Budget is silent where it matters

The New Indian Express First Published : 01 Mar 2011 11:21:00 PM ISTLast Updated : 28 Feb 2011 11:50:22 PM IST
In Pranab Mukherjee’s first budget speech as the Union finance minister in the 1980s, so unstoppable was he that it made Indira Gandhi, perhaps India’s wittiest prime minister, later on remark, “here is the shortest finance minister who has made the longest speech.” Three decades later, his budget speech, though not too long, has remarkably shrunk in content. Inflation, deficit, corruption — on none of these burning issues of the day is Mukherjee’s 2011-12 budget explicit in any way. On the other hand, there are far too many urgent items on his future list. Take for example the Goods and Services Tax (GST), which subsumes all the indirect levies like excise, VAT and local taxes and is expected to give at least a two per cent boost to the GDP. Only the constitutional amendments that are necessary will be tabled in this session of Parliament. Nobody knows when it will be a reality.
Besides, the priorities of the budget are quite opaque. Mukherjee plans to raise Rs 40,000 crore by sale of stake in the Central Public Sector Undertakings, yet not to allow the government share in them to drop below 51 per cent. However, the high moral posturing implicit in it has been thwarted only recently when the chairman of National Aluminium Company Limited (NALCO), a CPSU, was arrested for accepting bribe to favour a private company importing coal. It shows that having a government official to lead the PSUs does not necessarily improve its efficiency.
On some other delicate issues, particularly the one involving allowing foreign portfolio investors to invest in SEBI-registered mutual funds, the budget seems too daring. It says such foreign investors must comply with the Know Your Customer (KYC) requirements for the equity schemes. But which Indian agency has the wherewithal to testify to information provided by the Foreign Institutional Investor (FII), and to vouchsafe that it is not black money generated in India that is ‘round tripping’ into the Indian capital market, to flee it the moment there is prospect for a better return somewhere else? It is a particularly sensitive issue in view of the fact that except for the government employees India does not have a pension system worth the name, and the return of provident funds and bank deposits being low, there are many retirees who put their savings in the mutual funds, particularly the part-debt part-equity ones. It is a lifeline for the old people.
But it is the silence of the minister on inflation, deficit and corruption that is eloquent. He has expressed the hope that the average inflation in fiscal 2012 will be less than fiscal 2011, but it is nothing but a clever game of numbers. For headline inflation, the recent shift from computing the rise in wholesale price index to a new basket of consumer prices will expectedly make the 2011-12 price rise appear less menacing. Besides, on the high base of 2010-11, food prices in the following year may not look too jumpy. Nevertheless, what the budget skirts around is the high basic inflation rate, of items other than food articles and oil, which are now going at a worryingly high 5-plus per cent because growth is stifled by shortage of money, which in its turn is caused by government loans crowding out private credit.
There is no clue in the budget as to how would Pranab Mukherjee grease the wheel of the economy with the lubricant of easy capital, so that it can spin again. He says he will bring down fiscal deficit from 5.1 per cent of the gross domestic product as of now to 4.6 per cent a year hence. But there is no plan in his hand, unless it is there up his sleeve, to cut deficit either by reducing expenditure or raising the revenues. On the contrary, the direct and indirect tax revenue he is targeting in 2011-12 is a small, probably symbolic, Rs 200 crore less than that of the previous year.
Nor is there any let-up in the populist cash drainage typical of the UPA regime, either by hiking the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) wages, or lowering the price of food distributed among a nebulously defined population of poor at a rate that qualifies its being defined, as in the Bible, as manna from the skies. On black money too, the budget is economical with words. It says a Group of Ministers has been constituted to suggest ways for curbing corruption. That sounds like a cruel joke, with a former Cabinet minister now in police custody on graft charges. Nobody believes that India’s ministers are quite the right people to find the switch that can turn off the generation of black money, and that of its being parked in tax havens abroad. However, the least that was expected of the minister was to offer a roadmap to bring India several rungs below where it currently stands along the global corruption index.
The silence in the budget on key issues hints that there may be something wrong in the United Progressive Alliance coalition itself. If the leader of the coalition, the Congress, were transparent enough to its partners, it could be more clear-throated on how it would earn money, spend it and catch the wrong-doers.