By Swapan Dasgupta
An Indian Budget has more than its fair share of
hype. This has its origins in the bad old days of the ‘socialistic’ economy
when every fiscal year brought about a large measure of unpredictability.
Mercifully, wild policy shifts and fluctuating rates of taxes are evils that
went out of fashion after Manmohan Singh’s landmark Budget of 1991. Yet, old
habits die hard and the animated discussions that preceded Finance Minister P.
Chidambaram’s 2013 Budget were part of a ritual.
At the same time, there was a discernible
difference. In the past few years, Indian self-confidence has taken a huge
knock. This had everything to do with what Alan Greenspan in another context
had called “irrational exuberance”. After a few years of rapid growth and the welcome
end of the shortage economy, India had come to believe that its emergence as an
economic superpower was inevitable and, indeed, pre-ordained. The past three
years saw this exaggerated self-belief come unstuck. Far from negotiating the
challenges of an eight or nine per cent growth, the country has been trying to
come to grips with the new reality of GDP growth hovering around 5.3 per cent.
The expectations from the Finance Minister on
Thursday were distinctly modest. The pessimists were concerned that the last
Budget of the UPA-2 Government before the 2014 general election would see him
succumb to the reckless populism that party activists believe can win
elections. The optimists, on the other hand, clung to the belief that
Chidambaram wasn’t going to do another Pranab Mukherjee act and depress
sentiment further. It all boiled down to a simple question: will politics
prevail over the hard logic of economics.
The only thing that can be said in favour of the
Budget Chidambaram finally presented was that it was greeted with relief. There
was no one in either camp that came away from his 100 minute performance with a
sense of elation. Equally, there was no total dejection.
The populists who had expected a massive allotment
for the proposed Food Security Act were disappointed that he kept aside a mere
Rs 10,000 crore—an indication that the legislation will probably be enacted in
the final months of the Government. There was disappointment too that the
monetary allotment to the other flagship programme—MNREGA—was actually
decreased—an admission, perhaps, that this great act of rural empowerment was
yielding diminishing returns.
Among the ‘aam aadmi’ constituency, those with a
head for figures were also quick to notice that the claimed 46 per cent
increase in the Rural Development Ministry budget, the 22 per cent increase for
agriculture and 17 per cent for education were against the Revised Estimates
and not the ones presented by Pranab Babu before he departed for Rashtrapati
Bhavan. Congress MP Mani Shankar Aiyar calculated that the proposed Rs 655
crore additional funding for the Panchayati Raj ministry translated roughly
into an extra Rs 2,000 per panchayat each month!
The extent to which Chidambaram has managed to
control expenditure while paying obeisance to symbolic acts such as the
Women-only public sector bank and the Rs 1,000 crore fund in memory of the
Delhi gang-rape victim, will become clear in the coming days. However, what is
sufficiently clear is that if he is going to be faithful to his commitment to keep
the fiscal deficit at 4.8 per cent of the GDP, there is absolutely no way in
which he can allow populism to run riot.
The credibility of Chidambaram in the eyes of those
who make crucial decisions affecting money will depend on his fiscal deficit management.
The sub-text of the Budget speech was that the deficit had been contained at
5.2 per cent because of the past few months had seen the Finance Ministry
tighten the purse strings since August last year when it seemed that India
would be faced with a ratings downgrade. Many economists believe that the
claimed 5.2 per cent figure is window dressing and that the actual fiscal
deficit is much higher. This implies that Chidambaram has really very little
scope for manoeuvre before the election. If the investing community persists
with its overall scepticism and delays new investment in India, rash populism
will inevitably invite international disapproval, a ratings downgrade and a
plummeting rupee.
Chidambaram had few sops to give to Corporate India,
and even his punitive 10 per cent extra surcharge on the 42,800 individuals
with a non-agricultural income of over Rs one crore was packaged as a one-off
demand. But India Inc was not asking for concessions. It had two basic demands.
First, there was the expectation of better macro-economic management. Equally
important was the hope that the projects worth Rs 700,000 crore that have been
stalled owing to problems with government clearances will finally start to
materialise. This doesn’t involve announcements in the Budget—though a mention
of the problem may have helped; it calls for political will and better
governance.
Unlike the fiscal deficit or even the revenue
deficit, the deficit of governance can’t be quantified. Yet, the ability of
Chidambaram to mount a successful salvage operation and inject meaning into the
Prime Minister’s post-Budget hope that India will soon be on an eight per cent
growth trajectory, depends almost entirely on improving the quality of
governance.
Asian Age, March 1, 2013
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