Finance Minister Pranab Mukherjee has squandered an excellent opportunity to re-energise the economy, speed up liberalisation, and embark on the gigantic task of fiscal consolidation.
The opportunity was provided by the exit of the Left from the national scene, the surge of confidence in the Congress, and the relative marginalisation of allies. The stage was set for big-bang reforms; at least, some meaningful changes in the policy framework, if not spectacular announcements, were in the realm of possibility. Nothing of the sort happened, though.
Unwillingness to make any novel change is as inexcusable as it is inexplicable. Take the case of privatisation of public sector undertakings (PSUs), which was so competently carried out by the Atal Bihari Vajpayee government (1998-2004). Terming PSUs as “the wealth of the nation,” the Finance Minister wants that “this wealth should rest in the hands of the people.” He practically ruled out the strategic sale of PSUs. He said, “While retaining at least 51 per cent Government equity in our enterprises, I propose to encourage people’s participation in our disinvestment programme.”
There is no reason why a vigorous privatisation programme could not be carried out. For the DMK and the Trinamool Congress, the two prominent constituents of the United Progressive Alliance (UPA) which are opposing disinvestment, were also part of the government led by Vajpayee; they did not stall privatisation then, and there is no valid reason why they should do it now.
While there has been considerable diffidence to expedite reforms, there was a corresponding, concomitant zeal to widen and intensify populist programmes. The most notorious of these, the National Rural Employment Guarantee Scheme (NREGS), got another fillip, as its allocation shot up to Rs 39,100 crore for the year 2009-10, an unpardonable 144 per cent hike over the 2008-09 Budget Estimates. We say unpardonable because such schemes not only make serfs out of free citizens but also burden the public exchequer.
Unsurprisingly, fiscal deficit has zoomed to 6.8 per cent. Such unlovely numbers are not cherished by the markets, which gave a thumbs-down to Mukherjee’s Budget. It is not just the investor on Dalal Street who suffered; the man on the street, too, has been disappointed, as there has been very little relief in terms of income-tax slabs. Political managers rather than sensible economists have determined the basic features of the Budget. This is despite the fact that general elections are five years away. Yet, the UPA regime has failed to take cognizance of the fiscal figures. Timidity seems to have become the second nature of the political class.
Timidity was also the hallmark of the reactions to the Budget. The reactions of India Inc and the media to the amazingly perilous Budget are amazing as well as perilous. The reactions were amazing because a patently bad Budget has been praised as being “subtle”, “sensible and pragmatic” and long goes the list of congratulatory adjectives. Consider these facts: the Government is headed by an economist of some repute, Manmohan Singh; the Finance Ministry is headed by one of the ablest ministers the Government could boast of; Pranab Mukherjee recently earned Leader of the Opposition LK Advani’s lavish praise. And yet these and other worthies do not know, or much care about, what every sane housewife knows and acts upon: expenditure should not exceed the income. There are countless adages and proverbs preaching the virtues of thrift and frugality; the most oft-quoted of these tells us that one should spread one’s feet according to the size of one’s bed-sheet.
So, disregarding commonsense, time-honoured wisdom and, of course, reason, the Finance Minister has not only expanded the scope of revenue-guzzling NREGS but also announced more populism by way of food security legislation and sops for the urban poor. The ugly figures of fiscal situation did not deter the powers that be from indulging in more populism.
The bigger surprise is that business chambers and media have been, on the whole, charitable in their analyses and comments. The apex chambers lauded the Government for presenting a “balanced” Budget! One of them said that the growing fiscal deficit is a cause of concern but it has confidence in the Government! The more one comes to know about the response of industry, the more one’s amazement grows.
The reactions of industry and media are also dangerous because these lull the political class into believing that its endeavour to redeem the poor of the country is good. As it is, the ideologically-motivated election analysis—which attributed the Congress’ victory to the NREGS and the farm loan waiver—has done immense harm to not only public debate but also the public exchequer. This analysis almost completely ignored the voter’s impatience with politically correct ideas.
The aftermath of Budget has actually exposed the worthlessness of public discourse. Industrial tycoons, business chambers, big media, public intellectuals—none of them want to antagonise the powers that be by speaking the truth, even when speaking the truth may be in the long-term interests of ruling coalition. We are living in a country in which mendacity reigns supreme and the truth has become a pariah.
(The author works with The Political and Business Daily)