Need for alternative policy course

It was an amusing spectacle on the budget day. Soon after Chidambaram had presented the vote on accounts budget for 2014-15, Jaswant Singh, FM of NDA vintage, was seen raising hackles that the present incumbent has expanded the scope of vote on accounts and intruded in areas of policy.

In fact, Jaswant Singh himself had stirred up a major controversy in 2004 while rechristening vote on accounts as an interim budget. But for him, those were the days when riding on the ‘feel good’ environment of ‘shining India’ slogan, NDA was ‘projected’ to return back to office with a thumping two-thirds majority; where and how that hope went awry is another story. But relevantly, it is he who started translating this notion of ‘interim’ into vote on accounts.

For those of us who may be rubbished for being old fashioned, it is important to share the significance of a vote on accounts budget. Conventionally, in an election year, the government presenting the budget does not get to pursue the financial statement for the entire year. But, at the same time, the interregnum between the last date of the financial year and the day the new government formed after the general elections come into place and presents their proposals is a void; where certain expenditures are to be made and certain incomes earned. The vote on accounts is limited in discharging this minimalist function to fill the void; not to mention that it cannot delve into policy space or indulge in projections which go beyond that time scale of four months.

But Chidambaram would surely get back at Jaswant Singh with a ‘you started it’ response. But in the heart of this controversy is the otherwise unenviable circumstance that the Finance Minister finds himself in. It is apparent that Chidambaram was under compulsion to go ‘political’.

The single point obsession which has dominated all governments since 1991 which have been ardent advocates of neo-liberal policies have turned sour for Chidambaram and his UPA-II. The trend was clear and his budget officially recorded it – a GDP growth of 4.8 per cent which could, at the most, go up to 4.9 per cent. And this was a dampener for all those corporate bigwigs who had it so good in the past; and even with the economic slowdown, their profits have continue to grow, but obviously, their quest for further profits were not satiated. And the double whammy is that agricultural growth is pegged at 4.6 per cent indicating virtual stagnation in manufacturing. The impact on employment can be hardly overlooked.

For the last few years, budget making has been largely a competition for corporate support. This was hardly surprising for the UPA-II thought that their challenge comes from the more aggressively pro neo-liberal BJP. With the price rise and corruption alienating the people at large, the BJP is gunning for blood. The corporate bigwigs are dreaming of greener pastures with Modi at the helm. Therefore, the struggle that Chidambaram has to wage is for their hearts and minds. This is regardless of what happens to the people.

Therefore, with these discouraging figures for growth, the next important point was to somehow bring down the fiscal deficit figures; ‘fiscal consolidation’ which is for the finance minister, a fundamentalist belief. Bringing down those figures would prime the economy out of this slowdown!

But he could not care less of how to achieve it. He has proposed a reduction of Rs 66,000 crore in the revised estimates as that compared to the budget estimates last year. The central assistance for plan expenditure for state and union territories is also down by Rs 17,215 crore. Obviously, fiscal deficit is sought to be achieved through major squeeze of expenditure. Particularly deep is the slash in social sector spending. The subsidies have also contracted in real terms, accounting for inflation.

With stagnant or negative employment growth, the internal demand is not rising. In such a situation current account deficit looks tenuous. The little improvement registered is through restriction on imported gold. But this has its own limits. Without domestic demand and manufacture going up, hope to manage CAD through flow of foreign funds amounts to walking into a bigger crisis; exposing to whims and fancies of speculative capital. That in its turn will subject us to free fall of the rupee; devaluation being an incremental component of inflation.

As such, the situation is pretty adverse for the poor with unemployment, cut in social spending and particularly runaway food inflation. Fact is those who cannot afford 2100 calories and 2200 calories per day in urban and rural areas respectively are classified as poor. With this criterion, between 2004-05 and 2009-10 poverty climbed up from 64.5 per cent to 73 per cent in urban areas and from 69.5 per cent to 76 per cent in rural areas. But this is of no consequence to Chidambaram. He carries on with his harangue oblivious of the reality in his budget speech that an additional 140 million people have been lifted out poverty in the concerned period.

The only point on which he seems to be embarrassed is the fact that the huge largesse in ‘taxes foregone’ has failed to revive productive investment and growth; so much so, that these amounts do not figure in the budget papers. But in response to question in Parliament, the Government has revealed that it stands at Rs 5.10 lakh crore in December, 2013. This gives a clue to the possible outcome of the proposed cut on excise duty. Simultaneous reduction in import tariff and limited area of sectors specific to consumer durables will ensure that there is no let off from the slowdown.

Interestingly, bête noire Modi and his cohorts’ critique, however, does not highlight people’s plight. The only complaint is of a ‘policy paralysis’; implying no radical policy medicine, but more aggressive administration of the old therapy. Experience shows elsewhere that such aggressive response- ‘austerity’ being the euphemism- has only accentuated the burden for the people.

That is why the only escape route available to the people lie in embracing an alternative policy course which ought to be geared to revitalise the domestic economy, addressing crucial concerns of employment, inflation and social security; otherwise ‘match-fixing’ in policy space between major parties will continue to dog the people. With the manner in which Telengana bill was passed by Parliament, it is evident that the obnoxious phenomenon will spill over beyond economic policy to the realm of politics. Doubtlessly that is recipe for a certain disaster.

nilotpalbasu@gmail.com