Sinha has done nothing to keep his promises
Dilip Thakore
The Bharatiya Janata Party-led coalition government's maiden Budget has the potential of becoming a landmark Budget because it has identified - even if it has inadequately addressed - the priority sectors of the Indian economy as the nation staggers into the twenty-first century.
Union Finance Minister Yashwant Sinha needs to be commended for formulating a carefully balanced, please-all Budget for 1998-99.
The Budget promises to maintain the momentum of the economic reforms initiative by opening up the hitherto government-monopolised insurance industry and accelerating the hesitant privatisation of haemorrhaging public sector enterprises.
Moreover, to revive flagging industrial and agriculture growth - which, as the Economic Survey highlighted, slumped to 4.2 per cent and minus 3.7 per cent last fiscal -- Sinha has projected a 14 per cent increase in government spend aggregating Rs 2,679.27 billion.
Of this, a sizeable Rs 611.46 billion (a 35 per cent increase over 1997-98) has been allocated for infrastructure (energy, transport and communications).
Likewise, the central plan allocation of the Union ministry of agriculture has received a massive increase of 58 per cent to a more modest Rs 28.54 billion with an additional Rs 99.12 billion earmarked for the ministry of rural areas and employment in fiscal 1998-99.
Quite clearly with prolonged power outages and choked roads becoming a dominant feature of life in contemporary urban India the needs of the infrastructure sector must be urgently addressed.
The massive allocation towards infrastructure development projects apart, the finance minister's Budget speech also provided the good news that the non-government Infrastructure Development Finance Company has 'tied up its equity capital of Rs 10 billion including equity participation of Rs 4 billion by nine foreign investors and has now commenced operations.'
And though the plan allocation of Rs 28.54 billion to the ministry of agriculture is unlikely to make much of an impact on the lives of the nation's 500 million rural citizens, a 58 per cent increase in this allocation is indicative of the dawning realisation in urban India that Indian industry is unlikely to prosper unless purchasing power is injected into the nation's huge and hitherto neglected rural market.
There is other evidence that the finance minister, if not the government as a whole, has finally identified the priority sectors of the Indian economy.
As has been perhaps over-argued in this column, the top priority sector is education.
The 1998-99 Budget has hiked the Central government's expenditure on education by almost 50 per cent over the previous year to Rs 70.47 billion this year.
The finance minister reiterated the government's commitment to 'raising the total resource allocation for education to 6 per cent of GDP in a phased manner.'
Given that education is primarily a state subject under the Constitution, this substantially higher allocation towards education is of limited value. Nevertheless it is indicative of the right priorities and progressive values.
There are numerous other provisions in the Budget which indicate that the hitherto somnolent economic ministries in North Block, New Delhi, have finally discovered the thrust areas of the Indian economy.
A national informatics policy is being formulated by a technology task force; the Budget promises the construction of 2 million dwelling units this year and a boost to the housing sector through the repeal of the much-derided Urban Land Ceiling Act, 1976; the life and general insurance businesses, long monopolised by lazy government corporations, are now open to Indian private sector companies; several policies have been unveiled to end 'inspector raj' and make timely credit available to small scale industrial units.
Moreover the finance minister also made a bold (in the Indian context) statement that 'unrevivable' public sector enterprises will be wound up and their assets sold after handsomely compensating laid-off workers and that 'in the generality of cases the government shareholding in public sector enterprises will be brought down to 26 per cent.'
Yet the high-sounding promises in the Budget proposals remind one that the finance minister is a former bureaucrat.
That's perhaps why his Budget presentation speech - like all other Budget speeches - fails to mention any administrative reforms or restructuring to give effect to the laudable proposals of the path-breaking Budget of 1998-99.
Quite obviously Sinha believes that the same old creaky and weary government machinery, which has reduced this nation to penury, will be galvanised into delivering his numerous promises.
The failed Indian economic development has conclusively proved that there's more to economic development than throwing fistfuls of money at problems and hoping that they will go away.
The nation's obsolete and corrupt bureaucracy, which must translate policies into implementable programmes, needs urgent reform and restructuring.
It is a certainty that a large percentage of the enhanced allocations to the carefully chosen thrust sectors will just disappear into thin air.
In this connection I have a huge bone to pick with the large and prospering tribe of professional economists who dominate the economic ministries, academia and the business media.
Why is there a supine acceptance of all Budget proposals in monetary units? There is precious little data in the Budget proposals indicating the number of assets in absolute numbers created or to be created - number of schools to be built, kilometres of road or irrigation canals to be constructed.
For example, the revised estimates of 1997-98 indicate that a sum of Rs 11.44 billion was allocated last year for the construction of dwelling units under the Indira Awas Yojana Programme.
According to my calculation this allocation should translate into 1,14,000 homes. I am prepared to bet that not even 30,000 homes were in fact constructed despite which the allocation for this programme has been hiked to Rs 16 billion this year.
Therefore, in the final analysis, though the Union Budget of 1998-99 has the virtue of highlighting the thrust areas of the Indian economy, it is likely to prove just another Budget because it spreads itself too thin.
The allocation of marginally larger amounts to a large number of good causes without bothering to monitor asset-creation or spending is business as usual.
Moreover the Budget must not be assessed in isolation. A government which has first queered the pitch by going nuclear for dubious reasons, which has triggered an arms race in the subcontinent, hiked defence expenditure and antagonised international opinion, cannot expect to make everything alright by producing a Union Budget which makes all the right noises.
Dilip Thakore
Budget '98
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