Saturday, Jan 28, 2023

How did you get it so wrong?

‘‘Tax India, fund Bharat: Villages smile, cities frown, stock markets scowl’’: The Hindustan Times. ‘‘Budget w...

‘‘Tax India, fund Bharat: Villages smile, cities frown, stock markets scowl’’: The Hindustan Times. ‘‘Budget with a difference: taking off from CMP…Emphasis on agriculture, social sectors’’: The Hindu. ‘‘Reforms come with I-T bonus for middle class: Jai Kisan, Jai Jawan budget’’: Business Standard. ‘‘PC: Politically Correct…Mera Gaon, Mera Desh: Union Finance Minister P Chidambaram on Thursday turned Prime Minister Manmohan Singh’s promise of giving the farming community a new deal by announcing a series of measures that included…’’: The Asian Age. ‘‘Dream budget, FM farms it out’’: The Statesman. ‘‘Promising to turn new leaf, Govt sows reform in fields: Reserving pride of place for agriculture in the Union Budget, P Chidambaram today announced a bonanza of nearly Rs 13,000 crore for the farm sector…’’: The Indian Express.

Our industrialists were even more fulsome. As were the TV analysts. The boost to the agricultural sector will widen the benefits of development…The impetus to employment will put purchasing power in the hands of vast masses, and thereby stimulate industrial growth…

Had no one heard or read the Budget Speech? How could so many be fooled so comprehensively, so easily?

A solemn promise

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Start with that ‘‘boost to employment’’ bit. In the Common Minimum Programme, by way of a solemn commitment, this Alliance had promised to provide ‘‘at least 100 days of employment to begin with on asset-creating public works programmes every year at minimum wages for at least one able-bodied person in every rural, urban poor and lower-middle-class household’’.

Please read the italicised words again. The two ‘‘at leasts’’. The ‘‘to begin with’’. The ‘‘on asset-creating public works programmes’’. And the vital expression: ‘‘every rural, urban poor and lower-middle-class household’’.In the President’s Address, this solemn commitment was altered with as much solemnity. The Government now promised to provide ‘‘guaranteed employment for 100 days in a year to at least one able-bodied person in each rural household.’’ You would have noticed that

The ‘‘to begin with’’ had vanished.

The ‘‘at least’’ that had preceded ‘‘100 days’’ had vanished.

The commitment that this employment would be provided through ‘‘asset-creating public works programmes’’ had vanished.

That, in addition to every rural household, this minimum employment would be provided also to at least one able-bodied adult in every ‘‘urban poor and lower-middle-class household’’ had vanished.


And now in the Budget, we have a third version: the Government promises to ‘‘guarantee 100 days of employment in a year to one able-bodied person in every poor household’’. The context would suggest that now it is confining the promise to only rural poor households. There is no commitment that this will be provided through government programmes—the claim a while from now could well be made that, while you may not have noticed it, policies which the Government has initiated have led to the creation of that many jobs via private sector…

In any event, what does Chidambaram provide for in this path-breaking programme? This is what he say: ‘‘Allocations under different schemes will be pulled together to support the Food for Work Programme.’’ Thus, not one paisa more for this historic guarantee.

‘One of my big dreams’

Consider next what Chidambaram terms as ‘‘one of my big dreams’’. This is of restoring traditional water-storage bodies. He says there are a million of them, that five lakh of them are used for irrigation. ‘‘Many of them have fallen into disuse. Many of them have accumulated silt. Many require urgent repairs,’’ he says. And then there is the ‘‘impending crisis’’ of water. The ‘‘crisis of water’’ is going to be ‘‘the biggest crisis of the 21st century,’’ he says. ‘‘The crisis of water has affected the lives of millions of our fellow citizens…I therefore propose an ambitious scheme,’’ he says. ‘‘I therefore propose to launch a massive scheme,’’ he says. And what is that scheme? A pilot project in five districts! At a cost of Rs 100 crore. At least Rs 100 crore, you may think. But only if you do not read the sentence that follows. Chidambaram says, ‘‘Funds for the five pilot projects will be drawn from existing programmes such as SGRY, PMGJSY, DPAP, DDP, and IWDP.’’ So, again, not one paisa more even for the pilots!

A ‘nationwide scheme’


And then there is the ‘‘nationwide water-harvesting scheme’’. This will cover one lakh irrigation units at an average cost of Rs 20,000 per unit, he says. One lakh units into Rs 20,000 equals Rs 200 crore. So, Rs 200 crore, you may think. But only if you still have not started reading the sentence that follows each of Chidambaram’s proclamations.

For the following sentence indicates that money for the scheme is going to be loaned actually by NABARD—another one of those ‘‘autonomous’’ institutions that mysteriously always decides to act as the Government wants it to! The Government’s commitment is only to provide a ‘‘capital subsidy’’ for 50 per cent of the amount. All right, not Rs 200 crore, at least Rs 100 crore, you may think. But only if you have not read the sentence in full! For Chidambaram’s full sentence reads, ‘‘The Government will provide a 50 per cent capital subsidy through NABARD, and the estimate of the scheme is Rs 100 crore.’’ What magic! One lakh units into Rs 20,000 per unit equals, not Rs 200 crore, but Rs 100 crore. So, for this great ‘‘nationwide water harvesting scheme’’, Chidambaram, concerned as he is about the impending water crisis that is devastating the lives of millions, promises to provide Rs 50 crore!

The gigantic, perennial problem

‘‘Thousands of lives and thousands of head of cattle are lost every year due to floods,’’ Chidambaram says. ‘‘Floods are perennial in states like Assam, West Bengal, Bihar and Uttar Pradesh,’’ he says. ‘‘The NCMP (that Common Programme, a reference to which justifies everything) envisages full Central support to flood-control works in inter-state rivers and international rivers.’’ ‘‘The Brahmaputra Board has prepared a plan for anti-erosion and flood-control works in the Brahmaputra and Barak valleys,’’ he assures us. And so, what does he provide for flood-control programmes? Rs 30 crore!

As for the plan prepared by the Brahmaputra Board, to say little of the ‘‘plan’’, the Board itself has been in a moribund condition for a decade! When I visited it, everything about it made for a pitiable sight. The ‘‘plans’’ they had to show were in single copies typed years and years ago. In any event, to tame just the mighty Brahmaputra would require Rs 20,000-30,000 crore. And here we have a provision of Rs 30 crore. A beginning, no doubt!

A dire need to which he returns

‘‘Fair price shops constitute the backbone of the food-security system for the poor,’’ Chidambaram declares. ‘‘We shall address the weaknesses in the system and strengthen public distribution,’’ he promises. You must first see the artistry in those two sentences. If he had only talked of relying on the public distribution system and the notorious fair price shops, studies and reports, including the Mid-term Appraisal of the Ninth Plan prepared by the Planning Commission, would have been hurled at him—see, all these show that an unconscionable proportion of supplies poured into this system end up in the black market. On the other hand, if he had said what these studies document, he would have been traduced for depriving the poor of their bread. So, the genuflection to the ‘‘backbone’’ in one sentence, and allusion to the weaknesses that have to be addressed in the next. Commitment reaffirmed to both—the poor, as well as reform!


But it is the next sentence that catches my ear, and subsequently my eye. After that bit about addressing the weaknesses of the system, Chidambaram said, ‘‘I shall return to this subject a little later.’’ So, I wait with baited breath. And he does return. And what is the reform he promises? His only proposal—13 pages of text later—is that instead of food, the Government will give food stamps. In this land, where a Telgi can go on printing mountains of paper used as legal documentation, what ‘‘weakness’’ will stamps erase? In any case, the Government is going to at least attempt a reform, you may think. But only if you have still not read the sentences that follow this bold proclamation of reform! After leading us to believe that this is so important a subject that he will return to it, after enunciating this reform proposal with appropriate authority—it has been proposed by the Planning Commission, he assures us—Chidambaram says: ‘‘I propose to introduce a pilot scheme for distributing food stamps, instead of distributing food through fair price shops, in two or three contiguous districts in a selected state.’’ So, a pilot. In two or three districts. In one state. But even that, it turns out, is just a wish. For this time there is the sentence after the next sentence! ‘‘I sincerely hope,’’ says Chidambaram, ‘‘that one of the states will come forward to associate with the Central Government in this experiment.’’ Hence, determination to address weaknesses. Becomes a scheme to do so. Becomes a pilot. Becomes a hope. Albeit, sincere.

Artful allocations, miscellaneous proposals

Another proposal that got a lot of thumping, and which was taken as further proof of this Government’s commitment to the neglected was Chidambaram’s announcement that he is creating a Backward States Grants Fund. This Fund is going to have a corpus of Rs 25,000 crore, Chidambaram declared—to much thumping of desks. The next sentence revealed that the Rs 25,000 crore that was taken as proof of commitment to the poor is not something that is being set apart just now. No, the Government will provide for an annual contribution of Rs 5,000 crore.


But that is not to be scoffed at, you might think, Rs 5,000 crore is Rs 5,000 crore. Again, only if you have not read the next sentence! For Chidambaram says that the first Rs 1,800 crore a year of the Rs 5,000 crore will be obtained by merging in this Fund a scheme that already exists—namely, the Backward Districts Initiative Scheme.

But at least he is providing another Rs 3,200 crore a year, you might think. Think again. For the sentence continues, ‘‘the balance amount required for the annual contribution of Rs 5,000 crore will be earmarked out of the total Central support to the Plan’’. In a word, that too is to come—by re-designation!—from the existing amounts that are already going to the backward states! For Chidambaram is not saying that the amounts for the Fund shall be ‘‘in addition to’’ what these states get. He is saying, out of what they get, Rs 3,200 crore will be earmarked for this purpose!


And lest you are swept by such figures—the Rs 5,000 crore or Rs 3,200 crore—please remember that the backward states today get a Plan allocation of around Rs 40,000 crore each year!

Yashwant Sinha nailed the most blatant of these deceptions the other day in the Rajya Sabha. ‘‘Lalu smiles all the way to the bank,’’ proclaimed The Asian Age. ‘‘Bihar supremo Lalu Prasad Yadav should be smiling all the way to the bank. Union Finance Minister P Chidambaram, keeping one eye firmly on the allies in the Government and the other on his home state Tamil Nadu while preparing the Budget, gave Bihar the pride of place with a provision of Rs 3,225 crore and a promise to ‘augment’ this sum, if necessary.’’ ‘‘Railway Minister Lalu Prasad Yadav sat smiling behind the Finance Minister in the Lok Sabha,’’ the gushing ‘Special Correspondent’ continued, ‘‘the look of satisfaction deepening when Chidambaram included Bihar as a state deserving of a special economic package…’’ This impression was assiduously fostered throughout that day and in subsequent days—by Laloo Prasad Yadav, and by journalists.

Yashwant Sinha goaded the Rajya Sabha members to actually see what Chidambaram had said. ‘‘The NCMP promises that special economic packages for Bihar, Jammu and Kashmir and the North Eastern states,’’ Chidambaram said, ‘‘announced in the past, will be implemented expeditiously’’—the slip showing already: not a paisa more, just what has been ‘‘announced in the past’’. Next sentence: ‘‘Bihar, for example, has a number of projects pending for a long time, including projects in power, roads, drainage and rehabilitation of displaced persons’’—nothing in that, not a paisa more. Next sentence, and now we are getting close to the sleight of hand, and so please read carefully: ‘‘I would like to assure the House that Bihar will be assisted through the Rashtriya Sam Vikas Yojana’’—that is, through a scheme that already exists.

And then the sentence by which the Special Correspondent made himself the occasion for even more of Laloo’s smiles the next day! Chidambaram says: ‘‘A provision of Rs 3,225 crore has been made for the present and, if necessary, this sum will be augmented.’’ What is the provision of Rs 3,225 crore for, Sinha asked the House to see. It is not for Bihar. It is for the scheme, the Rashtriya Sam Vikas Yojana, through which Bihar, Chidambaram promises, will be assisted. But other states are also to be assisted through the same scheme—and so, the amount Bihar will receive will necessarily be just a part of what is allocated to the scheme.

Chidambaram has acknowledged as much! In answer to a question in the Lok Sabha, he has mentioned a figure for the amount that will be assigned to Bihar: the figure is exactly what had been set aside for the state by Atalji’s government! There is, of course, the allied question: why has a similar package not been given to Madhya Pradesh? Its situation is exactly the same as that of Bihar—just as Bihar claims special treatment on the ground that the mineral-rich areas of Jharkhand have been taken out of it, the mineral and power-rich areas of Chhattisgarh have been taken out of Madhya Pradesh. And, committed as it is to the creation of a separate Telangana within months, will this Government set aside an equivalent package for Andhra, after Telangana has been carved out of it?

A pattern

Instance after instance betrays the same feature—the allocation that Chidambaram makes for the matter that he pledges fealty to is of the proportion of words in the Budget Speech, not of money!

‘‘The welfare of the Scheduled Castes and Scheduled Tribes is very close to my heart,’’ Chidambaram declares. And so, for Scheduled Castes, he allocates the fiscal equivalent of fleabites—an extra Rs 43 crore, and for Scheduled Tribes, an extra Rs 69 crore!

The welfare of minorities, especially their need for better education, is of course even closer to the heart of every secularist. And so Chidambaram allocates all of Rs 50 crore for the purpose! And that after the high-voltage convention that Arjun Singh staged recently.

Chidambaram waxes eloquent about group health insurance, especially about a scheme for members of Self Help Groups. The fact is that this group health insurance is an LIC-driven initiative. One write-up indicates that, as far as the Government’s contribution is concerned, the amount will be Rs 3 crore!

‘‘Bold and determined efforts need to be made to achieve zero-level growth of HIV/AIDS,’’ Chidambaram declares. And the speech would lead you to believe that Rs 259 crore are being set aside by the Government for this purpose. In fact, the Government will give just Rs 18 crore. The rest will be ‘Externally aided component’!

Credit to agriculture will be doubled in three years, promises Chidambaram. Deve Gowda has since reminded him that that is the exact proclamation he, Chidambaram, made—when he was finance minister in Deve Gowda’s government seven years ago!

And so on.


The Budget contains the usual slew of proposals and, Chidambaram-like, I will return to them.

But every one commenting on them today is at a disadvantage—for, who knows what will survive? The proclamations about FDI, hailed by many as proof of this Government’s commitment to reforms with a capital ‘R’, will they survive? The determination not to hike interest rates on categories of savings? Will that survive? The Turnover Tax? We have already seen the very persons who used to pride themselves over the fact that they do not lose any sleep over the Sensex; we have seen the very persons who declared that the day’s Sensex cannot be looked upon as a referendum on the Government’s economic policies; we have seen those very persons cut and slice what they had proposed in deference to movements of the Sensex. Of course, when Yashwant Sinha and Jaswant Singh used to revise proposals, they used to be roundly condemned for ‘‘rollbacks’’. This Government, God and Marx forbid, would never do that—‘‘This is not a rollback Government,’’ a new Minister, fresh into a temporary charge, had proclaimed just the other day. So, what this Government has done and is about to do is just responsive open-mindedness!

Nevertheless, one must reckon with uncertainty about what in the proposals will survive.

But one thing strikes one immediately. Chidambaram presented to Parliament the Economic Survey on 7 July. That document showers credit for reforms that the Government instituted in various aspects of taxation. And in the Budget document that the same Chidambaram presented literally a day after he presented the Economic Survey, he takes credit for undoing those very things. I am not for the moment on the merit of individual measures as on this peculiarity—again something that commentators have either not noticed or have chosen to suppress.

Take, for instance, what the Economic Survey that Chidambaram tabled says in regard to taxation of the textile sector. Here it is: ‘‘Major reforms took place on the indirect tax treatment of the textile sector in 2003-04, seeking to remove tax-induced distortions. A key theme was the completion of the CENVAT chain to improve compliance, reduce the extent to which taxation influences the decisions of firms on choice of technology, and encourage modernisation and global competitiveness. The excise exemption for power looms was removed…Exemption benefits on readymade garments were limited to the first annual clearance, etc…These developments have helped set the stage for large-scale investments in the Indian textile industry and improvements in export competitiveness…’’

And the very next day, in the Budget, the same Finance Minister takes credit for abolishing the very same ‘‘major reforms’’!

For the steps taken in regard to steel, the Economic Survey tabled by Chidambaram says, ‘‘World steel prices rose from December 2001 onward…The Government actively responded to these market developments, and came out with a stream of ‘industrial policy’ actions. In the ‘Interim Budget’ of January 2004, three changes were announced…Reduction of customs duty…’’ And then in his Budget speech, Chidambaram takes credit for doing the opposite!

Actually, it pays to read the Economic Survey in the context of the Budget speech in other respects too. Recall Chidambaram’s prose on drinking water, specially in rural areas, about how it is the Rajiv Gandhi mission that is to be credited with attending to this dire need, about how ‘‘in recent years…new programmes have sprung up, obscuring the original mission’’. Now see what the Economic Survey put out by the same Finance Minister has to say on the same question:

‘‘To achieve the objective of providing safe drinking water in all rural habitations, programmes like Accelerated Rural Water Supply Drinking Water (ARWSP), the Pradhan Mantri Gramodaya Yojana—Rural Drinking Water (PMGY-RDW) are being implemented…With an investment of over Rs 45,000 crore (March 31, 2004), considerable success has been achieved in meeting the drinking water needs of the rural population. There are more than 3.7 million handpumps, and 1.73 lakh piped water schemes installed in the rural areas. As on March 2004, 95 per cent of the rural habitations have been fully covered and 5 per cent are partially covered and 0.4 per cent are not covered with drinking water facilities…’’ Which of the two documents tabled by the same Chidambaram should one believe?



First published on: 28-07-2004 at 00:00 IST
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