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Unkept promises litter Sinha's Budget 1999

George Iype in New Delhi

As Finance Minister Yashwant Sinha prepares for the millennium's first budget, the implementation of his last year's budget reads like a story of missed targets, unkept promises and heaps of money spent on lost causes.

Sinha's budget for 1999-2000 was a perfect coalition job. He promised to raise Rs 100 billion through the divestment of public sector undertakings. He pledged to prune the burgeoning government expenses by setting up an expenditure reforms commission. He announced a national programme for rural industrialisation.

Some of the Finance Minister's other key promises included effective programmes to provide food, health care, education, and shelter to the one billion Indians within a decade.

Thus, he announced the strengthening of the public distribution system, an Annapurna scheme for poor senior citizens, integration of existing rural development and health and family welfare programmes, funds for village councils and an education guarantee scheme.

But 12 months later, most of these reform measures remain on paper.

Take for instance, the PSU divestment. The target for divestment -- it's a governmental euphemism for privatisation -- was Rs 100 billion by Sinha’s budget projections. But how much has Sinha divested of the PSUs? Less than Rs 20 billion, including the sale of Modern Foods, according to officials of the Ministry of Finance.

Experts have been arguing that the government finances are in a mess because of the 240 PSUs in the country, only 130 come out with profits. The Disinvestment Commission has studied most of the loss-making PSUs in the past four years and recommended that the government should get out of them by privatising them.

But not only that, the recommendations remain only on paper, but even the modest budgetary projection towards that end have miserably failed.

Satish Kaura, chief of the economic affairs committee of the Confederation of Indian Industry, says Sinha's Rs 100 billion target was a mere drop in the ocean.

"The PSUs have assets of more than Rs 1 trillon (10 lakhs=1 million; 1,000 million=1billion; 1,000 billion=1 trillion). Therefore, the government should raise the divestment target to at least Rs 300 billion this year," he recommends.

Other suggestions from economic experts include the aggressive privitisation of successful government-owned companies like Mahanagar Telephone Nigam Limited and Maruti Udyog Limited.

But the one promise that the finance minister least kept is on the expenditure front. He announced a two-pronged strategy for careful expenditure management.

Thus Sinha pledged that four secretary level posts would be abolished from April 1, 1999 and that an Expenditure Reforms Commission would be constituted to prune the government spending.

While Sinha’s budget document last year showed an increase of more than 45,000 employees in the central government, the actual excess of government manpower could be more than double that number.

However, in the last one year, neither any measures have been taken to downsize the government nor the commission set up to control expenditure. In fact, MoF officials point out that the slogan of downsizing has only boomeranged.

“We have created new secretary-level posts and inducted more officials in various ministries because Prime Minister Vajpayee is now leading a jumbo government of 70 ministers,” one official commented.

Thus more expenditure and more bureaucracy replaced Sinha’s promises of downsizing and expenditure cuts.

Sinha also spent lavishly on causes that could have been avoided. Thus, the government dolled out several million to some state governments to rescue them from Balance of Payments crisis.

It sanctioned loans worth Rs 2 billion for bureaucrats to purchase cars and buy houses. Sinha spent a huge Rs 100 million for the golden jubilee celebration of the Supreme Court of India and nearly Rs 40 million for the renovation of Delhi’s Siri Fort auditorium.

Although Sinha promised a multi-million-dollar National Roads Project, it is not yet clear where the money would come from to fund the new roads.

MoF officials admit that fiscal profligacy was the highest in the last one year. For example, they point out that though the government spending calculated for the 1999-2000 financial year was Rs 140 billion, it in fact finished off with that amount in eight months.

Sinha and his colleagues claim that one reason for this unprecedented rise in government expenditure was the Kargil conflict which ate into the exchequer and threw earlier budget projections haywire.

The government has put the direct cost of the Kargil conflict at a little more than Rs 30 billion. But officials say the indirect cost of the war would run into at least Rs 50 billion as in the conflict’s aftermath, the armed forces have been shopping for spares, arms and ammunition.

Therefore, many expect that Sinha will considerably hike the defence allocation in the first post-Kargil budget. “Generally, the government allocates more than 60 per cent of its total spending on defence, interest payments and subsidies,” says Jagdish Shettigar, convenor of the Bharatiya Janata Party’s economic cell.

According to Shettigar, the government expenditure could be minimised through rationalisation of subsidies. While it is unlikely that Sinha imposes harsh subsidy cuts in the budget, many believe he will try hard to rationalise subsidies.

For rural development and employment generation, Sinha had last year announced a series of packages. But no one has since then heard of his promised four-pronged strategy to streamline employment through local self-government institutions and also about the so-called programme for rural industrialisation.

But it is not that Sinha is going to present his budget next Tuesday with a bundle of unfulfilled promises.

In fact, he has kept a few key promises. They include the reform that he is bringing in to rationalise indirect raxes, expansion of the foreign direct approval list, setting up of committees to review drug policy and the review of the Industrial Development and Regulation Act.

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