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Interim Budget 2014-15: An Analysis
A close perusal of the 17 page narration in 70 minutes by the Finance Minister P. Chidambram of the interim budget 2014-15 also called vote -on -account with its budget size of INR 1763214 crore revels the fiscal blueprint for the next government to follow partially if not completely for removing discrimination, deprivations and discontent among people of this great nation with sympathy if not empathy.
The lip service for the price stability, fiscal consolidation and the revival of the manufacturing sector with economizing on facts is evident for the sputtering economy of India which is still under fear ( false evidences appearing real) in spite of the world bank announcement of the crisis period is over now. 


The tasks for the new government will not be easy for bringing back to health the major indicators of the performance of Indian economy including ailing public finances through Fiscal Responsibility and Budget Management  (FRBM) Act. The so called second generation reforms including labour sector stands ignored but cannot be neglected by the new government. The consumption led growth like USA is not  necessary for the Indian economy which needs to enhance marginal propensity to decide for enhancing marginal propensity to save and invest for achieving faster, sustainable and more inclusive growth as envisioned in 12th Five Year Plan. There is no logic and rationale for subsidy on interest on educational loans which are costlier than car loans in my beloved India with  so called demographic dividend.


One rank one pension (OROP) for ex-servicemen with increased defence expenditure of Rs 2,24000 crore in 2014-15 (10 percent more than 2013-14 is perfectly in tune with the objectives of inclusive growth where groups of people are crucial.  


The allocation on defence account for 12.70 percent  of the total government spending which is necessary but not sufficient for the required focus on the uniformed services by taking into account the modernization with new projects, equipment and acquisitions. This amount falls short of the percentage of gross domestic product (GDP) which will be 1.74 in comparison to 1.79 percent of the GDP in 2013-14 and 1.9 percent in 2012-13. We are certainly behind China spending $112.6 billion on defence in its budget of March 2013. 


Let the national political parties justify separate budget for defence as railway budget  in their manifesto to come into power  after winning elections in 2014. There was a strong case for enhancing defence expenditure which is justified to face the challenges caused by internal threats and terrorism of various kinds including unemployment and suicides by farmers. The only practical solution of these problems is to make military services compulsory for five years for the youth which will bring discipline to Indian economy in one sense or the other. The domain of military activities will have to be increased to include agricultural industry, National Rural Employment Guarantee Scheme which can ensure proper, productive and practical use of hands, head and heart of the unemployed youth of India.


In my opinion, the financial security needs of the defence personnel were justified not only on social, moral but economic grounds. The expenditure on security and health of this manpower presently depreciated human capital deserve to be treated as investment.


The right to health and financial security after retirement calls for allocation of resources for the security and health expenditure. Such expenditure beyond the productive age is to be treated as a postponed claim on the accumulated surplus benefits of their past productive life.


The rationality of investment in ex-servicemen can be put in three categories: 


1)  Claim on the accumulated surplus product of one?s own productive life. The Government should improve the temporal distribution of income over the entire life by recognizing the claims of retired employees on their own productivity. Although ethical arguments may intervene to alter this claim, but not to deny it.


 2)  Claim on the external benefits provided by human capital, which are not captured by any person, but by the society as a whole. The difference between private marginal product and social marginal product entails the argument in support of an individual?s right to financial security and health beyond the retirement age.


3)  Return on investment in future productivity of children. The total product of human capital will be expected to pay for all investments as its replacement costs, make a return on the human capital embodied in them and provide a surplus for future consumption. It is not a claim on the present, but on the past labour. It is neither charity nor goodwill of the present working population. It is simply a claim on a one?s own.


These claims on the private product and a part of the social product make economic sense regardless of the ethical or utilitarian arguments that may be put forward to strengthen the cause of the security needs of retired defence personnel. While the third argument may hold good in the case of those who cannot make the first two claims. There is always a case to review of the pension schemes as per the requirements of the military services. There is certainly a need for manpower planning which is to be integrated with the comprehensive human development policy required for strengthening our Armed Forces not to meet external threats only but internal threats within the country.  Let the wisdom prevail upon the voters to do justice with the democracy of India by supporting the great cause of inclusive growth which means cared less (not care less) and use of the used less manpower (not useless). We can no longer be indifferent for the cause of the needs of the nation today and tomorrow. To ensure good democratic governance, we need honest, humane and hard working leaders are elected to the 16th Lok Sabha to be in power as well as opposition.


The writer is Professor of Economics & Dean, Faculty of Social Sciences, Kurukshetra University ,Kurukshetra .




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