Courage fails, rhetoric remains

Courage fails, rhetoric remains

P Chidambaram,
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India’s Finance Minister Arun Jaitley presents the Union Budget at Parliament, in New Delhi on February 1. Photo: PTI

Every budget has a context, every budget must have a goal. The context of Budget 2018-19 was graphically described in the Economic Survey: The macro-economic situation was vulnerable, the exchange rate of the rupee was not competitive, real agricultural income and real agricultural wages were constant for four years, jobs were not being created, private investment had stalled and credit growth was sluggish. It was a depressing assessment. The situation called for courage, willingness to admit mistakes and take bold corrective measures. Courage was in short supply yesterday. Instead, government resorted to grand announcements.

Recall 1991 when Dr Manmohan Singh pulled India out of its cocoon of a “closed economy” and challenged it to face the real world. Recall 1997 when a weak coalition government rewrote the tax laws of the country. Recall 2004 when the government raised its sights and aimed for double-digit growth and nearly achieved it during a period of three years. Recall 2008 when the economy overcame the challenge of an international financial crisis. Recall 2012 when the government took hard measures to put the economy back on the path of fiscal consolidation and macro stability. If one word marked those times, it was courage.

I admit that to find courage in the last year of a government’s tenure is usually difficult — and especially after the Gujarat poll result and with perhaps a forewarning of the by-election results that would be announced on Budget Day. Absent courage, we have a budget without any goal and without any focus. On every test, the government’s budget has failed.

It failed the test of fiscal consolidation. The Revised Estimate of every deficit has exceeded the Budget Estimate. The most glaring failure was on account of the Fiscal Deficit — 3.5 against 3.2. Even that number is doubtful. The ONGC’s gift of about Rs 30,000 crore — actually borrowed money — must be added to the FD. So must the Rs 80,000 crore borrowed from the banks to recapitalise the banks! These numbers will not escape financial analysts and global investors.

It failed the test of addressing unemployment. Mudra loans of average size Rs 43,000 do not create jobs. A new EPFO registration does not mean a new job. Private investments create jobs, but private investment has stalled. SMEs create jobs, but many SMEs have shut down and many more have cut back production and axed jobs. Credit growth creates jobs, but with credit to “industry” growing at 2.1 per cent it is obvious that credit is not generating new employment.

It failed the test of addressing farm sector distress. The government took the route of squeezing prices of farm produce (inadequate MSP) in order to contain inflation. By the time it realised its mistake in the fourth year, the damage had been done. Demonetisation further damaged cash-driven agricultural production and agricultural trade. Two failed monsoons added to the woes of the farm sector. Offering, at this stage, to fix MSP at 1.5 times the cost is welcome but does not carry credibility. Nor will it bring relief until after the next kharif and next rabi seasons. Farmers are angry and are showing their anger at the polling stations.

It failed the test of promoting welfare. The Economic Survey confessed that the three challenges that the government had not addressed adequately in the last four years are agriculture, employment and education. Under education, the Economic Survey clubbed both education and healthcare. The ASER and NAS reports are a severe indictment of the Central and state governments on education. The National Family Health Survey 2015-16 is an indictment on healthcare.

The budget has announced the “world’s largest government funded health care programme”. Is it for real? It appears to be an insurance scheme, but no scheme has been designed or approved so far. More importantly, I did not find any outlay or allocation for the scheme. Will it be implemented in 2018-19? Of course not. It is an announcement, a jumla. The budget has also slashed the outlays on many critical schemes such as Pradhan Mantri Awas Yojana, National Drinking Water Mission, Swachh Bharat Mission, National Health Mission, Gram Jyoti Yojana etc.

It is clear the government has run out of ideas. Mercifully, the budget did not coin new slogans or invent new acronyms. Government hopes that rhetoric will be the wind that fills its sails. The truth is that the people are tired of slogans, acronyms and rhetoric.

The writer is former finance minister of India

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