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March 1, 2001                                       Feedback  

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'The situation is almost on the verge of bankruptcy'

Biplab Dasgupta

It's a bits and pieces Budget. Lots of things are there, but these do not add up to anything substantial. There is no clear thrust, no clear theme, but lots of things are being said which do not reflect a clear understanding of the economic issues. This Budget is a typical Yashwant Sinha Budget. This is the fourth Budget where Sinha and what the Budget would contain are more or less predictable...

This Budget does not address real issues. For eg, the question is, why have you done worse after introducing the so-called reforms in 1991 than in the preceding decade? If you compare the two decades, from '81-'82 to '91-'92, and with the performance from '91-'92 till date, most of the macro-economic indicators show that the reforms have not really worked. The government's statistics establishes that we did better in terms of industrial growth in the '80s than in the '90s. Similarly, we did better in agricultural growth in the '80s. The economy can prosper only if we have a high rate of saving. Before the so-called reforms, our savings rate as a proportion of GDP was higher. Actually, the savings rate has gone down.

Similarly, we require investment... The rate of investment has also fallen from 27 per cent before the so-called reforms to around 22 to 24 per cent. The only success story is that of our foreign exchange reserves, which have gone up to 41 billion dollars now. But what is not realised is that this reserve has not been built on the basis of a surplus of exports over imports. The reserve has been built with money borrowed from various institutions and countries, some of the black money turning white and short-term capital coming in search of a high rate of interest or return. But in this world of big-time speculators, our reserves can vanish within one week.

Coming to the Budget itself, there are two parts. In part 1, there is a statement about government performance in the past year and also of what the government proposes to do in the coming year. In the second part, Part 2, the government proposes some new taxes. If you take Part 1, it plays a trick on innocent citizens, who may not be familiar with technical things. Economic reforms were initiated in July '91. So the base period for evaluating the performance under the reforms should be '90-'91. But the government takes '92-'93 as base year, the reason being that there was a negative growth in per capita GDP between '91-'92 and '92-'93...

When a family is experiencing a deficit in its Budget, it has two options: to reduce the expenditure, or increase income. The head of the family may decide to sell the house or to take up some extra work on top of what he is doing already. In the Indian case, the deficit could be bridged in either of the two ways. But the government has always preferred the option of reducing expenditure and has shown reluctance to increase income. When they are reducing expenditure, the attack is on things which people need, like PDS, irrigation, power, road, education and health. All the necessary social investments are curtailed because this is the only way the gap can be bridged or sometimes, as a soft option, public sector units are sold such as BALCO. But invariably, in these cases, there are allegations of price rigging, sleaze and many other abuses. Wherever the PSU units have been sold in the world in recent years, whether Ghana, Chile, Mexico, Turkey or Pakistan, that has been the experience.

The country has to be defended and one cannot argue with the government about the amount of defence expenditure required for properly defending it. But diplomacy is an alternative to defence spending. One can also avoid unnecessary military purchases or the Bofors kind of situation. I am sure that quite a lot of saving can be made in this way. The arms race between India and Pakistan is similar to the one between Iraq and Iran. When these two countries fought for nine years, they did not take into account the fact that they were both procuring arms from the same source. The armaments industry was dying before they started fighting, and made a hefty profit at the cost of these two countries. Ws should not fall into the same trap.

If you look at the non-plan expenditure, you'll find that almost 70-75 per cent of that expenditure over the past few years has been due to only three items: repayment of loans and interest, subsidy, and defence. Of these, we cannot touch defence. The interest repayment or loan repayment is a contractual obligation. If you do not repay the loan that you have collected from the market, that would be amounting to declaring the government as insolvent or bankrupt. But if you look at the figures, out of Rs 3,75,223 crores of expenditure allocated in the budget for '01-'02, Rs 2,38,272 crores will go towards repaying loans and interest. The situation is almost on the verge of bankruptcy. So the government should give more attention to increasing its income. It is not touching the rich farmers and landlords who have benefited from concessions during the Green Revolution. There are many farmers with combined harvesters, tractors, seed-drill, expenditure on all of which are easy to compute.

There is no alternative to self-reliant development. Both the World Bank's world development report and the UNDP's human development report indicate that we are among the poorest countries in the world. One of the ways in which we can protect our interests and keep the option of development is by taking over the leadership of the poor countries. But somehow, the government is not interested in identifying itself too closely with the poor countries on economic issues. In world fora like WTO, India can take on the responsibility of opposing countries which set the agenda like the European Union, the United States and Japan. But we are obsessed with being recognised as a great nuclear power and becoming a permanent member of the Security Council. So, rather than taking on the leadership of poor countries, we are licking the boot of the rich countries.

Our record in terms of investment on education is appalling, it is one of the lowest in the world. This educational backwardness is creating difficulties in spreading new technologies as a vast majority cannot communicate.

Biplab Dasgupta is a CPI-M MP

Budget 2001

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