June 20, 1998
The Budget? Fudge it
Lobbyists, who tried hard to install Jaswant Singh as Union finance minister and failed, should have no left-over regrets. Yashwant Sinha's Budget has proved the point: he spells his name differently, he is nonetheless as good a globaliser as the other one. Some miracle this, the apparition of Swadeshi has all but disappeared from the Budget, and yet the Swadeshi Jagran Manch has lost its voice of protest. The Budget 'carries the 'reforms' further forward, and this with a rare nonchalance. The insurance sector is to be opened up, initially to the domestic private sector, and the latter knows the ropes who to enter in due season, into effective collaboration with foreign entities: after all, the process began in the same manner with the banks.
There are loads and loads of other good tidings for the lovers of globalisation: FERA goes, FEMA comes, the stock exchanges are to be further liberalised, trading in derivatives will no longer be a banned activity; the public sector is being shown the door all the way, public undertakings judged to be terminally sick are to be sold off; appropriate devices are to be deployed to ensure that a huge number of public enterprises expeditiously reach that state of incapacitation. Those public undertakings that are lush with profit will have their shares off-loaded in the market, to the extent of 51 per cent, in the course of the next three years; 'non-strategic' public enterprises will be permitted to retain a government stake only up to 26 per cent of total equity. The NRI's are to be offered the choice to buy in the secondary market corporate shares to the extent of 5 per cent of a unit's aggregate stock.
The Laffer hypothesis keeps its pride of place in the fiscal scheme of things: resources are woefully short, the fiscal deficit is again to reach close to 6 per cent of gross domestic product in the current year; so what, corporate and personal income tax rates are left unchanged, the exemption limit in the case of individual taxation is in fact raised to Rs 50,000 and the standard deduction for salaries is also enlarged to Rs 25,000: these two measures will gladden the heart of the middle classes almost as much as the Pokhran explosions did in May. The State Bank of India and the Unit Trust of India are to launch fresh schemes to arrest foreign exchange inflows. The domestic banks are to go through the wringer of further rigour so as to make the environment cushier for foreign banks.
The 'reforms' in other words, are seemingly unstoppable; it is of no relevance that the rate of growth in the post-reforms years have consistently lower than in the eighties for each of the so-called fundamentals -- national income capital formation, industrial and farm production, employment, exports. The Indian elite knows the art of closing their ranks, in difficult times. That fact apart, their faith in foreigners has no fathom. Pokhran notwithstanding, direct foreign investment, the nation is being told, will be doubled from the present level in a couple of years; it will be milk and honey from then on.
Meanwhile, all that the people of India have to do is to pay higher prices for fertiliser, petroleum products, as well as equipment and inputs of various descriptions. The Swadeshi bit has been most effectively smuggled into this segment of the budgetary exercise. In the international market, prices of both fertilisers and petroleum products are sliding downwards; we Indians, however, do things differently, our government is determined to raise these prices whatever the trend in the rest of the world.
As has been the wont of previous finance ministers, the Budget tucks in the standard gesture of raising plan allocations for agriculture, infrastructural activities and social services; they do not cost much except a verbiage of words, the reality of prospective non-performance is not disturbed thereby. The finance minister has anyway avoided the dangerous shoals of macro-economic analysis and projections; he does not know which direction the economy is heading, he has no notion either how the World Trade Organisation is going to react to the measures he has been compelled to introduce to buy peace with the Bombay Club, including the across-the-board impost on imports. Perhaps as a balancing endeavour, a Millenium India scheme is proposed for the edification of foreigners.
Whether foreign investors will be at all interested in such lollipops is another matter. The regime running the show, let it not be forgotten, is imbued with the spirit of Hindutva, advice rendered by Gita provides the leitmotif of the Budget too: you are to concentrate on the task assigned to you, the fruits of your efforts ought to be treated as inconsequential trifles.
Do the ruling politicians really know, though, the grimness of the situation they are facing? Forget for the moment the likely impact of the 'sanctions'; should currency speculators and racketeers of other hues target India and the rupee start to tumble, our meagre foreign exchange holdings would soon dwindle to zero. It is a big like the night before the beheading. The framers of the Budget could not care less, the consumption spree is allowed to continue unrestrained, the globaliser-ideologues live only for today. The finance minister's morose two hour-long monologue contains not one mention of Pokhran, nor of the troubles brewing in South-East Asia. That is another facet of wisdom bequeathed by Hindu philosophy: what one refuses to see does not exist, period. If one is operating within the boundary conditions of short-period analysis, the conclusion one ends up with is therefore impeccable.
It is worth inviting attention to another emerging phenomenon. Once the chips are down, the most important bit of the political reality falls into place: the BJP and the Congress become indistinguishable from one another; going by the contents of his budget, Yashwant Sinha could have been just another Chidambaram, or any other relic from old man Narasimha Rao's scam-sodden administration. George Fernandes of the Second International vintage easily discovers his identity in this congenial crowd. Never mind the tomorrows, this crowd wants to live only for today, clinging cellular telephones to their bosom.
The poor are not entitled to the use of cellular telecommunications. Even if they were offered such a sophisticated tool, they could not eat it, or consume it otherwise: unreasonable fellows, their needs are more basic, they hanker after food and apparel and shelter. These have been their requirements throughout the half-century since independence, and even earlier. While the ruling classes are not altogether unmindful of the poor -- the beginning and the need of each Budget speech will prove the contrary -- let there be some plain speaking the indigent sections unfortunately lack the faculty for sorting out priorities from non-priorities.
The rulers have decided, for solid objective reasons, to lift the ban on the exports of all farm products. International competitiveness in industrial products is a long way off; the prospects are a shade better for farm products, so why not earn precious foreign exchange by pushing farm exports. If that raises the prices of essential goods, including foodgrains, causing additional difficulty for the poor, that cannot be helped.
The burden of development has to be shouldered by each and all. If the poor are unable to comprehend this simple logic, and apologists on their behalf keep hollering about rising price levels, well, it is their funeral. All time is indeed funeral time for the poor.
The finance minister is determined to steer clear of controversies. His Budget speech does not refer to either the macroeconomics of spiralling prices or the unfolding events in Indonesia. It is mum on Pokhran too. But the finance minister does not forget the occasional heroic stance: should further funds be needed to maintain the top-notch state of our defence preparedness, he would not be found wanting to fulfil his obligations to the nation. Hear hear.
The Left will, of course, holler, but by now everybody is aware of their credentials, they are unpatriotic to the core; the Congress, the BJP and George Fernandes could not agree more. It promises to be a lovely last supper, despite the Congress party's queasy feeling over the American 'sanctions'. Presumably, the Ten Janpath cabal is more worried of a snap election before the rupee plunges, inflation soars and the balance of payments turns more and more sour.