The main issue bothering the people in general and also the opposition parites, both right and left which staged a never before seen walkout during the budget speech, is the rise in fuel prices. Meanwhile the positives highlighted are the tax concession for people with income between 3 and 5 lakh, the reduction in fiscal deficit to 5.5 per cent and the projected GDP growth of 9 per cent. Reducing the budget to fuel prices, tax concessions, fiscal deficit, projected GDP growth or market performance is a dangerously alluring trend one might fall into. What follows is that some of the larger issues tend to go unnoticed.
It is imperative that we understand what the broad areas this budget sought to address. The Finance minister, in his speech, flagged three challenges that India would have to deal with in the next few years
- To quickly revert to the high GDP growth path of 9 per cent and then find the means to cross the ‘double digit growth barrier’.
- To harness economic growth to consolidate the recent gains in making development more inclusive.
- To address the weaknesses in government systems, structures and institutions at different levels of governance.
The three questions raised are very pertinent for India to have a brighter future. In fact the whole budget speech, except Part B dealing with Tax proposals, spoke on the various ways of meeting these challenges. It is difficult to understand why the Indian media failed to highlight the three issues raised considering the fact that it was looking for broad policy trends from the government. Importantly, the finance minister did not present these as the achievements of India or the UPA but as the challenges which we must overcome. Whether the minister has identified the challenges correctly is one issue and whether he has the right plan to meet the challenges is another. And whether we would, in the near future, successfully meet these challenges is an entirely different matter.
Hardly anyone would say that economic growth is not essential; more so following the economic downturn. A higher GDP growth should generally mean more economic activity, more job opportunity and higher incomes. But the larger question is who all participate in this growth process. Is the growth triggered by small sections of the society while the majority cripples in depravation? This would mean we have to consider the second issue- how to make the growth more inclusive. Different social sector and welfare schemes are suggested for this. There are many flagship programs which the centre runs which seek to further this end. The funds kept aside for this might need to increase but even with increased funds the problem of structural and institutional difficulties in implementation arise. Hence third challenge regarding the need for tackling the weaknesses in India’s government and institutional systems comes into the picture. Strengthening transparency and public accountability at the different levels of governance can thereby be ways of tackling the implementation issue.
So from the global economic crisis one has come to the crisis in governability at home. Though the two may not be easily relatable at the first, as we progress from one to another, one can find the connection. This is one line of thought. There may be other approaches which seek to address the issues which comes before the budget. Nevertheless this line of thought, whereby the larger issue of goverenace is linked to the budget, appears to be appropriate or at least logical.
Yes, the governance issue was not the highlight of the budget. The highlight was better fiscal discipline from the government, at the cost of higher fuel prices. But there were many reasons why the government could reduce the fiscal deficit. It did not have any loan waivers or pay arrears to meet this time unlike the last year. Disinvestment and the one-time sale of 3G to the bidders in the telecom spectrum also helped. And finally, there was no extra subsidy on the oil account which also reduced the fiscal deficit but increased, much to the ire (or happiness?) of the opposition parties, the prices of the petrol and diesel.
The issue regarding the rise in fuel prices has dominated the Parliament this week which, thanks to the women’s bill introduced by the government, could soon get sidelined. The opposition, though with political motives, might have a point here as an increase in the fuel prices at a time of all-time high food inflation might have a cascading effect. Note that, it is not only the car and bike owners who would be affected. But with higher prices for diesel, prices of food, essential commodities and other articles might also rise. But expressing that the fiscal deficit has to reduce and fuel subsidies increase, do not seem to make any logic.
Also with all the clamour surrounding fuel prices, some other issues in the budget concerning the aam admi have been ignored. The additional provision for rural development just rose by 6.3 per cent and the rise in the allocation for NREGA is only 2.5% even when the GDP is projected to grow at a much higher rate. Meanwhile the rise in defense expenditure is more than 8 per cent. The question is whether the priorities of the government is in line with that what the majority of the country really need. Again, dismissing the government’s intentions might not be a good idea as social sector development constitute 37% of the total expenditure and the new reforms suggested include the decision to increase the banking options in rural areas and the introduction of National Social Security Fund targeted at the unorganized sector.
Also at the institutional level, a Financial Sector Legislative Reforms Commission was decided to be set up to rewrite the financial sector laws, an Independent Evaluation Office to be set up to evaluate the impact of the government’s flagship programmes in the social sector and a National Mission for Delivery of Justice and Legal Reforms has been setup to help reduce the backlog of cases in courts. There was hardly anything else on governance in the budget.Yes, its not the budget that has to deal with the larger issues of governance in India. In fact, it can do very little regarding this. But the very fact that the crisis in governance got some mention in the constricted budget speech makes this issue more important. The Second Administrative Reforms Commission had recently made a set of recommendations on this regard, but the people do not seem to be aware of its content. Why is it that we always criticize “the system” and when some serious suggestions are made to improve it, we simply do not seem to care? We have to first understand the various options that are available before us in order to critique and debate the shortcomings of our polity. Are we ready to engage in these issues eruditely?
