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'There are going to be bigger problems for our economy one year from now'

BUDGET 2000

Tarun Das

I am disappointed maybe because I expected more. Last year the FM targeted a fiscal deficit of 4.5 per cent. This year he is targeting a fiscal deficit of 5.1 per cent. This is not encouraging.

We know about Kargil, Orissa, and the election which brought the fiscal deficit to 5.7 per cent. But the target for 2000-1 should at least have been 4.5 per cent or even less. This is disappointing. This is not a harsh Budget which we have been promised.

I think industry is overall unhappy because we are not seeing growth going to 7 per cent plus out of this Budget. The IT sector has got a boost. But by and large we are not seeing real encouragement for others. And with government expenditure remaining high, it means that extra resources are not available for industry to grow.

The stock market is reacting to the tax on dividend and the five year plan for tax on export profits. But industry is reacting beyond that to overall issues.

Dr Manmohan Singh decided in the five years he was FM to improve the fiscal deficit by cutting infrastructure expenditure. This was a plan based on the hope that private sector would come into infrastructure. No luck there because the private sector could not get approvals for infrastructure. So we have this crazy situation of the government not spending on infrastructure and private sector not getting in for a variety of reasons eg, bankrupt SEBs who have to buy power but can't pay for it.

Meanwhile, NTPC, the public sector company, is now able to set up power stations on its own without government funds. This is good news. But this is a drop in the ocean. Unfortunately, even this is not happening in the major airports, ports and roads. Meanwhile, with the fiscal deficit going up, the government just cannot find the money now for infrastructure investment.

This would have been a harsh Budget -- much needed -- if the FM had slashed revenue expenditure drastically and provided more for infrastructure development. Another lost opportunity. It does not help the fiscal deficit. But it is showing to the people that the FM is taxing those who are better off. So, politically, it probably goes over well. It is not a big deal either way. We can't really crib about it. But as far as the fiscal deficit is concerned it is not even half a drop in the ocean.

We are in the debt trap, and we have to get out of it. We thought this Budget will help take us out of this debt trap. But I expect political compulsion, and lack of support within the coalition, prevented the FM from taking tough action. He knows the problem. He wants to address it. And, if he has not been able to, it is because of lack of support from others in the system. This is going to cause bigger problems for our economy one year from now. We are heading for a 1991 situation again in a different way.

Tarun Das is the Director-General of CII.

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