Commentary/Mani Shankar Aiyar
It is only a matter of months before the cheers for Budget turn to tears
Moreover, says Sengupta, "The shortfalls were there in practically
every sector." He identifies the deprived sectors as including
rural development and social services.
The deleterious impact
of such sectorial shortfalls can best be evaluated by contrasting
the UF government's performance in these key areas with Dr Manmohan
Singh's prescription in his Jawaharlal Nehru Memorial lecture in November 1996: "As I see it, the major part of central assistance
should be earmarked for strengthening programmes of social development
with large externalities, particularly health and education, and
support for programmes specifically designed for the weaker sections."
Not only has the UF government violated this cardinal principle
of good governance in its first year of office, it continues to
violate it in its Budget for 1997-98. Sengupta says that the provision
for social services in Chidambaram's Budget "has fallen far
short of the requirements" He goes on to identify the major
deprived sectors as "medical and public health, water supply
and sanitation, welfare (of weaker sections), social security..."
He stresses that there has been practically
no addition this year to the special central assistance for the
hill areas, the Tribal Sub-Plan, the border areas and the North-Eastern
Council."
Sengupta further emphasises that "general
education" is the worst victim of Chidambaram's parsimony.
Over to Singh's Nehru Memorial lecture again: "There
is an urgent need for credible social safety nets to protect the
more vulnerable sections during the phases of transition to a
more dynamic economy... First and foremost, the best way to cope
with a fast-changing world is to have a well educated labour force."
It is precisely with regard to weaving a "credible social security
net" and specifically in the area of "general education"
that the Chidambaram Budget reveals itself as a dangerous departure
from the tenets of Manmohanomics.
Far from compensating for the shortfall in 1996-97, the finance
minister has increased the central plan outlay for 1997-98 by
just five per cent. Sengupta says, "Assuming a rate of inflation
of 7 to 8 per cent this year, the total CPO
in real terms will be less in 1997-98 than it was in 1996-97."
In other words, just as the finance minister got away in 1996-97 with a sleight
of hand which gave him a reasonable fiscal deficit by drastically
curtailing development expenditure, so does he propose to do in 1997-98. This is extraordinary as he
is as much obliged to respect the ninth Plan targets
as the planning commission. Yet, his Budget has undermined, not
promoted, his government's own Plan objectives. Clearly, the right
hand of this government does not know what its other 13 hands
are doing!
The Budget's fulcrum, on which all other targets depend,
is that the economy should grow at seven per cent in 1997-98. Sengupta
recalls, "The planning commission had earlier worked
out exercises about the requirements for the ninth Plan for achieving
a seven per cent growth rate." He points out that to achieve
this, the CPO should, on an annual
pro rata basis, have approached Rs 785 billion in 1997-98.
If, he says, the intention is to backload rather than frontload
this development expenditure target (that is, spend less than
the pro rata average in the first few years and step
it up to above the average in the last), even
then this year's Plan outlay should have been at least Rs 720-730 billion. But the finance minister has pegged it at Rs 628 billion -- Rs 100 billion less than the minimum required
to attain the five-year plan target.
What Chidambaram has done is repeat last year's trick: -- cut development
expenditure and then pretend that books are all balanced. But this time, it will not work because, by hiving Rs 100 crore of investment in
development for the second fiscal year running, the finance minister
has jeopardised his own growth rate target. And if he does not
attain his growth rate target, he will not attain his revenue
target. And once his revenue fall short of his fanciful projections,
the economy and the UF government will be up the creek.
It is
only a matter of months before the cheers turn to tears.
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