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|February 23, 1999||
Don't expect Sinha to come up with a path-breaking Budget
When the Bharatiya Janata Party-led coalition presents its second annual Budget this Saturday, it will break a long national tradition: the Budget will be unveiled in Parliament at 1100 hours Indian Standard Time instead of six hours later as used to be done all these years for the convenience of the colonial masters in Westminster Abbey. The cosmetic change may well be the only conspicuous characteristic of the coming Budget. Already that decision of the Atal Bihari Vajpayee government has stood out as being the rare one which did not meet with any objection whatsoever from either alleged friends or arch foes.
That last observation reflects the fragile condition in which the coalition government has continued to find itself from day one when the prime minister had to forego the appointment of Jaswant Singh as his finance minister because of some strong opposition from someone within. But the nation's economic report card, the entrenched constraints within the economy, and the conflict between various sectoral demands --- all these together would not have enabled even the suave Singh to come up with any other path-breaking innovation except the time of the Budget's presentation.
Just what does the nation's economic report card show for the financial year April 1998-March 1999?
Though the final figures will be ready only after two months or so, the government estimates indicate that, with reference to base year 1993-94, economic growth (GDP) will be up by 5.8 per cent in which agricultural produce shows an increase of 5.3 per cent, industrial production by 3.5 per cent and the services sector by 6.7 per cent. Though industry associations and independent professional agencies consider these growth figures as being sleight-of-hand jugglery, the government's statistical arm has refuted them and stood by its own projections. There is no dispute though that the Indian economy is not at all doing well. And judged by the desirable growth of between 8 per cent and 9 per cent which is a must for India to reach a take-off stage, the 5 per cent and odd rise in GDP is very unsatisfactory.
Some figures are positively distressing:
* According to a study by the Centre for Monitoring Indian Economy, as many as 71 mega projects with an envisaged investment of Rs 824.47 billion (constituting almost 20 per cent of the investment due for implementation) lay stalled in 1998 while another 51 proposed private sector projects entailing an outlay of Rs 466.31 billion were dropped in 1998. Whatever the reason for these setbacks, that should be evidence enough of the excruciating phase of Indian industry.
* The export growth rate, considerably affected by cheaper East Asian products and a sluggish global trade, slowed down from 9 per cent in 1996 to 6 per cent in 1998.
* The persistent shortfall in the collection of indirect taxes is expected to lead to a revenue shortfall of Rs 75 billion.
* Domestic borrowings during the first nine months of the year 1998-99 (April-March) went up to Rs 560.48 billion, as against Rs 394.45 billion the previous year. As a result, it is estimated that the government of India's total domestic debt now stands at Rs 7,000 billion and the interest burden on it is Rs 750 billion annually which constitutes 46 per cent of the annual revenue receipts.
* Of the planned expenditure of Rs 720.02 billion for the current year (to end on March 31), that on revenue account is estimated at nearly 61 per cent, only the balance 39 per cent being on capital account so vital for genuine development.
The above situation is not one that has occurred overnight. It has been developing over the years with government's revenue expenditure remaining unchecked on account of continued multifarious subsidies for various publics, a massive employee strength with its continued hike in pay and allowances secured through powerful trade unionism, and general governmental profligacy all round.
All of it has snowballed because no political party in power at Delhi or in the state capitals has learnt that populist, vote-catching policies ultimately lead to bankruptcy. No political party has ever cared all these years to disseminate economic common sense among its luminaries, leave alone its cadres. No political party has learnt all these years that economics lies at the root of most of that which passes off as politics. No political party all these years has learnt that democracy does not mean the wholesale mortgage of discipline--- discipline in controlling demands and increasing productivity, in curbing needless ministerial expenses, in removing non-merit subsidies which are mostly pocketed by those who don't need them in the first place, in effecting reduction of a whole gamut of administrative expenses.
In all these critical areas, each government in power has been timid and played the ostrich in the sand, simply postponing doomsday to be faced by the next one in power.
The whole problem has been compounded, of course, by the sheer vastness of the country making administration so difficult, by antiquated procedures and rules, by the judicial delays even in tax and other financial matters, by a federal structure in which the constituent states have shown little economic savvy of their own and, instead, depended upon Delhi for financial doles, by a large illiterate population which looks up to government for every little thing, AND by the literate population which has shown the zeal to agitate no end for its rights but keeps silent about its own obligations or of those of its fellow citizens who cheat the nation day in and day out in a hundred devious ways.
Have you, for instance, heard of unions wanting to work an extra day without pay to compensate the loss in a statewide bandh? Have you heard them asking their employer to reduce the obscene number of public holidays in a year? Or have you heard of the citizenry conducting dharnas outside the offices of such of our members of Parliament who have refused to quit their government bungalows despite being served with eviction notices? Have you ever heard of a similar agitation against those social elite ---super cine stars and business magnates---who are annually announced as being in arrears of massive amounts of income tax? If there were a classical case of one such individual deserving public ostracism, it is Harshad Mehta, the alleged share scamster who lives in respectability and high style even today.
The Himalayan task facing the finance minister should be obvious. He has to substantially increase government resources by effecting bold and unheard-of economies in expenditure and simultaneously tapping unheard-of sources in raising revenue. Putting the enlarged kitty to gainful use is only the second part of the exercise.
Reducing expenses on staff salaries and perquisites, on wasteful practices, and cutting non-merit subsidies by increasing user charges on a variety of services --- that attempt is sure political suicide for any government that wishes to remain in power in Delhi. Only a bold prime minister without any self-interest left will allow his finance man to take the plunge. Is Atal Bihari Vajpayee that kind of a towering statesman? One wonders, though only time will tell.
Among the resources waiting to be garnered is the mind-boggling quantum of black money floating around in the country. One financial journalist recently estimated that the amount of money which tax evaders and defaulters owe the government is, hold your breath, Rs 1,500 billion --- only Rs 120 billion less than the government's estimated revenue receipts for the year 1998-99. That there is loads and oodles of money in the country is evident from the estimate that our annual consumption of gold is valued between Rs 300 billion and Rs 400 billion. The society columns of English language newspapers and glossy magazines as well as the extravagant parties in five-star hotels across the cities are only further proof of the wealth available within the country.
Clearly, there's nothing path-breaking which Finance Minister Yashwant Sinha can be expected to deliver this Saturday, what with Vajpayee unable or unwilling as yet to steamroll pressures from all quarters. All that the finance minister can be expected to do is tinker with taxes and duties and exemptions -- add some, amend some and remove some. Hopefully, he will pluck enough personal courage of conviction to ensure that the label of "roll-back" Sinha is finally removed from his jacket's lapel.
Tailpiece: One figure certain to appear in the 1999-2000 Union Budget is of Rs 3billion. It will appear in the "Receipts Budget" just as it has in all government of India budgets from Pandit Jawaharlal Nehru downwards. As in the last century, that frozen, fetid figure of Rs 3 billion will be described as "amount due from Pakistan on account of share of pre-partition debt (approximately)." Obviously, that "little" due (excluding 52 years' interest) from our 'friendly' neighbour has never been discussed in our scores of parleys with it. If that is not indicative of national spinelessness and somnolence rolled into one, what is?
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