Chidambaram too has bowed to the party’s diktat in his budget by increasing non-Plan revenue expenditure another 10.81 per cent. Expectedly, his reformer image has gone for a toss, and so has the chance of the sub-5 per cent growth rate actually reviving, despite tall budget promises. In the election-eve year, the crude electoral calculation that had confounded economic logic became even more demanding. Subsidies have jumped 27 per cent. Current transfer, which is the sum of interest payments, subsidies, pension, etc., stands at Rs 803,103 crore, which is a cool 87.5 per cent of total expenditure. The government has already begun to pass on to the consumer the price increases in petroleum products, with pump price of petrol going up a day after the budget and bulk diesel price too following suit. Yet expenditure on subsidies for 2013-14 is estimated at Rs 231,084 crore, and where it may climb to is anybody’s guess! In the previous year, the budget estimate estimate was Rs 190,015 crore but the revised estimate has put the figure at Rs 257,654 crore.
Chidambaram has tried to paper over the disastrous consequence of the previous years’ profligacy with very high, if not fictional, projections of revenue. At a time when the ‘aam admi’ is thinking twice before buying even essential medicines, and rows upon rows of readymade houses are lying unsold, he promises to augment tax revenue in 2013-14 by a whopping 20 per cent. It is more ingenious than raising funds by mortgaging the Taj Mahal. And the Finance Minister slyly played his party’s socialist card by levying a surcharge of 10 per cent on the tax dues of those who filed at least a crore of rupees of taxable income, their number being 42,800, as the government could calculate. Assuming each of these crorepatis having a taxable income of Rs 1.5 crore on the average, the total surcharge collected from the “super-rich”—perhaps a ploy to keep Sitaram Yechuri simpering instead of screaming on the TV talk shows—is a mere Rs 2,140 crore. It is just over half the paltry amount earmarked for “grants to foreign governments”.
To be fair to Chidambaram, though, it should be admitted that he has kept his predecessor’s promise of controlling fiscal deficit to a T. Mukherjee had committed that fiscal deficit would step down to 5.3 per cent and Chidambaram is ending the year on 5.2 per cent, with an undertaking to bring it down to 3.6 per cent of GDP in 2015-16. One wishes it doesn’t turn out to be jam tomorrow. It also remains to be seen if Plan expenditure pushes up as promised by 29.4 per cent, for that alone can address the economy’s two most pressing problems—inflation and jobs. Foreign investors watch these two bellwethers, fiscal deficit and inflation, before taking a call on a new market. And foreign investment is the oxygen without which the Indian economy cannot breathe at the current level of its development. It needs a favorable current account situation for an all-round upgrading of its economy, to a higher level of manufacturing and services. For example, if India needs to reduce its dependence on high-cost import of crude oil, it has to acquire technology and equipment for nuclear energy, solar power and shale gas.
India also needs a long-term correction process which must include addressing its endemic structural problems. Take a look, for example, at its pitifully low collection of taxes on income. With collection under this head budgeted at Rs 247,639 crore, each Indian will be paying just 2,030 rupees as Income Tax. Yet India aspires to be an economic super-power! The remedy lies not just in expanding the tax net, though that is also necessary (the result of having a tax net with too many holes is visible in the government figure saying only 42,800 have more than one crore rupees taxable income). It calls for a general enhancement of skills and jobs so that wages rise across the board, yielding higher tax revenues. It is shameful that agriculture, which contributes just about 16 per cent to GDP, is still holding 55 per cent of the work force. In a nation of 122 crore people, only 2.8 crore hold jobs in the organized sector, be it public or private, the rest being consigned to either the low-paid farming sector or small units where wages are just as low as they are uncertain. This is a basic deficiency which has kept India’s budget continually in the red.
In his first stint as finance minister in 1997, Chidambaram, perhaps for being the finance minister of H. D. Deve Gowda’s rickety government, did not worry much about elections and gave a spirited budget that was built on a foundation of future hope. His gamble of cutting tax rates to widen its base did work to a considerable extent. But his 2013 budget is too much pre-ordered by those to whom politics and election are synonymous. Maybe he’s growing old but it’s painful to see men of ideas losing their courage. The only silver lining is that he has not completely surrendered to the forces of populism. The Railway Minister Pawan Kumar Bansal also stood up to populism. Both, the Railways and General, Budgets are not “election year” largees though they are perceived to be so. May be, six months down the line, if the economy shows signs of recovery, the populism may return in full force to woo the lost voter.
