The Budget as the BSP test

In India, there is hype about development now. India will become a developed economy in 2020. Clearly perceptions about India are changing and there are several reasons for this. First, the 1990s have been associated with several successes in the external sector, including software exports, and burgeoning foreign exchange reserves. A country that had once depended on foreign aid, has finally said no to aid. Second, the rate of population growth is slowing down at an all-India level and this implies a higher per capita income growth, with a consequent explosion in consumption. A decrease in the dependency ratio also stimulates income growth and, demographically, India is probably poised today where several East Asian economies were poised in the 1960s. Third, educational indicators have begun to improve. Subject to inter-regional variations, increase in literacy from 52 per cent in 1991 to 65 per cent in 2001 is one manifestation. This has to be replicated for health outcomes. Fourth, food stocks are spilling over, although this is not always a plus. Fifth, Indian companies have become leaner, more competitive. While not everyone can survive competition, the ones that have done so are efficient and can handle global competition. Sixth, India has begun to be noticed globally. IT, H1-B visas, success of Indians based in the US, BPO and call centres are indications of this. Finally, there is good news about GDP growth in 2003-04, thanks largely to low base in 2002-03 and the good monsoon. We may even touch 8 per cent growth in 2003-04.

One instance of changing perceptions about India is in the BRIC (Brazil, Russia, India, China) report, brought out by Goldman Sachs and often quoted. The Indian per capita income we are talking about in 2020 is anywhere between $1,500 and 2000 US dollars. In today’s dollar terms, that’s wonderful. But that doesn’t make India a developed economy. We won’t have a developed economy until the per capita income touches around $10,000 dollars. By 2020, the literacy rate will still be less than 85 per cent. The infant mortality rate will still be more than 35 per thousand. The percentage below the poverty line will still be more than 10 per cent, often located in undivided Bihar, undivided MP, Rajasthan, undivided UP, Orissa and the Northeast. We will be roughly where China is today.

Writing in this paper, Arun Shourie made the point that we shouldn’t be perpetually negative about India. True. But we shouldn’t blow the positives up disproportionately either. Consider the seven positives I listed. How many of these directly affect the poor in the geographical regions I have mentioned? How many are positive from a rural point of view? In the context of polls in MP, Delhi, Rajasthan, Chhattisgarh and Mizoram, the terms development and governance were used synonymously, development being interpreted as BSP (bijli, sadak,pani).

Despite possibilities of unbundling and private sector participation, BSP will continue to remain a core state function. Forget China. It has been no different in the US. This definition of development covers some types of physical infrastructure and is thus a sub-set of governance, which should also include social infrastructure, law and order and the enabling environment. The enabling environment must facilitate creation of private sector jobs. Otherwise, we will continue to squabble over a few measly jobs in the Railways, or elsewhere within the government. Has India voted on the enabling environment, law and order or social infrastructure? There is no evidence to suggest this. Has India voted on BSP in these polls? To the best of my understanding, no evidence again. But for MP and Delhi, and even in MP, there is scope for debate about what happened. If anything, a preference has been expressed for physical over social infrastructure.

BSP is not a rural agenda. It is not an urban agenda. It is every Indian’s agenda and has been since 1947. And few governments have ever delivered. There is a difference between packaging a promise and actually delivering. Once it comes to delivery, the dichotomy between progress and populism becomes artificial. If BSP stands for progress, appropriate user charges and finding money for BSP tread into the realm of populism. There is a difference between a perceived non-performing government being ousted and an incoming government delivering on whatever is defined to be governance.

Don’t get me wrong. If future elections are going to be about governance, I will be delighted. But I suspect we are reading too much into the five state elections. Will all expenditure in the forthcoming budget be gauged against the BSP test? If the answer is yes, I will be happy to be proved wrong.