PM, FM have merely blamed Pranab: Yashwant Sinha

by Yashwant Sinha In nine years and 10 budgets, the UPA government has managed to bring growth down from 8 percent to 5 percent, the fiscal deficit has increased from a low of 2.5 percent of GDP to over 5 percent, the current account deficit at 5.4 percent is at an all-time high, inflation is stubborn, interest rates are high and its back to the bad old days. Investments are down and investor confidence in India and abroad is at its lowest. The budget was presented in this background and the least that was expected of the Finance Minister was that in this budget he would unveil the steps which would revive confidence and create the environment for reclaiming the earlier high growth rate. Unfortunately, the Finance Minister has failed miserably to do so. [caption id=“attachment_644175” align=“alignleft” width=“380”]  AFP.[/caption] Just as the Railway Minister criticised his predecessor minister in his budget speech, Chidambaram has indirectly criticised Pranab Mukherjee by saying “in the budget for 2012-13, the estimate of plan expenditure was too ambitious and the estimate of non-plan expenditure was too conservative”. It is the same government and the same prime minister, but he merely sits there and listens approvingly. What an irony? The FM then proceeds to “rationalise” expenditure and in the process reduces the plan expenditure for the current year by over Rs 92,000 crore, capital expenditure by Rs 37,000 crore and claims to achieve a fiscal deficit of 5.2 percent, better than the expected 5.3 percent. It must, however, be noted that it is productive expenditure which has been drastically reduced, which explains why the revenue deficit has gone up to 3.9 percent in the revised estimate this year from 3.4 percent estimated in the budget. He has thus paid no attention to the quality of expenditure and reduced productive expenditure at random. There is no doubt that this massive reduction in expenditure will further dampen demand in the economy and definitely create short-term pain for everyone. The government clearly believes in the principle of ‘heads I win and tails you lose’. So, when it raises expenditure by over Rs 2 lakh crore in 2008-09, ostensibly to tackle the global financial crisis, it is doing the right thing and when it reduces expenditure by Rs 60,000 crore in 2012-13 even when the global crisis persists, it is still right. The FM has not dealt with the problem of inflation either on the monetary or on the supply side as was expected and has left the people at God’s mercy. As far as the current account deficit is concerned, he is hoping that foreign investors will bring money into India automatically and solve the problem for us. Nothing could be more pathetic. In view of the fact that savings have declined in the last five years from 37 percent of the GDP to less than 30 percent, the Finance Minister should have taken more determined steps to encourage savings by giving concrete concessions in income tax to the savers. He has failed to do so. The only silver lining is the additional Rs 1 lakh concession that he has given for housing on the income tax side. Infrastructure has received mere lip service. The problem in infrastructure is of clearances and other administrative bottlenecks not finance. He has kept quiet about the removal of bottlenecks. So, all infrastructure sectors like the National Highways Development Programme, telecom, ports and roads will continue to languish and so will critical sectors like power and civil aviation. The defence allocation has been reduced drastically from budget estimate to the revised estimate, and the allocation for next year does not even take care of the rate of inflation. The Food Security Bill allocation of Rs 10,000 crore is a mere pittance. Everyone knows that the annual outgo will be in excess of Rs 100,000 crore. Going by the cuts which have been imposed in this year’s budget, the next year’s allocations have no sanctity and there is therefore hardly any point in discussing them. On the taxation front, the Finance Minister was expected to bring the Direct Taxes Code which had been returned by the Standing Committee on Finance on 9 March last year. Instead, he has tinkered with direct taxes and postponed the DTC. Similarly, he has indulged in tinkering as far as excise duties are concerned without outlining a clear road-map for the GST. It must be noted, however, that he has ended up imposing a hefty burden of almost Rs 18,000 crore on taxpayers through his various measures. The subsidy bill of the government has increased from Rs 1,98,000 crore to Rs 2,58,000 crore in the RE for the current year. This only shows how the expenditure on subsidies was underestimated in the BE. The same trick has been resorted to again for the next year in which the expenditure on susidies is shown as only Rs 2,31,000 crore which is unashamedly unrealistic. The government is sitting on over 80 million tonnes of food grains stock. The Finance Minister has not indicated how he proposes to deal with this burgeoning accumulation. The UPA government is solely responsible for the crises of the Indian economy. We had expected that the Finance Minister would come out with a bold budget which will inspire confidence in the Indian economy. Unfortunately, the budget is a status quoist, ‘business as usual’ budget and fails to inspire any confidence. Verbiage is not a substitute for content. The economy will continue to languish and the people of India are in for a great deal of suffering in the days to come.