The Opposition parties have charged the government with 'failure' to check rising prices and demanded a Parliamentary probe of the ‘scam’ in pricing of essential commodities like wheat, rice, pulses and sugar
The Opposition parties on Thursday sought to puncture the economic growth story, charging the government with "failure" to check rising prices and demanding a Parliamentary probe into the "scam" in pricing of essential commodities like wheat, rice, pulses and sugar, reports PTI.
Launching a scathing attack in both Houses of Parliament on the issue of price rise, the Bharatiya Janata Party (BJP) and the Left coalition alleged that the United Progressive Alliance (UPA) was indulging in a blame game instead of controlling runaway inflation, particularly of food items.
After stalling proceedings for two days on the issue, the Opposition mounted a fresh offensive on the government through a structured debate simultaneously in both Houses, skipping the customary Question Hour.
The government came under attack on a day when the pre-Budget Economic Survey painted a rosy picture of the economy, projecting GDP growth of 7.2% for the current financial year and 8.75% in the next fiscal.
Despite some measures like export checks and import liberalisation, food inflation is ruling at 17.58%.
Leading the attack in the Lok Sabha, Leader of Opposition Sushma Swaraj said, "We demand a Joint Parliamentary Commission (JPC) to enquire into the scams in wheat, rice, pulses and sugar". She said the probe should find out why decisions which led to "scams" were taken.
She quoted a Bollywood film dialogue about 'maal idhar se udhar karna' (wheeling-dealing) and said "the government is doing this and the matter should be investigated".
Ms Swaraj claimed the government imported and exported sugar ‘simultaneously’. The sweetener was being exported at Rs12.5 per kg and imported at Rs36 per kg at the same time. She said total profits of the 33 listed sugar mills jumped from Rs30 crore in October-December 2008 to Rs901 crore in the same period next year. "It is a jump of 2900%. This is a scam and it needs to be investigated," she said.
Ms Swaraj said the Food Security Bill would be a futile effort if the government did not have correct figures of those who should be covered under it.
In the Rajya Sabha, leader of Opposition Arun Jaitley said the situation reflected ‘complete inaction’ of the Manmohan Singh government and lack of coordination between the Prime Minister's Office and various ministries.
Mr Jaitley said the statement in the Congress mouthpiece, Congress Sandesh, that “some practical difficulties in coordination between the PMO and various ministries are natural in a coalition government” was a confession of lack of cohesion between ministers responsible for controlling prices.
"Leadership is not an art of making compromises for the sake of coalition. We cannot live with a system where PMO feels helpless," he said.
Slamming the Union government for indulging in a blame game over the rising prices, the Left said the government will have to make a policy shift to arrest the situation, which it termed as a fall-out of economic liberalisation.
"Government is not ready to accept its failure but only engaging in a blame game. Do not make it an issue of ego. You will have to make a policy shift," Brinda Karat (CPI-M) said.
Alleging a scam in sugar prices, she said the government's "manipulative policy" is responsible for it and demanded constitution of a JPC or a white paper to "expose this and make someone accountable".
She alleged that sugar millowners profited hugely at the cost of farmers and consumers.
Pranab Mukherjee will present the Budget for 2010-11 on Friday amid speculation that taxes may be raised as part of a partial rollback of stimulus prescribed by the government's advisers.
Finance minister Pranab Mukherjee will present the Budget for 2010-11 on Friday amid speculation that taxes and duties may be raised as part of a partial rollback of stimulus prescribed by the government's advisers, reports PTI.
However, direct tax rates are not likely to be altered for the time being as the finance ministry is likely to wait for implementation of the Direct Tax Code from 2011-12 before initiating any change.
The Direct Tax Code, which will replace the archaic Income-Tax Act, is unlikely to come in the Budget session, sources said.
The debate on withdrawal of stimulus measures introduced in the wake of the global economic slowdown since late 2008 intensified on Thursday with the Economic Survey of the Finance Commission favouring a gradual rollback of stimulus to check strains on government finances, but India Inc wanted the sops to continue to push up economic growth further.
The Economic Survey tabled in Parliament on Thursday suggested that stimulus be withdrawn gradually, since the economy is on the rebound and the growth is broad-based.
"The broad-based nature of the recovery creates scope for a gradual rollback, in due course, of some of the measures undertaken over the last 15 to 18 months," said the Survey.
The Finance Commission also recommended "a calibrated exit strategy from the expansionary fiscal stance of 2008-09 and 2009-10."
Last week, the Prime Minister's Economic Advisory Council had pitched for raising excise duty to the level of service tax and broadening the service tax net as part of stimulus withdrawal. Currently, excise duty stands at 8% and service tax at 10%.
However, the industry is of the view that the government should continue with these incentives in the upcoming Union Budget to ensure high economic growth.
"For higher growth, the government will have to adopt a calibrated approach and continue with stimulus package for at least another fiscal," Assocham president Swati Piramal said.
FICCI president Harsh Pati Singhania said: "Government should continue with stimulus measures, as the growth in the industrial and export sector is mainly because of this support."
A roll-back of stimulus basically means raising of indirect taxes, which were reduced earlier, and compressing expenditure.
In the wake of the global financial meltdown, the Union government reduced excise duties by 6% and service tax by 2%, besides stepping up plan expenditure to provide Rs1,86,000-crore stimulus to accelerate the country's economic growth.
This has helped economic revival, with GDP growth galloping to 7.9% in the second quarter of this fiscal, compared to 6.1% in the previous quarter and 5.8% each in the preceding two quarters. This year, GDP growth is pegged at 7.2% against last year's 6.7%.
However, the stimulus measures also widened the fiscal deficit to 6.2% of GDP during 2008-09, from the Budget estimate of 2.5%.
The fiscal deficit is projected to widen to 6.8% in the current fiscal.
The Economic Survey predicts 8.75% GDP growth in 2010-11 while recommending a gradual roll-back of stimulus— a move that could entail a hike in excise duty and service tax.
A day before the general Budget, the Economic Survey of India on Thursday predicted 8.75% GDP growth in 2010-11 while recommending a gradual roll-back of stimulus—a move that could entail hike in excise duty and service tax, reports PTI.
Warning that high double-digit food price inflation could lead to higher-than-anticipated general level of inflation, the Survey called for effective steps to be taken to remove supply-side bottlenecks, together with other policies.
The Survey said the government policy, other calibrated measures and tax relief contained in the stimulus measures have helped the economy shrug off the effects of the slowdown triggered by the global financial meltdown in 2008.
The buoyancy in the economy, in tandem with reforms, would make India possibly the fastest-growing economy in the next four years, it said, while recommending that there was a need for improving the government’s financials by way of rasing tax and non-tax revenues and containing the Budget deficit.
Last week, the Prime Minister's Economic Advisory Council too had suggested a partial roll-back of stimulus measures, including raising excise duty and service tax rates.
The Survey also echoed this view: "...The broad-based nature of the recovery creates scope for a gradual rollback, in due course, of some of the measures undertaken over the last 15-18 months... so as to put the economy back on to the growth path of 9% annually."
The economy is projected to grow by 7.2% this fiscal, with industrial and services sectors growing at 8.2% and 8.7%, respectivelly. Full recovery is likely over the next two fiscals, with up to 8.75% growth in 2010-11% and 9% in the subsequent year.
Critical about the government's policy, particularly over the very high consumer-price inflation, the Survey said that the "hype" over kharif crop failure without taking into account the comfortable food stocks and rabi prospects "may have exacerbated inflationary expectations encouraging hoarding and resulting in higher inflation on food items.
"... in the case of sugar, delay in the market release of imported raw sugar may have contributed to the overall uncertainty, thereby allowing prices to rise to unacceptably high levels in recent months," it added.
Elaborating on the prospects in the short and medium term, the Survey observed that gross domestic savings stood at 32.5% of GDP in 2008-09, while the gross domestic capital formation (investment) was 34.9%.
"The rates of savings and investment have reached levels that even ten years ago would have been dismissed as a pipedream for India. On this important dimension, India is now completely a part of the world's fastest growing economies."
The Indian economy has been one of the least affected by the global crisis. "In fact, India is one of the growth engines, along with China, in facilitating faster turnaround of the global economy. Risks, however, remain," it added.
On the foreign trade front, which had taken a beating in 2009, the economic document said it is looking up, with prospects of recovery in global output and trade volumes.
The downside risks for world and Indian trade lie in the fact that though the fall has been arrested, both output and trade recoveries are still fragile, given the fact that the recovery has been pumped up by the fiscal stimulus injected by different countries, including India, the effects of which may dry up if natural recovery does not follow.