Even though there are plentiful food stocks with the Government and data show that rural poverty is on the increase, the Finance Minister has made a large cut in food subsidies. As a result,, households below the poverty line would now have to pay nearly two=thirds more for wheat and nearly half more for rice purchased under the PDS. It is claimed that the doubling of the allocation for BPL households from 10 to 20 KGS per household would benefit them, but in the context of this sharply rising price, their real purchasing power would be hit adversely. Even the prices paid by the population above the poverty line would also go up because of the decisions to charge economic cost for PDS foodgrain, while items like sugar have been removed from PDS for those above poverty.

The Budget also undermines the viability and potential for growth of foodgrain cultivators, who have already been adversely affected by a number of recent economic processes. In addition to PDS foodgrain, fertiliser prices are also to be increased in order to cut subsidies, even though such subsdies together represent only 1.5 per cent of GDP at present. Furthermore, public outlays on agriculture and rural development are being reduced. The Finance Minister has also declared his intention to put further pressure on rural residents by introducing cost-based user charges for water and electricity. While being squeezed by higher costs and lower levels of public outlay, cultivators are also to face more severe import competition in future. This is because most agricultural products are to be put on the free import list from April 1, 2000, and the Budget has even lowered the maximum import duty from 40 to 35 per cent.

The rise in food prices will be accompanied by an across-the-board increase in the prices of many essential commodities, for which the excise duties have been doubled from 8 to 16 per cent because of "rationalisation". Once these are joined by the increases in prices of kerosene and cooking gas, which had been deferred because of local body elections in some States, ordinary people will face much higher prices of most essential goods..

These cuts and regressive forms of taxation are being accompanied by cuts in important areas of government expenditure such as agriculture and rural development. Already in the previous two years there were significant short falls in plan outlays relative to budgetary targets in most sectors. In the coming fiscal year, almost all of the increase in government capital expenditure is taken up by defence alone, so that these material burdens on the people are to be spent almost entirely on adding to the means of waging war.

The buiggest single item in this budget is interest payments, which amount to aalmost as much as the overall fiscal deficit and as much as one-third of the total expenditure of the Central Government. Interest payments are high not only because of past debt, but because the financial liberalisation measures over the past decade have meant very large increases in the interest rates payable by the Government. As a result, the Government is now borrowing simply to repay debt, a process which is inherently unstable.

Despite this adverse consequence of such liberalisation, the Finance Minister now proposes to make matters even worse through further financial deregulation. A range of measures for the financial sector is likely to increase financial fragility and further tighten the hold of financial speculators over our economy. Capital flows may become even more volatile as a result, and domestic companies are now more free to send their capital abroad or to borrow without concern for the need to repay in foreign exchange. Foreign investors can now hold more shares in Indian companies. This is the path that was taken by the Southeast Asian economies in the early 1990s, with dire consequences that are now well known. But it seems that this government has not learned from that unfortunate experience.

Even the nationalised banking system is sought to be removed from the public sphere, as public shareholding is to be reduced to 33 per cent. As a result, the Parliament and people of the country would lose control of the financial system. This is to be further emphasised in a proposed Bill to give autonomy to the Reserve Bank of India.