Finance Minister P. Chidambaram rightly stuck to his guns on the FDI question, asking audiences to help him in communicating how greater foreign ownership is a progressive move. The economic message of his mandate is complex, and economic policy is going to be a tightrope walk. But Budget 2004 has also revealed that Chidambaram could have done with better advice and insights from the mandarins at the Ministry of Finance. The turnover tax is criticised because it will lead to a sharp reduction in liquidity on the stock market and the bond market. Unlike the capital gains tax, the turnover tax hits an investor regardless of whether he profits or loses on his transactions. To his credit, Chidambaram is open-minded and will rethink the issue. However, such holes in the Budget have come to overshadow its good achievements—such as containing revenue expenditure growth to 6 per cent. The knee-jerk reaction of blaming the Left for all flaws in Indian economics is misplaced. The problems of the last week should appropriately be laid at the doorstep of MoF. For they relate to poor analytical work and the lack of clarity at MoF, not populist or control raj compulsions. Chidambaram needs to engage in some navel gazing, and gear up to perform better next time. One major issue is breaking with the secrecy of the budget process. Because budget makers are not omniscient, they will benefit from extensive consultations, and harnessing the best experts in the country. The obsessively secretive budget process is innately one that prevents knowledge from being brought to bear upon problems of public policy. MoF needs to do better on identifying experts and utilising them, well before a budget speech is unveiled and the criticism starts flowing. Chidambaram’s commitment and acumen is unquestioned. But he needs a competent team of advisors to help him negotiate the nuances of economics. Chidambaram would be unfair to his own potential if he doesn’t do better in his next budget. He has already said that this isn’t a one-day match, he’s in for a Test match. All the more reason for him to get down to the task of building a good team at North Block, and establishing ground rules for budget-making which break with recent experience.
