriented.

Agriculture was given secondary role and the first place was given to heavy industry. When the Plan was being finalised, Prof. Kaldor of Cambridge came to India and prepared his report on India's tax reform and before leaving for London, he was invited by the Planning Commission for tea.

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There he made a casual remark that "The Second Five Year Plan is badly conceived. The nation is not able to digest deficit financing of Rs.

800 crores for five years of Rs. 160 crores per year." The Second Five Year Plan was a failure. The Plan was pruned and it was cut to size.

Prof. Colin Clark of Oxford published a pamphlet called "Growthmanship" where he said that "Pandit Nehru in an extraordinarily foolish statement said `We must produce machines to produce machines'." India was not able to digest this kind of a Plan.

Therefore, what I am trying to say is that the Nehruvian line of development has generated this crisis, inflation crisis and the balance of payment crisis. These two crisis persist even now.

To adopt Nehruvian line would be disastrous to the country. To adopt the BJP line as stated in the BJP manifesto, would be desirable as it makes India a land of flowing milk and honey.

I would like to offer two suggestions to the Finance Minister.

According to growth theorists, the rate of growth depends upon net new investment which depends upon savings. The effect of savings is to reduce inflation in the economy and to supply resources for investment. 80 per cent of the savings are done by small savers and the middle income savers and it has been proved empirically that savings respond positively real interest rate. Real interest rate is money interest rate adjusted for inflation in the economy. When money rate rises at a faster rate, than the inflation rate, real interest rate rises and induces more savings. The rise in savings cause a fall in the level of prices and it supplies resources for investment which promotes growth.

Secondly, the controversial issue with which the public are concerned is incometax exemption limit. In the 1989-90 Budget, the limit was Rs. 18,000. In 1990-91 Budget, Prof. Madhu Dandavate raised it to Rs. 22,000. This is too little because even if a family gets Rs.

3,000 p.m., after meeting all their essential require-

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ments, they will not be able to make both ends meet. Therefore, it is necessary to raise the exemption limit to Rs. 48,000. Therefore, the BJP examined the issue and came to the conclusion that the incometax exemption limit should be raised to Rs. 48,000. Therefore, in these days of rising prices, falling value of the rupee, people are suffering in misery and hence I request the Finance Minister to raise the exemption limit to Rs. 48,000 as recommended by the BJP.

Therefore, all that I say is that this Budget is not able to contain or resolve the crises which have already been mentioned and they are so deeply entrenched and, so pervasive that the fiscal exercise in the Budget cannot solve them. What is necessary is restructuring of the fiscal structure, fiscal policy and so mere beating about the bush will not do.

[Translation]

SHRI SUKH RAM (Mandi) : Mr. Chairman, Sir, I support the Budget presented by the Hon'ble Finance Minister in the House. Everybody knows that the present economic crisis is unprecedented since independence. In these circumstances no Budget can be better one than presented by the Finance Minister. Efforts have been made in the budget to bring down the gap between income and expenditure from 8.5 per cent G.D.P. to 6.5 per cent by cutting the expenditure and increasing the income and its credit goes to the Finance Minister. It is better in the sense that direct taxes have been given more attention. Taxes have been increased on those items which are used by that section of the society which is in a position to pay the taxes.

So far as poor are concerned, the prices of kerosene oil and diesel have not been increased. Subsidy on food items has been increased but prices of the items of daily use of the poor people have not been increased.

SHRI SURYA NARAYAN YADAV (Saharasa) : I have a point of order.

Hon'ble Member says that subsidy on fertilizers has been increased but it is reduced by 40 percent.

MR. CHAIRMAN : No point of order.

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SHRI SUKH RAM : Hon'ble Minister has said in his speech that such a big gap cannot be brought down in a year. It will take two to three years. Our efforts are to bring this gap down to less than 5 per cent.

I think the entire House should appreciate and support this budget. It is said that the budget is inflationary. But do not think so because the prices of items of daily use of poor people have not been increased. It will reduce the current account deficit, budgetary deficit and fiscal deficit by reducing the money supply. Last year, the consumer price index was 13.5 per cent. It is proposed to bring it down to 9 per cent this year. Therefore, the question that rate of inflation will increase, does not arise. It is also said that the economy of the country has been mortgaged to I.M.F. But I would like to tell my Hon. friends that it is not true. The subsidy has been increased from rupees 22 hundred crores to rupees 26 hundred crores.

The budget plan of this year has been increased by 11 per cent. If we were dictated terms by I.M.F. it would have also been reduced. It is also said that the Budget is not joboriented. Alongwith increasing the budget plan by 11 per cent, the Hon'ble Finance Minister has done a marvellous job by withdrawing the excise duty on agriculture based industry, whether it is jam or jelly or dry-fruits. It will promote industralisation and agriculture. Therefore, the Budget is job- oriented one. In the speeches, it has been said that we have tidden good-bye to the policies of Pt. Jawaharlal Nehru so far as public sector and private sector is concerned. But it is wrong. Our mixed economy is based on the policy of Pt. Nehru. I would like to tell my friends that the country which has a population of 24 crores and an area of 1/6th of the total area of the world, has to import foodgrains from the European market even after 80 years of the revolution. On the other hand our country's population is 35-86 crores. We had to face a severe drought in 1986-87 but we did not import foodgrains, did not beg before any country and met the foodgrains requirement from our buffer stock. All this happened due to our policy. What more clarification do you want regarding our policies.

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SHRI BHOGENDRA JHA (Madhubani) : Mr. Chairman, Sir, it seems that our friends have been influenced by misleading argument of the Hon'ble Finance Minister. The population of U.S.S.R. is 27 crores and they produce 26 crores tons of foodgrains, even then they are starving. Our country's population is 85-86 crores and we have never produced foodgrains more than 17 1/2 crore tons.

17.55 1/2 hrs.


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