Harsh and hearty

FEBRUARY 13: The more often Yashwant Sinha promises to deliver a harsh budget, the more the markets seem to love it. In the last fortnight...

FEBRUARY 13: The more often Yashwant Sinha promises to deliver a harsh budget, the more the markets seem to love it. In the last fortnight he has used the word rather too often for the general comfort but has been met with record-breaking highs in the stock markets. The Sensex climb to 6000 last week is surely due, at least partly, to the relief that the government is seized of the importance of balancing its books and intends seriously to tame the fiscal deficit which has gone out of control again this year.

The markets certainly cannot be expecting much more by way of reform signals. There have been plenty of those already and after the announcements of the last three months, it is taken for granted that the process will continue. It would seem 8220;harsh8221; is taken to mean a push for fiscal prudence, expenditure and subsidy cuts and, at long last, PSU disinvestment. If a higher rate of public savings is achieved, there will more to invest in the infrastructure. That would explain why 8220;harsh8221; is good newsin some places.

Beyond the euphoria there is cause for concern. Inequalities are growing. President K R Narayanan was right to caution against forgetting the millions of poor and oppressed people whom economic reform has passed by until now.

Unless they are able to participate actively in the opportunities being created by economic growth and by the revolution in technology, their standards of living will not rise rapidly. Many studies of the post-reform period confirm this. From the Planning Commission, Montek Ahluwalia warns of social and political explosions if the worsening disparities between states are not reduced. States like Maharashtra, Gujarat and Andhra Pradesh grow at 9 to 10 percent annually. Uttar Pradesh, Bihar and Orissa show low 1.5 percent rates of growth, a decline from earlier years. In short, states which account for one in three of all Indians are not only poor they are worse off than before.

What can the Finance Minister do about the darkness beyond the neon light of the bourses? Plenty. It is believed he intends cutting expenditure on some development programmes. He must be very careful here to make sure the deprived and inarticulate are not hit and must substitute wasteful programmes with socio-economic interventions which are effective.

Agriculture supports 70 percent of the population but has been terribly neglected. The result is the poor growth rates of the recent years. Investment in agriculture and the rural infrastructure must be major thrust areas. Finally, the backward states need somehow to be goaded into being forward-looking. The Centre can use carrot and stick but that is going to be harder with greater devolution of financial resources. It can also try the institutional approach. But the best catalyst for change is probably the private sector, not in the form of unregulated, underdeveloped small scale units but medium and large all-India corporations and MNCs. Since the poorstates on their own are unable to attract such private investment, central policies and programmes should be focussed on bringing in the private sector on a scale that would impact on the economic and social lives of those states.