Monday, July 14, 2014

Jaitley's next Budget should be with a difference..Power & Politics/The Sunday Standard/July 13, 2014

Jaitley's Next Budget Should be with a Difference, in Taste, Tone and Tenor

Union Budget 2014 is just like a three-star Michelin course. The chatterati waits for it to be arranged and displayed in the proper ambience. Corporates expect it to be served in fine China tableware. And the media, opinion-makers and political leaders enjoy its flavours according to nature of their palates. Whether it serves its intended purpose or not, the budget has become the talk of the town. All TV channels paraded exclusive panels of experts, spent lavishly on sending reporters out to get voices that mostly supported the budget, with a few contrarians thrown in for the sake of balance. Like all food, the freshness lasted for a few hours, after which people looked for a different cuisine to savour. Since 1947, 25 finance ministers have read out 86 budgets, with C D Deshmukh making the shortest speech and Arun Jaitley breaking the record—with a short break—by speaking for 130 minutes. Barring the Congress talkathletes and the usual BJP and RSS baiters, few found fault with his logic or schemes. Jaitley has something for everybody. The budget proposals, however, resemble the menu of a roadside dhaba, which serves everything from Punjabi-ised pasta, desi pizza, Indian chow mein to even lamb chops for snooty Anglophiles.
For Jaitley, crafting the budget was a class and caste dilemma. His heart was with market reforms, which benefit more the types whose habitat is Lutyen’s Delhi, South Mumbai, upmarket Chennai as well as those who direct the markets in Shanghai and New York. But he was constrained to expound on fiscal deficits, subsidies and the interest regime, which only a few sitting in boardrooms would understand. His original constituency comprises middle class traders, unorganised labour, Swadeshi propagandists and lower middle class urban voters. It wasn’t surprising, however, that he let his heart down and used his mind instead to present a please-all budget, hailed not just by those who gained but also by those who gained even marginally. He didn’t get plaudits for presenting a bold, a dream or a super budget, but Modinomics, which brought the party to power and made him the finance minister, was not lost in translation.
Jaitley’s budget might probably join the myriad forgotten documents in the dusty archives of the finance ministry. But the question remains whether it resolves the fundamental problems ailing the economy for the past 65 years? The finance minister took a bold step by opening up defence and insurance sectors to Foreign Direct Investment (FDI). He magnanimously announced 20-odd schemes of `100 crore each. He reiterated Prime Minister Modi’s resolve to launch a bullet train and create IITs, IIMs and AIIMS in almost every state. He also humoured the Sangh Parivar by providing liberal outlays for cleaning and developing the Ganga and pilgrimage tourism. But can just opening elitist educational institutions and inviting FDI in remunerative sectors lift India from the bottom ranks on various social indicators? Undoubtedly, the budget is not an instrument to abracadabra any magical mission to make India a prosperous and healthy nation. Jaitley has been able to provide something good out of the worst situation he has inherited from the UPA.  But providing a paltry `500 crore as a palliative for a permanent plague like inflation appears to be a non-starter.
In a nation where every third person is living below the poverty line, fiscal and monetary policies should aim at providing each wholesome food and shelter. In India, real disposable income has just grown by 2.8 per cent over 2004-05. More than half of the country’s 1.2 billion people have no toilets in their homes. Surprisingly, they have mobile phones. In the age of modernisation, a single Indian consumes just 52 kg of steel a year as against the global average of 203 kg per person. Even after 65 years of Independence, the average citizen gets only 734 kWh of power (500 units a month) vis-à-vis the worldwide average of 2,782 kWh. If that isn’t enough, only half a bed is available per 1,000 Indians in government hospitals. Poor Bharat is afflicted with all categories of poverty, which vary from water poverty, healthcare poverty, education poverty, housing poverty, sanitation poverty and even transportation poverty in the form of a pathetic road network.
Amazingly, India still remains a rich country inhabited by the poor. From 1991, when extraneous pressures forced it to take a right turn from a mixed economy to a World Bank-imposed reform mechanism, only the rich have benefitted from budgetary exercises. India is perhaps the only developing country where 64 per cent of the GDP comes from the services sector, which provides hardly any facilities to the poor but definitely offers luxurious services to the rich. Both manufacturing and agriculture, which contributed over 70 per cent of the GDP in the ’80s, now account for less than 40 per cent. Over 50 per cent of the population still depends on agriculture for livelihood, but have been left out of the growth miracle. Yet, our fiscal policies are aimed at attracting FDI only in services. Will FDI in
defence and insurance solve India’s unemployment and poverty problems? Foreign investors have been investing in captive markets or high yield sectors. For example, the percentage of FDI in trade, hotels and restaurant business has grown from 14 per cent in 2001 to 24 per cent in 2014. Foreign funds (belonging to invisible Indians as some suspect) investment in financing, insurance, real estate and business services rose from 14 per cent to almost 18 per cent during the past 12 years. Evidently, FDI sponsors have taken more money out of India through tax-free dividends and sale of their shares than they have actually invested. They haven’t created any tangible assets in India. Instead, they provided plum jobs with stratospheric salaries to those who influence policymakers. Modi is under no obligation to give more opportunities to those whose sole aim is to earn more miles and munificence from their foreign promoters.
Sadly, successive finance ministers from Manmohan Singh onwards have been guided more by endorsements from markets than from masses. The colour of the budget and its prose, along with the sartorial elan of the finance minister, get more premium and publicity than its content. For Modi and Jaitley, the time will arrive soon—in eight months—to present the next budget with a difference, in taste, tone and tenor.; Follow me on Twitter @PrabhuChawla

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