Books

The Budget That Wasn't

An important book for the insights it offers into the mind of the man at the fulcrum of national economic policy in the longest (1998-2004) non-Congress government since 1947.

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The Budget That Wasn't
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The picture that emerges is of a political leader endowed with much talent, intelligence, vision and courage. Aside from some predictable (for Indian memoirs) lapses into self-glorification, the book reveals flashes of anguish from feeling let down by political comrades, bureaucrats and the press. Inexplicably, there is a strong wish to be viewed as the "original reformer" on the strength of his unpresented Feb ’91 budget in the short-lived Chandra Shekhar government (Rajiv Gandhi’s Congress ensured that only an interim budget, shorn of major policy changes, could be presented that March, just before the government fell). Sinha goes to the extent of invoking subsequent pronouncements by leading economists I.G. Patel and Arjun Sengupta in support of his claim.

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Such claims are quite unnecessary to secure Sinha’s legitimate place as a leading reformer in independent India’s history. The range of reform initiatives he espoused during his finance ministership (1998-2002) is truly impressive. They include: the progressive conversion of multi-rate central excise taxes to the single-rate CENVAT; the crucial piloting of new laws to open up India’s insurance sector to private providers; the cumulative (and politically difficult) reduction of government-administered interest rates on provident funds and small savings instruments; the progressive dereservation of sectors from the exclusive domain of small-scale (and often inefficient) industries; the crafting of the fiscal responsibility and budget management bill (passed by Parliament in 2003); the strong push for conversion of state sales tax systems to VAT principles; the introduction of the bill to reduce government ownership in public sector banks to 33 per cent (it died in the legislative process for lack of political oxygen); and the courageous budget announcement in 2001 to reform India’s stifling, anti-employment labour laws (scuttled by his political colleagues).

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These reforms were especially commendable when juxtaposed against the economic platforms of the Swadeshi Jagaran Manch and other Sangh parivar members. Sinha was most crucial in keeping the reform train rolling.

Sinha also grappled fairly effectively with a number of "mini-crises", including the post-nuclear testing sanctions of ’98 onwards, the ’01 stockmarket scam, the UTI crisis and the prolonged fiscal aftershocks of the Fifth Pay Commission decisions of ’97. Sinha’s handling of these and other economic and financial challenges might have been even more effective had he maintained continuity in his top "budget team". He notes his failure but does not explain it.

After ’91, Sinha was indubitably the second most effective reformer FM out of the four we’ve had. This book does not do full justice to his achievements.

(The author was chief economic advisor, Govt of India, from 1993 to 2000.)

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