MAS­TER OF THE BLEAK HOUSE

India Today - - UP FRONT - BIBEK DEBROY Bibek Debroy is pro­fes­sor at the Cen­tre for Pol­icy Re­search, Delhi

Be­ing a po­lit­i­cal an­i­mal, there is no deny­ing that Chi­dambaram

is mal­leable in con­vic­tions and knows pol­i­tics is not about

the art of the im­pos­si­ble.

Be­fore P. Chi­dambaram’s name was an­nounced as fi­nance min­is­ter, in spec­u­la­tive con­jec­tures, sev­eral names did the rounds. The list in­cluded a cou­ple de­scribed as non- po­lit­i­cal tech­nocrats or spe­cial­ists. If one does the right thing by re­forms, how does it mat­ter whether the per­son is po­lit­i­cal or non- po­lit­i­cal, as long as he pos­sesses req­ui­site ex­per­tise? Pref­er­ence for politi­cians sug­gests the agenda, the ob­jec­tive func­tion and the con­straints will be driven by not eco­nomic ra­tio­nale but what is po­lit­i­cally proper. Po­lit­i­cal pro­pri­ety is eu­phemism for per­ceived elec­toral div­i­dends, where the bal­lot rather than the bul­let is bit­ten and savoured. That ef­fec­tively de­ter­mines con­tours of 2013- 14 Bud­get, and 201415, if there is one. Chi­dambaram is per­ceived as one of the ar­chi­tects of 1991 re­forms. That flows from his role as 1991- 96 com­merce min­is­ter. Slash­ing QRs ( quan­ti­ta­tive re­stric­tions) and re­vamp­ing ex­port sub­si­dies is chalk. The cheese of fi­nance has many more holes. Think of the dream bud­get of 1996- 97. It turned into a night­mare be­cause of the Fifth Pay Com­mis­sion and it was the fi­nance min­is­ter, rather than Left, who pushed Pay Com­mis­sion im­ple­men­ta­tion through. If one still re­calls slash­ing of tax rates in a dream bud­get, one should be re­minded of a state­ment is­sued by Chi­dambaram when he was home min­is­ter, just be­fore 2012- 13 Bud­get was fi­nalised. He ad­vo­cated higher tax rates for the rel­a­tively rich.

Be­ing a po­lit­i­cal an­i­mal, there is no deny­ing that Chi­dambaram is mal­leable in con­vic­tions and knows pol­i­tics is not about the art of the im­pos­si­ble. A bud­get is about re­viv­ing po­lit­i­cal spir­its, not those of the an­i­mal va­ri­ety. Con­sider Chi­dambaram’s track record as fi­nance min­is­ter be­tween 2004 and 2008. What­ever deficit in­di­ca­tor one takes ( fis­cal, rev­enue, pri­mary), the sharp wors­en­ing oc­curred in 2008- 09 and lest we for­get, Chi­dambaram was then fi­nance min­is­ter, not Pranab Mukher­jee, though Mukher­jee got the blame for profli­gacy. It was Chi­dambaram who first pushed back ter­mi­nal year of Fis­cal Re­spon­si­bil­ity and Bud­get Man­age­ment ( FRBM) Act and then hit the ‘ pause’ but­ton in 2005- 06. On most com­put­ers, the ‘ pause’ key is next to ‘ delete’ key. Ergo, Chi­dambaram buried FRBM and fis­cal con­sol­i­da­tion and it is pre­sump­tu­ous to be­lieve he will res­ur­rect ei­ther now. Widen­ing pub­lic ex­pen­di­ture is a Chi­dambaram legacy, as is vi­o­la­tion of prom­ises on im­prov­ing ef­fi­ciency of pub­lic ex­pen­di­ture. ( Read 2004- 05 Bud­get speech on food stamps and tar­get­ing sub­si­dies only to­wards poor.)

Con­versely, there is tax re­form. In part, say Goods and Ser­vices Tax, this in­volves talk­ing to states and ne­go­ti­at­ing with them. Though one shouldn’t pre- judge, Chi­dambaram’s home min­is­ter per­sona doesn’t in­spire a great deal of con­fi­dence in this case. There are also stan­dard­i­s­a­tion, har­mon­i­sa­tion, re­moval of ex­emp­tions and tax­ing in­come. As fi­nance min­is­ter in UPA 1, Chi­dambaram has ex­hib­ited ten­den­cies to­wards tax­ing items that aren’t in­come— Fringe Ben­e­fit Tax for in­stance. A raid raj has also been as­so­ci­ated with the ear­lier Chi­dambaram ten­ure. Higher pub­lic ex­pen­di­ture, higher tax rates, ret­ro­grade taxes, cesspools of cesses, raids to gen­er­ate rev­enue, and leg­erde­main in win­dow- dress­ing deficit num­bers don’t in­spire con­fi­dence. Re­al­ist in­dus­try and mar­kets will fac­tor these in and take so­lace from the truth that any other UPA fi­nance min­is­ter would have dam­aged no less. How­ever, those who still bask in the hype of 1991 re­form cre­den­tials and be­lieve that Chi­dambaram is in­nately busi­nes­sand com­merce- friendly, are in for a shock. This doesn’t mean noth­ing will get done. For a start, GAAR and ret­ro­spec­tive tax laws ( es­pe­cially penalty and in­ter­est) will hit a pause but­ton, though not a delete. And there will be some re­forms in fi­nan­cial sec­tor to as­suage in­vestor con­fi­dence.

This leaves big- bang re­forms, which con­cern both other Cen­tral min­istries and states. There are two caveats. First, an­nounc­ing big- bang re­forms first and both­er­ing about fol­low- up later, hasn’t been his pre­de­ces­sor’s style. With Chi­dambaram, any flashy an­nounce­ment ( pen­sions, bank­ing, in­sur­ance, FDI, pe­tro­leum prod­uct pric­ing) should be treated with scep­ti­cism, un­til in­sti­tu­tional de­liv­ery is en­sured. Re­forms are never big- bang ( other than 1991). They are steady- state, even if they mas­quer­ade as big- bang, and the present state is some­what un­steady. Sec­ond, re­forms aren’t fash­ioned by min­is­ters alone. There is a bu­reau­cracy in fi­nance min­istry and there is a vac­uum now, both in quan­tity and qual­ity. Given the ‘ Hard Times’, it is best not to have ‘ Great Ex­pec­ta­tions’. In weav­ing ‘ A Tale of Two Cities’, Chi­dambaram will be con­strained by the so- called in­clu­sive agenda and cater more to Bharat than to In­dia. Whether that serves the cause of ei­ther Bharat or In­dia is a sep­a­rate de­bate. How­ever, that’s the com­pul­sion he will op­er­ate un­der, which is why he is in fi­nance min­istry, and not a non- po­lit­i­cal tech­no­crat, or a politi­cian who doesn’t know the ins and outs of bud­get- mak­ing, and there­fore lacks skills to get back on round­abouts what is ap­par­ently given away on swings. Sounds like a ‘ Bleak House’, but that’s the way it is.

SAU­RABH SINGH/ www. in­di­a­to­day­im­ages. com

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