The Budget '98 Interview/S S Bhandare
'If you reduce government employees, there will be a revolution'
What you feel about non-plan expenditure, how do we control it?
On the spending side, I don't think there is not much scope for the finance minister. We always talk about cutting down revenue expenditure, cutting non-plan expenditure. But if you look carefully, non-plan expenditure comprises defence, subsidies, and administrative expenditure. Unless you have a very tough government capable of rolling back subsidies and internal debt, you cannot control revenue expenditure. These are the areas where you need hardcore reforms. A committed political leadership, willing to take decisions. I don't think a coalition government can take such decisions.
How come no government has been able to take strong decisions on non-plan expenditure, a real problem in our country?
I agree it is a real problem for our country. The main problem in our country is subsidies. Removing food subsidies will earn the wrath of the urban and rural consumers besides making the price of food go up.
Secondly, if you reduce the size of the Indian bureaucracy, you will invite the wrath of the civil servant. If you reduce the price of fertiliser subsidies, you will invite the wrath of the farming community. Can you reduce defence expenditure? It's out of question in the new context. So none of these are in the vicinity of achievable means or possible by coalition-led political parties.
But don't you agree that the salary paid to bureaucrats is peanuts compared to the rate of inflation.
If government servants are paid as per market considerations, then I think the total expenditure will not be less than Rs 340 billion. There are 3.8 million central government employees and if they are paid high salaries, then the pressure on the Budget will be enormous. So you have to make the government lean and mean, only then can you pay the civil servants as per their contribution. In China, 3.8 million employees can be sacked. In India, you cannot do that because it is a democratic country. There will be a revolution, the railways will be closed and all government offices will shut down.
Does this mean there will always be a problem with the Indian economy?
I think in five years time, within the framework of the Constitution, you have to create a national consensus. Start educating and informing the people about subsidies. The moment you decide to hike power rates, there will be an instant reaction from the farmer lobby. So, you have to educate the farmers that they must pay at least 50 paise per unit.
There are also subsidies for traders and manufacturers. While not all subsidies are bad, these are the areas where reforms in subsidies can take place.
If the government should downsize, what will happen to the employees? In the last seven years, how many jobs were created in the private sector?
Actually, there are no authentic figures available of creating jobs in the post reform period. However, it is a fact that approximately 7.5 million join the labour force every year, apart from 30 million to 35 million people who may be unemployed or underemployed. But creating employment should not be the prerogative of industry or the bureaucracy. Take for example, the public sector, where employment is the objective, and productivity or production. That is one of the reasons for its dismal condition.
The creation of jobs must take place in growth momentum and can take place in a variety of forms in the linkage industry and the linkage sector. Mostly, in the unorganised sector and the service sector and not necessarily in the manufacturing sector or organised sector. Here, job creation will surely help. For example, there has been growth in the car industry. For every job created in a factory producing commercial cars, 17 other jobs can be created outside the factory -- in the workshop, drivers, cleaners, mechanics, and so on. The process of job creation is the process of industrialisation.
What growth do you expect this year?
Last year, the growth rate was 5 per cent of GDP while industry grew 4.2 per cent. Agriculture growth was virtually negative. Now you cannot expect a sudden swing in the growth rate, unless agriculture gives you a bounty. A bounty is possible only if we have a very favourable monsoon, but we don't expect this kind of a miracle to happen. With a normal monsoon, the overall GDP growth can be between 5 and 5.5 per cent with industrial growth rate picking up to anywhere between 6 and 6.5 per cent.
Dr S S Bhandare will appear on the Rediff Budget Chat on June 1. Be there!
Interviews
Budget '98
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