BARELY 10 days after he presented Budget 98, a visibly moved finance minister Yashwant Sinha was struggling to defend his creation in Parliament. His work had just gone down as one of the worst budgets in Indias economic history. Even industry, which Sinha had tried hard to please, had turned about. "Im not trying to apportion blame here," an understandably embittered Sinha argued in the Lok Sabha, "but its not a clean slate that I got to write on".
In the next one month, Sinha was forced to use the eraser quite often. With the result that the Finance Bill 1998 that got passed on July 17, hardly bore any resemblance to the one that was moved on June 1. Most of the tax-tinkering proposals, which gave up a centimetre here only to gain an inch thereand which were presumably the product of major brain-storming by the bureaucrat army under the finance ministerhave gone. Along with, hopefully, some major myths that existed in Sinhas mind about the demand charter of the urban intelligentsia, corporate chieftains and big farmers. What remains now is a yawning gap of Rs 4,000 crore odd. As well as Sinhas dogged defiance. And defence.
Indeed, Sinha has a fairly acceptable defence. He inherited an economy going steadily downhill. Consumer demand was depressed, so was the corporates hunger for funds. Yet prices were rising taking goods further out of reach. And infrastructure bottlenecks kept the few actionmen, whether foreign or domestic, tied to their small, guarded territories. As for selling abroad, has Indian industry ever been known for innovativeness?
It was certainly not the stuff dreams are made of. Especially when dreams are woven around hard numbers and ominous indicators of the health of the national purse such as the fiscal deficit and the current account gap. Squabbling politicians kept out the pin-striped foreigners with their fat briefcases. Inside the country, people took less money home and therefore had less to contribute to the sarkari till. Robbed of income and staring inevitable payments in the face, the government borrowed.
As a result, Sinha came in to live a nightmaredomestic borrowing had gone up by one-third and the fiscal deficit was touching seven per cent of the gross domestic product. Worst of all, the revenue deficit, which shows whether the government is earning enough to meet its own expenses like paying its staff wages and doles to the poor, had climbed to 3.6 per cent. And, no, these calculations do not take into account the voluntary disclosure of income scheme earnings, the only part of P. Chidambarams dream budget that worked, and yielded, as PC had so shrewdly calculated, a last-moment bonanza.
Talk about luck! Certainly PC didnt deserve any. Not for his gross miscalculations of the revenue income, his Canute-like complacence about consumer markets, his nonchalance towards the stockmarkets which refused to repose faith in him, and his disdain towards all economic viewpoints other than his own. Perhaps the intelligentsia did deserve him after all! And Sinha had just about 40 days to let the Chidambaram-created mess sink in. Even less, considering that immediately after taking over at North Block, he went to the US for the Fund-Bank meetings. When he returned, all he could do was presumably to issue orders, to anyhow scrape the bottom of the near-empty barrel and collect revenue to bridge the several deficits. It wasnt his fault that industry was also clamouring for tariff protection.
Still, Chidambarams mismanagement cannot be a watertight excuse for Sinha. Not in the rules of the game of political economy. Certainly not for the policymaker player. Sinha did inherit a messed-up balance sheet. So did Manmohan Singh. Sinha had a mandate for extensive reforms, even if swadeshi-style. So did Dr Singh. Sinha had the complete backing of his prime minister, like Dr Singh. And unlike Dr Singh, Sinha also had the bomb.
And the great expectations that shimmered on the billowing desert sands.Why then did his Budget fail to cheer? Why did it have to end up as a pathetic piece of patchwork quilt? Why doesnt Sinha throw some light on how the Rs 4,000-crore hole will be filled? Why does he still continue to say that revenue income at the end of the year, which he wants us to believe is underestimated, will "absorb the impact" of the rollbacks?
Is that because Sinha, more correctly his party, lacks an economic vision? Is it because the BJP knows whats at the end of the journey, not how to reach there in the best possible way? The party anyway has a dearth of good economists to advise the cabinet. Thats one area where Sinha could urgently focus on. As self-styled freetrader Jagdish Bhagwati told Indians in general, and Jaswant Singh in particular: "If the two names suggested to me are economists, then Im a Bharatnatyam dancer." (He also told us that initially, when he asked about the economists in the government, all he got was a giggle.) But then hes an Indian economist in the US and in this era of sanctions and hot bargaining, he cant be relied upon by the government for a dose of national wisdom, can he?
A good finance minister is the best policymaker in the government who knows the answer to tricky questions. Like why do prices rise after the Budget? Why are honest citizens the best tax avoiders? Why do innovative entrepreneurs clamour for props? Why do forex earners feel they have a personal right to what they have acquired? How do a few computer operators in the stockmarkets ride high and low only on expectations?
The Finance Bill showed Sinha is willing to learn. But, unlike a wise policymaker, hes still not ready to wipe his slate clean.