Millennium Post

Hitting the poor, pampering the rich

Scorched earth, is the kindest phrase to describe the approach of the last budget (rather, vote-on-account) of the United Progressive Alliance (UPA) in its inglorious second term. Finance minister
P Chidambaram savaged social sector spending, severely cut capital expenditure, pampered the elite, and left an ugly mess for his successor.

The Rs 1.5-lakh-crore cut in plan expenditure, which represents productive investment, will impoverish the infrastructure and affect growth. But even more unkind is the 31-per cent reduction in the current financial year’s allocation to schemes which benefit the poor and address long-neglected areas like health and education.

The budget for mid-day meals was slashed by 11 per cent, school education by seven per cent, sanitation by 46 per cent, rural drinking water by 12 per cent, and the National Health Mission by 13 per cent.

Worse will come in the new fiscal year. The health and education sector allocation will fall by three-fourths, the agriculture budget will be halved, and rural development will get less than one-tenth of what was budgeted for the current year!

True, some money will be transferred to the states, but there will be an overall decrease in social spending. The Centre will have effectively washed its hands of its duty towards the poor.

Deplorable as this is, Chidambaram tried to win middle-and upper-class support by reducing excise duties on a range of consumer durables: from refrigerators and airconditioners to washing machines, DVD players, microwave ovens and vacuum cleaners. Computers/laptops too will become cheaper.

Similarly, Chidambaram tried to please nearly one million middle-class students by waiving interest on pre-March 2009 education loans. He targeted 2.5 million ex-servicemen through the one-rank-one-pension scheme. He also set up a Rs 200-crore venture capital fund for Dalit entrepreneurs – another upper-class target.

However, all these freebies pale beside the generous across-the-board excise duty reductions ranging from four to six per centage-points on two-wheelers, trucks and cars, including big cars and sport-utility vehicles (SUVs). The duty-structure is regressive: the larger and costlier the vehicle, the higher the cut! Thus, two-wheelers will be cheaper by Rs 1,100-3,000. But an entry-level Nano will cost Rs 4,500 less, a Maruti Alto Rs 10,000-12,000 less, and a Maruti Swift Rs 15,000-24,000 less.

Mid-sized sedans, a fast-growing market segment, will be cheaper by Rs 24,000-36,000. SUVs are favoured even more. A Mahindra Scorpio will cost Rs 24,000-34,000 less and a Toyota Innova Rs 50,000-76,000 less. And upper-end cars like Mercedes and Audi will cost Rs 2-4 lakhs less. Never before has India seen such concessions for the automobile sector – not even five years ago when the Tata Nano was launched, facilitated by a massive excise duty cut. These cuts are only partially meant to boost the auto industry, whose sales have dropped somewhat over the past year. An equally important motive is to cultivate a middle-class or upper middle-class constituency for the UPA. Cheaper cars can create a ‘feel-good’ sentiment in the elite – although it’s doubtful if that will significantly improve the UPA’s electoral chances.

Indian society will pay dearly for this artificial state-induced automobilisation – through greater road congestion, slower commuting speeds, horrendous levels of air pollution, widespread health damage, and increased fatalities and injuries from road accidents. India has one of the highest rates of deaths from road accidents, estimated at over 1,40,000 a year – or about the same as deaths from AIDS-related causes and twice higher than mortality from pulmonary TB. Road accidents in India claim one-fourth as many lives as cancer. India’s mortality rate per 10,000 vehicles is a high 10.5, compared to less than two in the developed world.

Indian cities are among the dirtiest and most congested in the world. The distinction of being the world’s most polluted city no longer belongs to Beijing, but to Delhi. Delhi’s PM 10 (particulate matter of dimensions less than 10 microns) and PM 2.5 (less than 2.5 microns) levels routinely exceed 200 or even 300 units. The World Health Organisation-prescribed ‘safe’ limit is 25 units.

Other Indian cities too have extremely high air pollution levels, especially of PM 2.5 which readily penetrates the lungs. More than a third of children in India’s large cities suffer from respiratory problems or asthma, which lower the quality of life. Cars, which account for less than 10 per cent of commuter trips in Indian cities, contribute roughly three-fourths of the urban air-pollution load. Car sales have been rising by 10 per cent or more every year for the past two decades.

The proliferation of cars is driven by consumerism, the elite’s search for a ‘status symbol’, neglect of public transport, and relatively low-interest bank loans. Thanks to proliferation, most Indian cities suffer high and rising levels of traffic congestion, which impedes the movement of buses and private vehicles, causing an enormous waste of social time.

The government is promoting cars as part of its Automotive Mission Plan 2006-2016, which wants India ‘to emerge as the destination of choice in the world for design and manufacture of automobiles and auto components’. This flies in the face of all rational urban transport priorities.

Cars are the most inefficient, expensive and polluting mode of road transport ever invented. In India, their ownership is under 10 for every 1,000 people. Yet they occupy the lion’s share (75 per cent) of road space but meet only about five per cent of the travel demand. Buses, by contrast, occupy 5-7 per cent of space but deliver 45-60 per cent of commuter trips.

This is unacceptably iniquitous.  India must correct course at once by adopting policies similar to those tried out in Singapore, Shanghai and Beijing, including taxing cars heavily, limiting/auctioning the additional licence plates issued annually, restricting sales only to those with proof of parking-space ownership, banning use of even- and odd-numbered cars on alternate days, levying high deterrent-level parking fees and extending vehicle-free zones.

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