Shed flab

Faced with a serious crisis, in the form of the oil pool deficit, the finance ministry has announced a spate of austerity measures. Essential, but neither timely, nor enough. Why does the government wait until a full blown crisis hits it on the face before it comes up with token reform ideas. Remember 1991, major economic reforms were only initiated when we were almost on the verge of a financial collapse. Why are we always reactive and never proactive? For instance, according to the mid-term review of the Ninth Five Year Plan, one-third of the stocks of grains like rice and wheat and one quarter of the sugar distributed through the PDS simply disappear. And this after a large amount is simply eaten by rats. Similar is the case with electricity, where a large proportion is lost even while distributing it. However, this colossal waste has not bothered any of the policy makers. Do they simply lack imagination? Even if one were to agree that the oil price rise was purely contingent and therefore caught everyoneby surprise, but certainly the coming crisis was not accidental.

There were numerous roadsigns of the impending crisis. First of all, oil prices have more than tripled in the past three years. But than again it is not only about oil. Consider these: foreign investment has dipped, in fact, turned negative: while FIIs have been busy offloading their Indian holdings, FDI has trickled down. The Sensex has plummeted. Inflation has soared and that has resulted in higher outlay on the dearness allowance account. The rupee has drifted down while our foreign reserves are under tremendous pressure. Industrial growth has slowed down after the initial spurt this year. In short, except for the boom in the IT and the automobile sectors, the rest of the signs all point towards the looming crisis. The sarkari babus and netas must really be asleep not to have seen any of this coming.

We certainly are suffering as a result of a mixture of factors some contingent, others brought upon ourselves. But the failure to carry through reforms at better times accentuates the terrible pain. Given the nature of the crisis, are the slew of austerity measures enough? While a 10 per cent cut in expenditure on fuel for all official cars may be necessary, given the current crisis it is clearly not sufficient. Neither are the other measures: 10 per cent cut in posts in all ministries and departments, abolition of new and vacant posts, and restriction on foreign travel. These are merely cosmetic changes brought about to salvage the conscience of those who clearly do not care. Despite all the song and dance about downsizing government by finance minister Yashwant Sinha, over one lakh government employees have been recruited in the last one-and-a-half years. The number of Central government employees, barring the defence forces, stood at 3.82 million as on March 1, 2000, against 3.75 million last year. Whilethe finance ministry announces austerity measures, the telecom ministry goes for a binge with free telephone connections to all employees. The UP chief minister rewards all his legislators with free computers. We need to be consistent and need to have commitment. For instance, the disinvestment policy is meaningless unless we downsize. We need to cut the flab, not merely tighten our belts.