After the onset of the world capitalist crisis, there was a brief period when most countries in the world attempted to use the State to stem the severity of the crisis, a period often described as ''the Keynesian moment''. Some provided a very deliberate fiscal stimulus; others simply did not cut back on State expenditures even as State revenues fell owing to the recession, reducing thereby the intensity of the crisis. India too had its ''Keynesian moment'', with a wide-ranging cut in the excise duty (from 14 to 8 percent in the standard rate on non-petroleum goods) and an increase in the fiscal deficit in relation to the GDP. In India's case moreover the ''Keynesian moment'' came on top of some increases in relief and welfare expenditures under the UPA-I which had occurred because of the pressure of the Left, the most notable instance being the launch of the MGNREGS. All this did not amount to any abandonment of neo-liberalism: in this very period there were massive tax concessions for the corporate sector, persistent efforts to introduce FDI in multi-brand retail, and privatization of public property at throwaway prices, with unbelievable levels of ''corruption'' associated with it. But it meant tempering neo-liberalism with some relief, giving it a bit of a ''human face''. If MGNREGS was a prominent feature of this ''human face'', then the proposed food security legislation was meant to enhance it.

The 2012-13 budget represents a reversal of this trend. Such a reversal indeed is evident all over the world, with ''the drive to austerity'' replacing the ''Keynesian moment''. If the ''Keynesian moment'' had provided some barrier against the free fall of the world economy, the return to ''austerity'' at the expense of the people, which represents a reassertion of the hegemony of finance capital after a period of temporary shakiness, will only accentuate the global crisis. India will have to bear the impact of this world development, and that too in an exacerbated manner because of its own ''drive to austerity'' at the expense of the people, which the 2012-13 budget heralds.

This reversal is evident from the very statement of the objective of the budget, which is ''fiscal consolidation''. The point at issue here is not whether the relative size of the fiscal deficit should be reduced; the point is how this reduction is to be effected. The Left too is opposed to a burgeoning fiscal deficit, but for a reason which is very different from that of finance capital and which the bourgeois media gloss over. This reason is as follows.

Suppose the State is to spend Rs.100. It can finance this expenditure either by borrowing or by raising taxes. Let us for simplicity ignore for a moment all foreign borrowing and indeed foreign transactions. Then borrowing this amount domestically does not involve, as is commonly supposed, drawing from some fixed, pre-existing pool (and thereby leaving less for others); it involves, on the contrary, generating an additional Rs.100 of savings in private hands over and above the private sector's own investment. In other words what is borrowed is itself put into the hands of those (i.e. the capitalists) from whom it is borrowed. Now, savings constitute addition to wealth; borrowing-financed State expenditure therefore adds to the wealth of the private sector, i.e. of the capitalists. If what is borrowed would have been simply impounded from them through taxation, then this additional wealth would have been snatched away from them. Everything else remaining unchanged, borrowing-financed State expenditure therefore entails a greater wealth inequality compared to the same State expenditure financed by direct taxes on the capitalists. The Left opposes a fiscal deficit for this reason; it always argues for curtailing the fiscal deficit and imposing direct taxes on the capitalists instead, which has the same effect on employment as if the fiscal deficit were not curtailed, which does not squeeze the consumption of the poor, and which at the same time checks the increase in wealth inequalities.

This however is not the way that spokesmen for finance present the consequences of a fiscal deficit. They deliberately use the obfuscating term ''fiscal consolidation'', which suggests that a reduction in fiscal deficit brought about not at the expense of the rich, but just anyhow, is preferable to no reduction. They thereby suggest that a fiscal deficit is always bad per se, and use this argument to justify ''austerity'' at the expense of the people. The view that a fiscal deficit is bad per se (and not because its effect on wealth inequalities is worse than if the same expenditure would have been financed through taxing the capitalists), was called by Joan Robinson, the renowned Left Keynesian economist, the ''humbug of finance''. The 2012-13 budget uses this ''humbug'' to launch a ''drive to austerity'' at the expense of the people.

Ironically, the Budget document itself (in its Key Features) attributes the ''deterioration'' in the fiscal balance in 2011-12 to ''slippages in direct tax revenue and increased subsidies''. Now, increased subsidies are inevitable in a period of inflation; but if there were slippages in direct tax revenue, then it obviously followed that the budget should have made an effort to undo these slippages by raising direct tax revenue. Instead we find that total direct tax revenue is budgeted to increase by only 13.9 percent over 2011-12 (RE), while customs, excise and service tax revenues together are to increase by 26.7 percent. In fact the share of direct tax revenue in GDP is to marginally come down in 2012-13; the entire adjustment for ''fiscal consolidation'' is to occur through cuts in subsidies and relief expenditures and increases in indirect and service tax revenue. It is to be achieved in short, in the midst of inflation, by exacerbating inflation through indirect tax hikes, and cutting back on subsidies, i.e. by squeezing the people.

The fact that the virtually unchanged food subsidy bill (the increase is trivial, from Rs.73000 crores to Rs.75000 crores), is rather like ''the dog that did not bark'', and amounts to a scuttling of the much-awaited food security programme as has been noted by many. But looking at the food subsidy bill alone in this context is inadequate. The fertilizer subsidy bill is slated to come down from Rs.67199 cr. In 2011-12 (RE) to Rs.60, 974 crores in 2012-13, and the petroleum subsidy bill from Rs.68481 crores to Rs.43580 crores. This would certainly increase the cost of production for the farmers; and the increase will be particularly sharp if the world oil prices climb still higher, as seems likely. If the procurement prices offered to the peasants reflect this increase in cost of production, then the unchanged food subsidy bill will entail not just no expansion in the scope of the public distribution system, contrary to the objective of the food security programme, but an actual contraction, or alternatively a rise in issue prices. What the budget entails therefore is not just no expansion in the scope of food security, but an actual contraction.

Much the same can be said about the MGNREGS, where the reduction is from Rs.40,000 crores in last year's budget to Rs.33000 crores in the current year's. Jairam Ramesh has justified this cut on the following grounds: expenditure in the current year on MGNREGS would be only Rs.38000 crores, compared to which the budgetary provision of Rs.33000 crores plus the carry-over balance with states of Rs.6000 crores plus their own contribution of Rs.3300 crores (together adding to Rs.42300 crores) is ample increase. The problem however lies in the fact that basing MGNREGS outlays on past expenditure itself amounts to a scuttling of the programme. It is rather like saying that nothing need be done about ensuring dalit entry into temples because past records show not many dalits as having entered temples! MGNREGS, though nominally a rights-based programme, is far from being one in practice; and there is a whole array of vested interests that are opposed to its continuance. What is necessary therefore is increasing outlays on it and forcing its implementation as a rights-based programme; but to cut down outlays on the grounds that they are not being used is a de facto abandonment of it.

Thus both the major schemes, MGNREGS and the food security programme, which were supposed to provide neo-liberalism with a human face are being given a slow and quiet burial. It will of course be argued that social sector outlays have gone up in the current budget, but the increase in school education by 17 percent entails only marginal increase in outlay relative to GDP. And the increase in health and family welfare outlay by 22 percent, though higher than the expected nominal GDP growth, will still keep central government's health expenditure at an abysmal 0.3 percent of GDP! We have in short a return with a vengeance to neo-liberal orthodoxy and a snuffing out of the ''Left-inspired'' (UPA-I) and the ''Keynesian'' moments.

This fact is of great significance. There was a time when neo-liberal policies were justified on the grounds that the inequalities they generate would usher in high growth whose effects would eventually ''trickle down'' to the poor. The fact that this did not happen then produced another apologia: the high growth ushered in by the inequalities engendered by neo-liberalism would raise government resources which can then be used for the poor. The more savvy neo-liberal apologists these days use this latter argument. And for a while because of the specificity of the ''moments'' mentioned earlier, it appeared to many that the apologists might well have a point. Such however is not the case. The interests of finance capital and of the corporate-financial elite that promotes neo-liberalism are opposed to those of the people. There is never any ''trickle down'', neither an automatic nor a State-mediated one. The only way that the people's interests can be defended is if there is fight for them, against the corporate-financial elite, against the hegemony of finance capital and the neo-liberal policies it promotes.

Government spokesmen, at least those who do not merely mouth platitudes, may defend the strategy of the budget on the following lines: with the world economy slowing down, India will face a major current account deficit if it maintains its growth rate; to finance this deficit it will be necessary to attract financial inflows for which a return to orthodox hard-nosed neo-liberalism, of the sort that enthuses international finance capital, becomes necessary. The strategy underlying the budget therefore is the only one that can achieve both high growth and balance of payments equilibrium.

It may appear at first sight that within the logic of a neo-liberal regime these spokesmen may have a point. But even within this logic, the denouement is likely to be the very opposite of what they suggest. The return to neo-liberal orthodoxy has obviously not been up to the expectations of the corporate-financial elite, as shown for instance by the stock market's response to the budget. It is quite likely therefore that even as the ''drive to austerity'' at the expense of the people brings down the growth rate, the balance of payments will get into a crisis because of the outflow of finance. Such outflow will be even greater if the anti-people thrust of the budget brings about widespread popular resistance which makes India a less than attractive destination for globalized finance. The budget would then have pushed the economy into the worst of both the worlds, in terms of growth and balance of payments, even while attacking the people, and indeed because of its very attack on the people.