M A I N   N E W S

As I see it
Basic issues being ignored
Manmohan Singh

MY first impression about this Budget (2003-04) is it has a large number of token measures. The challenges for our country today are that for the last five years the growth rate has been decelerating, industrial growth rate has been much below potential and the per capita agriculture input has declined. Besides the employment situation has worsened in the last three years. The fiscal situation has been worsening year after year ever since the BJP Government came to power at the Centre. So, the real challenges are to have a strategy which will reverse this dismal track.

As far as the defence outlay is concerned, the budgetary provision is deceptive. If you look at the budget for the current fiscal year the provision was Rs 65,000 crore and the revised estimate shows that the defence expenditure will not be more than Rs 55,000 crore, a shortfall of Rs 10,000 crore. This government makes a great deal of song and dance for its concern about national security. It imposed a tax cess last year to raise resources for national security. Yet there is a Rs 10,000 crore shortfall in defence expenditure. Again for the next year (2003-04) they have repeated the figures of the current year of Rs 65,000 crore.

Inflation has been declining for the past two years, but that phase seems to be coming to an end and right now the inflation rate, judging by the wholesale price index, is above the 5 per cent mark which the Reserve Bank of India says is the threshold level. Once the inflation rate goes up, I think, it will damage the manoeuvrability of the Reserve Bank of India to maintain soft liquidity condition in the market, interest rate will come under pressure. Therefore, the inflation situation will have to be monitored carefully, particularly because if there is trouble in West Asia, oil prices will shoot up and oil prices exert a very important influence on our price structure.

As far as the reduction in the peak excise duty by a 5 per cent point is concerned, I don’t believe that the Indian industry will be affected. However, much will depend upon what is the exchange rate. If the Rupee remains strong, obviously there could be some adverse effect. But my own feeling is the combined incidence of tariffs and exchange rate management can prevent the situation where the Indian industry is adversely affected.

Our (Congress’) view on disinvestment is it should not be part of the gap-filling exercise of the General Budget. This year the government has realised only Rs 3,300 crore through disinvestment as against the budgetary target of Rs 12,000 crore. Whether they will meet the same fate in the next fiscal, only time will tell.

I think people, who talk of lowering interest on small savings or Public Provident Fund, forget that in our country the institution of social security is underdeveloped. There is no system of pension for the great majority of people, there is no system of health insurance to majority of our people and the savings of the middle class is mostly in the form of term deposits, PPF or small savings. So, when you reduce interest in these, one should bear in mind what effect it will have on these social classes in a country where institutions of social security are not developed.

If we had developed social security institutions then there would be no problem in minor reduction in interest rate but otherwise it is bound to create hardship.

The ambitious infrastructure development plan of Rs 60,000 crore is only on paper. The proposal is based on the public-private cooperation and what sort of cooperation it will be has not been spelt out. As of now it is only an idea. For example, we have been hearing about upgradation of Ahmedabad, Bangalore and Hyderabad airports not from today but for the past five years. These things have not materialised. The Budget says that the government will provide only Rs 2,000 crore, but they will leverage in such a manner that they will be able to mobilise Rs 60,000 crore. I doubt whether they will be able to raise such a large amount from the market. In the same manner, the national roads programme, good as it is, I think is too much being financed by debt. Therefore, this debt could create problems. So this song about raising Rs 60,000 crore for infrastructure development is mere paper tiger.

I would sum up this budget as having lot of tokenism and not strong in dealing with the basic problems of the economy.