The Hindu Business Line : The Budget story: Now and then

The increasing transparency in the entire Budget-making process has taken the sting out of live TV debates and self-styled moderators posing as economic experts who are finding it difficult to script a `Budget climax'. Most of the action has more or less been played out already. And CEO round tables are likely to find empty galleries.

ECONOMIC liberalisation and the opening up of the market have done considerable harm to the mystique of the Budget story by stripping it of all its suspense elements. In the `post-reform' years successive finance ministers have revealed the Budget by removing the multiple layers of `socialistic controls'.

Budget queries were even put on the Internet to enable direct communication with a larger audience and reduce the `great divide' between the bureaucracy and the common man. Such acts have killed all the drama and mystery of the Budget.

Gone is speculation and the excitement; gone are the back-room boys; missing are the honchos of the industry who, year after year, find time from their otherwise busy schedules to participate in a multitude of CEO forums with their eloquent brilliance.

The increasing transparency in the entire Budget-making process has taken the sting out of live TV debates and self-styled moderators posing as economic experts who are finding it difficult to script a `Budget climax'. Most of the action has more or less been played out already. Only the dreary peripherals remain. The CEO round tables are likely to find empty galleries.

Earlier Budgets (before liberalisation) were supposedly created out of concerns for the poor and the underprivileged. The results were quite the opposite. Rhetoric and promises remained unfulfilled and grandiose plans remained largely on paper. Economic strangulation, borne out of an unreasonable expectation of producing everything in the world — from a pin to an airplane, bread to hotels, shoes to space programmes — gobbled the scanty resources of the nation.

The utility of the Planning Commission and the Five Year Plans was limited due to the myopic belief that the government could run all the businesses even while providing political and social governance. As a consequence, both suffered. Half-way measures became a deterrent to the prospering of healthy enterprises. In trying to replicate the erstwhile USSR model, the policy-makers and economists went overboard. A selective focus and strategic game plan could have made all the difference. Several PSUs had the potential to become world-beaters had they been opened to competition. Political interference, back-seat driving with the added burden of redundant manpower killed the `goose that could have laid the golden egg'. Productivity, profits and growth were not the `priority'.

Later, many PSUs turned into employment bureaus buried in the debris of Board of Industrial Finance and Reconstruction (BIFR) and became loss-making monoliths. Parties across the political spectrum have been responsible for presiding over the fall of these once profitable companies. A gross misinterpretation of socialism.

The Budget wheel has come full circle. Only the stage and actors have changed. We have not learnt from the lessons of the past.

Continuous bickering is becoming an obstacle to the country's progress. Any reversal of policies adopted on the grounds of `political agenda' is going to hurt the economy.

Budget 2006 is likely to be a `mixed economy' Budget that will cleverly camouflage a reformist programme with subtle shades of red. The Government in under political compulsions.

The Finance Minister, Mr P. Chidambaram, has burnt his fingers once with a dream Budget. He will, therefore, ensure that the next stage of reforms will deliver to the masses and at the same time accelerate economic growth. His long-term strategy will be to push reforms along with a short-term agenda of placating the allies in good humour. There are already reports of the emergence of a Third Front as an alternative to the Congress and the BJP.

This compromise approach of the Government has derailed some of the progressive policies and delayed others. The pre-Budget hustle and bustle is conspicuous by its absence. The power brokers are missing from the corridors of power. The current business confidence level in the country is at an all time high. Nothing ought to be done to upset this. India requires a slow and steady programme of development that is consistent with its socio-economic nuances and one that provides no hiccups to business partners and stakeholders. The Left has given its expectations from the Budget, and the positives must be welcomed. So what can one expect from the Budget 2006?

At the high end one could see a faithful implementation of the Common Minimum Programme (CMP) with increased allocations for the development of rural and semi-urban infrastructure, extension of the employment guarantee scheme, trade alliances with economic zones of the world with a focus on East Asia, selective opening up of sectors such as financial, insurance, retail, real estate and construction, and media, rationalisation of the tax structure, managing short- to mid-term interest rates, reduction of fiscal deficit, pruning negative lists and automatic FDI in thrust sectors of the New Age economy.

At the micro level, one might see a thrust to revive the Green Revolution with high priority to infrastructure, irrigation, agriculture production, industrial development, farm produce, food processing, power, textiles, exports. Incentives may be provided to industries that will generate employment; focus on achieving goals set in the Bharat Nirman Yojana and other similar schemes; widening the `service tax-net', cover rapidly growing segments of economy; selective disinvestments; reduction of excise duty on cars and re-entry of long-term capital gains tax, inheritance tax are some of the contentious issues being discussed.

There is a strong lobby for a selective reduction of excise duty on small cars — a step that would favour a few manufacturers but will go against the grain of consistent and credible policy making.

The agenda is huge and the resources limited. The manner of raising resources has become an ideological area of debate between the Government and its allies. The politics of conflict must pave the way for politics of accommodation. Engagement must take over arguments. The partners concerned must learn to find solutions keeping their differences aside. Any retrograde step at this critical juncture may spell economic slowdown and loss of jobs. The High Command has to make some difficult choices — to continue with reforms and liberalisation or concede to its allies. The Finance Minister may have to exercise his diplomatic skills rather than his economic wisdom during his forthcoming Budget presentation.

Budgets those days were objects of fear and repression. A monster that was dreaded by society at large in view of the burden it imposed on the already overburdened tax-paying citizens. These occurrences were rampant in a nation governed by `socialistic policies' designed for the common man. For now he has been spared of the trial and tribulations of the suffering due to the scarcity syndrome created by the post-Budget actions of hoarders and racketeers. No unfathomable price hikes; no hoarding of wheat, rice, sugar, kerosene and other essential and sparse commodities; no queues in front of ration shops and probably not having to pay to the touts for their daily survival.

Mercifully things have changed with more predictability in the methods. The antagonists of reforms will at least acknowledge this one significant aspect of liberalisation.

Things appear serene at the Finance Minister's office though it could be an uneasy calm. Formulating economic policies and Budget proposals comes easier to the him than having to manage politics. A conflict seems to be brewing in the form of the Prime Minister's recent announcements on Iran and the Government paving the way for FDI in single brand retail and modernisation of the Delhi and Mumbai airports .

Will Mr Chidambaram try hard enough to prevent his Budget proposals from becoming a battle royale between the Congress and the Left? Let us wait and see.

(The author is Chairman, All India Resort Development Association, industry analyst and advisor. Feedback may be sent to anil_rathor@vsnl.net)