Jug­gling num­bers will not lead to higher growth

The Pak Banker - - OPINION - Arun Jait­ley

THE Fi­nance Min­is­ter has pro­posed higher out­lays for some so­cial sec­tor schemes know­ing full well that they will not be uti­lized. When P. Chi­dambaram was shifted to the Fi­nance Min­istry in Au­gust 2012, many wel­comed the change. It was hoped that his in­duc­tion would lead to cer­tain bold steps and end the era of pol­icy paral­y­sis. He de­ferred im­ple­men­ta­tion of the Gen­eral Anti Avoid­ance Rules. But the en­thu­si­asm has evap­o­rated with a lack­lus­tre bud­get. Short of re­sources for sops and con­ces­sions, the Min­is­ter has brought about cos­metic changes and pre­ferred the sta­tus quo. His de­sire to im­prove the fis­cal deficit could only be met if he raised both di­rect and in­di­rect tax­a­tion and cut down ex­pen­di­ture sig­nif­i­cantly. The con­se­quences of cut­ting down ex­pen­di­ture will be a re­duc­tion of eco­nomic ac­tiv­ity, which will prove ad­verse to growth. The bud­get con­tains no sig­nif­i­cant steps to boost man­u­fac­tur­ing or agri­cul­ture. Ex­ports are low and the ru­pee some­what shaky. In­fla­tion, more par­tic­u­larly food in­fla­tion, is high. I se­ri­ously doubt if this bud­get can put us back on a higher growth path.

There is jug­glery in the way tax rates have been in­creased for cer­tain sec­tions both in re­la­tion to di­rect and in­di­rect taxes, and the ex­pen­di­ture has been hugely cut down/un­der-pro­vi­sioned. Only by cut­ting down ex­pen­di­ture has Mr. Chi­dambaram made this year's and next year's fis­cal deficit op­ti­cally more pre­sentable. Ex­am­ples of this abound in the de­tailed bud­get doc­u­ment. The food sub­sidy bill was es­ti­mated this year at Rs.75,000 crore. The re­vised es­ti­mate is Rs.85,000 crore. For next year's bud­get, the es­ti­mate has been re­duced to Rs.80,000 crore, yet the Fi­nance Min­is­ter claims to have pro­vided Rs.10,000 crore ex­tra be­cause of the Food Se­cu­rity Bill! Ef­fec­tively it is only an in­crease of Rs.5,000 crore, whose im­pact on food sub­sidy will be mar­ginal. The UPA's flag­ship scheme, The Ma­hatma Gandhi Na­tional Ru­ral Em­ploy­ment Guar­an­tee Act (MGNREGA) orig­i­nally pro­vided for Rs.40,000 crore. In the past two years this amount has been re­duced to Rs.33,000 crore. The cur­rent year's ac­tual es­ti­mate is at Rs.29,387 crore. Next year's ac­tual ex­pen­di­ture may be even less. The Fi­nance Min­is­ter has op­ti­cally brought the pro­posed tar­get back to Rs. 33,000 crore know­ing full well it will not be utilised. The most glar­ing ex­am­ple of fail­ure is the Rs.29,677 crore Prad­han Mantri Gram Sadak Yo­jana. The re­vised es­ti­mate for this road con­struc­tion plan in the cur­rent year is Rs.8,100 crore. For the cur­rent year, it is pro­posed to in­crease the ex­pen­di­ture to Rs.15,690 crore. Un­der the Di­rect Cash Ben­e­fit Trans­fer Scheme, the new flag­ship pro­gramme touted by the United Pro­gres­sive Al­liance, the 26 schemes have a bud­getary al­lo­ca­tion of Rs.5,595 crore. Till date, how­ever, the ac­tual ex­pen­di­ture is only Rs.5.38 crore. And this was said to be the gamechanger for In­dian pol­i­tics. There is a warn­ing in the bud­get. The pe­tro­leum sub­sidy of Rs.96,980 crore is in­tended to be brought down to Rs.65,000 crore. It is an in­di­ca­tion that petrol, diesel and gas prices will fur­ther in­crease. The bud­get will not change the sta­tus quo. It does not make di­rec­tional changes. It is more an ac­count­ing ex­er­cise that nei­ther helps the poor nor the mid­dle class.

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