Reform in reverse

The country’s future finance ministers will find Yashwant Sinha’s remarkable reverse driving a tough act to follow. The latest amendment to the Budget he had presented with a great deal of ceremony on June 1, has seen the country’s projected fiscal deficit shoot up from Rs 91,000 crore to Rs 95,000 crore and the revenue deficit, from Rs 48,068 to Rs 51,668 crore. Budget-making has traditionally been regarded as a revenue-enhancing exercise. Under Sinha’s dispensation it seems to have become a concession-disbursing one. The minister, in his defence, maintains that he is only doing this in a “spirit of accommodation” and that in a democracy the government has to be sensitive to public opinion. The point is well made. But there is a fine line that separates the accommodation of legitimate trade and industry concerns and the succumbing to articulate economic lobbies and political vote banks. By indicating that the Budget is a negotiable instrument, Sinha is consciously blurring this distinction and creating anunhappy precedent for the future.

Of the amendments in the 1998-99 Budget that the minister announced on Friday in his reply to a three-day debate in the Lok Sabha, it is the reversal on the price of urea which is the most reprehensible. Not only did he backtrack on it three times, he finally seemed to lose his nerve completely. With the position restored to status quo ante, the price of this fertiliser which has in any case always been highly subsidised by the state will remain what it was. The move is completely irrational and testifies to the stranglehold that the rich farmer lobby has on this country’s political class. Not only does this pampered group escape the tax net, they are being constantly wooed by all manner of bigwigs, from a Jayalalitha in Tamil Nadu to a Parkash Singh Badal in Punjab. An orgy of competitive appeasement follows. If one demands that power is made cheaper for Indian agriculturalists, the other insists that they be given free water as well, and so it goes.

Therefore whenYashwant Sinha demonstrated some courage on Budget day and upped urea prices by Re 1 per kg, it was a step in the right direction. Unfortunately, Sinha preferred the counsel of politicians to those committed to sound economics, as his knee-jerk action to scale the price-hike by 50 percent within a day of presenting the Budget gave early inkling of. But the farmers’ lobby wasn’t prepared to settle for anything less than a total rollback, it seems, and the country stands to lose Rs 2,000 crore in tax revenue as a result. Sinha’s Budget had, in any case, increased subsidies on indigenously produced phosphatic and potassic fertilisers by Rs 400 crore. Ministers have their political exigencies, of course, but they should remember that while they can merrily sign the cheque, it is the people of India who will finally have to pay the bill.