Opinion The Nowhere Budget

It was said that Sarah Bernhardt,the famous actress,could move people to tears even if she only read out a dictionary.

March 18, 2012 03:37 AM IST First published on: Mar 18, 2012 at 03:37 AM IST

It was said that Sarah Bernhardt,the famous actress,could move people to tears even if she only read out a dictionary. Pranab Mukherjee achieved a near enough feat when he read out in great detail the list of sectors on the negative list for service tax. Why the FM should read out such a list in detail is a mystery. It did fill up time and proved to be no more nor less interesting than the rest of his Budget speech.

It was a strikingly do-as-little as possible to survive Budget. The growth estimates made last year of 8.5 per cent became 6.9 per cent in actuality. Inflation has persisted for a year near double digits and is now still stuck at 7 per cent. Deficit expected to be 4.6 per cent for 2011-12 last year turned out to be 5.9 per cent. For 2012-13,it is pegged at 5.1 per cent. And yet the Budget gave no assurance that enough will be done to achieve that level even though it is way above the forecast of 4.1 per cent made in the previous year.

The reason is that the Government is worried about upsetting its allies. The Railway Budget two days previous had boldly tried to raise fares after ten years of no change. Even this displeased the TMC and Mamata Banerjee who considers the Railway Ministry to be her fiefdom. Her chosen minister,Dinesh Trivedi,said he had taken the Railways out of ICU. Guess who put it there?

Having said that,he was destined for the gallows. He had obviously been told to test the waters for the bigger Budget to follow. The answer from the TMC was clear. The UPA-II was under notice to roll back the fare increase. As of today we have no information on the rollback. But the strategy for the Budget was hence for survival. Dont frighten the horses is the best way to characterise the exercise.

The strategy may perhaps succeed. UPA-II may be able to survive till May 2014. But along the way,the Government has abandoned any ambition to resume growth at any level above the 7 per cent bottom floor. Even its forecast of 7.6 per cent carries a welcome margin of plus/minus 0.25 per cent. It has also abandoned any active policy of controlling inflation. At this level of deficit,there is no reason why the RBI should actively slash its interest rates.

The serious discussion which the country needs on the choice between the subsidies which are not just helpful but complementary to inclusive growth and those which are merely retrogressive,pandering to vested interests,was avoided in the Budget. If India is to have a comprehensive food security programme (whatever its administrative complications),it needs to delete some other retrogressive subsidy such as the fertiliser one or the diesel one. There is also a debate necessary on tax concessions for the rich as against the burden on the poor. A liberal economic reform package can be and should be progressive and inclusive. This requires boldness in facing up to difficulties and creating a consensus for it rather than pandering to every vagary of the populist sentiments of political parties.

India lacks any political party which champions economic efficiency or fiscal prudence. All parties MPs thump their desks in the Lok Sabha when a rise in some entitlement spending is listed. Of course,all politicians want to claim that they can give their voters a free lunch. But voters live in the real world,not in Lutyens bungalows as the MPs do. They know things cost money and you have to pay the going price for what you buy. The politicians want to pretend that public services such as rail journeys can be sold at throwaway prices; the hidden cost being a rising deficit and interest payments on the debt incurred. It is time the politicians educate themselves on the economic reality which their voters experience every day of their lives

India can realise its dream of achieving an adequate welfare system only if it assures a steady and high rate of growth,a lean regime of subsidies and a progressive tax system with minimal concessions. The UPA-II has not managed this. Will the next coalition governmentUPA-III/NDA-II do so?