June 15, 1998
Budgets must promote sustainable development
The annual budget presented to Parliament is not merely an accounting exercise to be approved by Parliament, but a powerful instrument by which the pattern of growth and development in the future can be fashioned for maximizing the welfare of Indian society. Recent work by TERI has estimated that the country is losing over 10% of its GDP in the form of environmental damage. The danger is that this cost could increase over time if the current pattern of growth and development continues. Unfortunately, the worst sufferers of natural resource depletion and degradation are the poorest sections of society. Clearly, therefore, the process of development needs to be altered not only such that higher levels of growth are achieved to eliminate poverty in the country, but also that these rates are sustained, a prospect that appears dim in light of growing pollution of our air and water, degradation and impoverishment of soil, and loss of forest cover.The currenteconomic structure which has evolved over time cannot be changed overnight, but each successive budget has to take a step in the right direction, so that the Indian economy moves to a path of more efficient use of natural resources and to much lower generation of waste. It is also necessary to devise policy instruments that would promote an increase in the stock of natural resources and their conservation, such as through an increase in the stock of forests and protection of healthy soil. The 1998-99 budget has missed some opportunities to meet these challenges (as indeed have budgets in the past).
There is, nevertheless, cause for satisfaction in the greater budgetary support provided to some of the social sectors and the ministries of Non-Conventional Energy Sources and Environment & Forests, which if utilized properly, would lead to greater utilization of renewable energy resources and reduction of pollution and waste. Higher allocation for the Ganga Action Plan (GAP) is also a step in the rightdirection, because despite popular perceptions to the contrary, some recent assessments have established that in economic terms GAP has been a very worthwhile investment for the country. Larger funds have also been provided to the Power Finance Corporation for renovation and modernization of the power sector, which urgently need improvements in efficiency to ensure that every tonne of coal, for instance, used for producing power is utilized efficiently at the stages of generation, transmission and distribution.
Opportunities that have been missed relate to the absence in the Budget of market based instruments to promote efficiency of resource use. For instance, backtracking on the price increase for urea only continues the imbalance in fertilizers usage. Nor is there any evidence in the Budget to move towards lower subsidies for agricultural consumers of power, which leads not only to mis-utilization of electricity, but also overexploitation of groundwater resources leading to lowering of water tables, to apoint that even drinking water is going out of reach for the poor. Detailed studies by TERI in Mehsana district in Gujarat and parts of Karnataka show the prolonged and pernicious effects of subsidized electricity on these groundwater resources. Also, efficient transport vehicles could have been taxed at lower rates than those that are polluting, such as two stroke engine scooters.
Overall, the time has come for a clear assessment of budgetary measures that would promote sustainable development and those that would not, so that these are carefully considered and included in the budget well before it is put together and presented to Parliament.
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