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Consensus on higher public investment

New Delhi, June 5: It’s a rare unanimity that must have surprised finance minister Palaniappan Chidambaram today.

Both the trade union leaders, who met him in the morning, as well as the economists, who trooped into his chamber in the evening to advise him on the budget he will present in a month's time, had the same advice for him: increase public investment.

Since economic reforms started in 1991, economists and trade union leaders have rarely seen eye to eye on policy prescriptions. Moreover, trade union leaders have seldom enjoyed a good rapport with finance ministers.

But today AITUC chief and CPI MP Gurudas Dasgupta said, “We had a good discussion... we want a new-look budget that will stimulate the markets with huge public investments which create jobs. And the funds for that can be mopped up by broadening the tax base… by increasing the tax base for service and improving corporate tax compliance.”

Such words must have sounded like music to Chidambaram’s ears.

The country’s top economists, including Surjit Bhalla and B. B. Bhattacharya, spoke on similar lines. They said the economy needs “a big push” by stepping up investment in farming and infrastructure besides rationalising taxes and broadening the tax net to increase revenue and cut fiscal deficit.

“All this will help in economic growth and generate employment,” said Bhattacharya.

All through the 1990s, economists had astutely stood for less of government and more of private participation in the economic process.

Only after repeated monsoon failures, which saw consumption slumping during Yashwant Sinha’s tenure as finance minister between 1999-2002, did some of the older economists start murmuring the traditional Keynesian prescription for economic ills : spend more public money on infrastructure projects.

At today’s pre-budget meet, trade union leaders sought higher returns on provident funds and small savings schemes. But privately they believed that there was little chance of their demand being met. In fact, they will be happy if the government maintains a status quo on interest rates.

The only pro-worker point that the unions really stressed on, which Chidambaram’s officials say has already been conceded, is that no changes should be made to labour laws without taking trade unions into confidence.

Dasgupta even advised the finance minister to start taxing the rural rich to mobilise resources for the budget. His colleague from the CPM-affiliated CITU, Chittabrata Majumdar, demanded investment incentives that could be linked to employment generation.

Sanjeeva Reddy, leader of the Congress party’s own trade union wing INTUC, stressed the importance of foreign direct investment in a country’s development and cited the role it had in building China’s prosperity. It seemed the major trade unions who were affiliated to parties participating or supporting the coalition government had decided to go out of their way to make Chidambaram’s job easy by being more than cooperative.

“We will remain vigilant about worker interests but right now we want to see the economy grow and new jobs created ... that’s our prime concern,” said Dasgupta.

SSI demand

An apex body of small scale industrial units has in its pre-budget memorandum to the finance minister demanded a rise in excise exemption limit and changes in tariff structure.

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