A nice little drama—or the first act of one whose duration is as yet uncertain—has just been played out before our eyes. The country's new finance minister announced some guidelines on Government austerity and fiscal prudence—apparently just the sort of things that Indian business and foreign investors and credit rating agencies have been rooting to hear. Within a few hours, however, the Left Front and trade unions across the political spectrum landed on him like the proverbial ton of bricks.
Chidambaram was attacked principally for asking all ministries to reduce manpower "to the maximum extent possible and in the shortest possible time", and for the declaration, "no real increase in pay and allowances for government staff from 1997-98 onwards". "Instead of tapping the big monopolists and landlords for resource mobilisation, the finance minister has declared a war on the hard-earned earnings of the public and the working class," said the CPI(M), in that lovely archaic terminology that is the hallmark of communists. Only "running dog of imperialism" was missing. The next day, a seemingly chastised Finance Ministry issued a statement allaying fears that the Government was thinking of retrenching staff.
Of course, it is incumbent on the Left Front and the trade unions to safeguard their constituencies, but, truly, they need not have bothered. For the Finance Ministry's guidelines are clearly more style than content. Just what veteran Chidambaram-watchers have come to expect from the man over the past few years. Remember the stirring resolve to make the "Made in India" label a force to reckon with across the world, and the India Equity Fund to be set up for this purpose? Not too much happened on that one. So too for the grand export strategy unveiled in December last year which aimed to up exports threefold by the year 2000. "The plan appears too facile and skeletal, lacking the necessary meat and clothing to give it real life and blood," Outlook had said then. The same applies to the new austerity guidelines.
Rigid adherence to budgetary expenditure ceilings, monthly cash flow statements of revenue and expenditure, guidelines to reduce time and cost overruns to be strictly followed, prioritisation of projects so that available resources are not thinly spread...which sane man can argue with any of these? But when set in context, they begin to sound suspiciously like those heavy-duty vision statements that companies across the world love to develop in three-day top management workshops and immediately forget.
Visions are for flaunting, and the nitty-gritty—breaking down the grand goal into quantifiable ever-lower-level goals that can be clearly understood and worked upon, now that's something else altogether. For instance, the Government wants public sector enterprises to show a minimum 5 per cent return on investment (ROI) in four years' time. Current ROI: 1.82 per cent. How on earth do you achieve this? Presumably by "professionalising the management, granting management autonomy", and other such vaguely articulated strategies. Great, let's even believe in that for a moment, but why then does the Finance Ministry also want to force profit-making PSUs to pay the Government a minimum 20 per cent dividend? Wouldn't it be better if you let a competent CEO re-invest his profits and grow his PSU long-term? The net result of these proposed actions will be that the Government will draw more money from profitable PSUs than many of these companies can possibly afford, and use this money to subsidise sick and undeserving PSUs.
Chidambaram's guidelines also conveniently forget to mention some facts. For example, the decision to review all Government schemes and weeding out all those identified as non-essential or moribund was actually taken by the Rao government in February this year. The guidelines also do not mention that the Fifth Pay Commission recommendations will definitely be accepted with retrospective effect from April 1, 1996, and this will add at least Rs 4,000 crore to the Government's expenses. So, the Rs 3,000-crore savings that these proposed austerity measures will bring in will not be enough to cut the fiscal deficit, which one thought was the whole point of the exercise.
At the end of it all, one is left with the feeling that this whole business was a public relations exercise aimed at Indian business and business journalists, who form Mr Chidambaram's core constituency, unlike other politicians who have their regional and caste mass bases to please. A man of Mr Chidambaram's intelligence would surely have anticipated that the Left elements of his rainbow coalition would react sharply to his manpower-reduction and wage-freeze guidelines. Is his actual gameplan then to prove to his admirers on Dalal Street and Wall Street that he remains the lone free-market voice fettered by his colleagues' confusion? So that when this Government finally falls, he will emerge untainted and unblamed for all the targets and actions that were promised but never saw the light of day?
If this is the strategy, there's just one hitch to it. From now on, the Left is definitely going to make sure that the finance minister makes no policy statements without having the issue discussed and cleared by the coalition's Steering Committee. And the free-market voice—whether sincere or specious—will truly be fettered.