The phrase “hard options” was interpreted to mean a drastic reduction in government expenditure, achieved mainly by downsizing of the government and slashing of subsidies. As far as downsizing is concerned, Mr Sinha has disappointed everyone by refusing to set any fixed targets. He has been somewhat more forthright about subsidies, specifying a reduction in the fertilizer subsidy brought about chiefly by an increase in the price of urea, and the removal of sugar from the public distribution system for income tax payers (though how he will enforce this is anybody’s guess). But there will not be any overall reduction in the food subsidy since the allocation of foodgrains to the poor has been doubled. Apart from a small decrease in the rate of interest on provident fund, he has not made any attempt to reduce interest rates. Hence, interest payments, which are the single largest item of government expenditure, will continue to be as high as before. Mr Sinha has also been extremely timid in so far as the disinvestment target is concerned.
Very few innovations were expected in the field of new tax measures and the budget has been fairly predictable here. There have been only a few small changes in direct taxes. The taxes that companies pay on distributed dividends as well as that paid by mutual funds on debt-oriented schemes have been stepped up. The concession given to exports has been reduced, and the finance minister has also promised to remove them completely over a five-year period. Neither of these were completely unexpected. Mr. Sinha has introduced a single rate of central value added tax. Taken by itself, this would have meant a considerable degree of simplification and rationalization of the tax structure. Unfortunately, this has been combined with special excise taxes of which there will be three rates. So, there will not be any remarkable degree of rationalization. There is also a slight increase in the average level of indirect taxes on domestic production.A welcome move is the reduction in the peak rate of customs duty which comes down from 40 per cent to 35 per cent. The finance minister has been able to resist pressures from the swadeshi school and actually reduced the level of protection for domestic industry.
In the pattern of expenditure, there has been a fairly significant increase in budgetary support to the plan. Even more refreshing is the announcement to increase expenditure on the provision of basic facilities such as drinking water to the rural areas. A rather populist move is the decision to improve credit flows to the small scale sector by dispensing with collateral requirements for loans upto Rs 5 lakhs. This will almost certainly increase the extent of bad debts for public sector banks. The budget shows no great foresight and Mr Sinha comes out of it much like a goody-goody schoolboy eager to please the head prefect and the house master, but nowhere near the top of the class.
When Yashwant Sinha presented his budget last year, it felt like here was somebody willing to think afresh. He talked about rural marketing, private sector entry into the business of agricultural warehousing and cold storage, integrating the various social welfare programmes into one, and so on. One felt then that, if he were to have a five year mandate as the finance minister, he would do something different from his predecessors. Our hopes lie shattered.
Yesterday was his first budget when he did not have to worry about elections for the next five years. So, we were all expectant. He had made noises about the possibility of a very tough budget. We expected tax rates to be raised and more people being asked to pay, while unnecessary and wasteful expenditure were whittled down. One of these has partially happened, the second is hoped for, and the third has remained a distant dream.
According to the proposals in the new budget, people in the highest tax bracket will pay more, tax exemption on export income is going to be phased out and there will be a renewed drive to increase the income tax base. The new measures will increase direct tax collection by some 5,000 odd crores of rupees. The total of revenue receipts and that from the recovery of loans will be Rs 217,212 crore.
Given an expenditure of Rs 3,38,487 crore, the government is in trouble. So, it will disinvest Rs 10,000 crore worth of public sector unit shares, or so it seems. Out of this, Rs 1,000 crore will be set aside to retire public debt. In the meantime, the total internal debt is close to Rs 8,21,000 crore. Is the Rs 1,000 crore earmarked for the retirement of public debt really meaningful? At least, his predecessors acted like they were innocent of this method of using PSU disinvestment to retire debt!
Notice that, the reason for a tough budget is to generate more resources in the hands of the government. One way of doing this is to take more resources from the haves. Another way of doing this is to cut out the waste. As for the first, the finance minister has promised to include more people in the tax base. As for the second, he has done nothing.
For two years now, we have heard about a committee on expenditure reduction. For 10 years now we have heard about the need to curtail government expenditure. It is interesting that, while revenues go up and down, expenditures always go up. The millennium’s first budget was no better, in this regard, from those of earlier years.
Indeed, there is an amazing sense of continuity among the actions of the finance ministers of the last decade. Over the five years that Manmohan Singh had been the finance minister, he had never been able to meet the target of fiscal deficit. His average realized fiscal deficit as a percentage of the gross domestic product, over the five years, exceeded his target by one percentage point.
P. Chidambaram, in his two years as finance minister, fared no better. Yashwant Sinha has surged slightly ahead in this regard. And, remember, this is after two adjustments — one to the GDP series, and the other to the share of the states in small savings. Without these adjustments, the performance of all the three finance ministers, with regard to their targeting of fiscal deficits, leaves a lot to be desired.
What is most depressing about this budget is that it failed us after raising expectations. Let me talk about two of them. Last year, the finance minister had embarked on a plan of rationalization of the myriad duty structures and exemptions in the tax system. In particular, he had reduced the excise tax rates down to six slabs last year.
Of course, in his budget speech, he had talked about only three slabs, and only after a bit of more careful reading we found that there were six, instead of three. This year also, he talked about one general duty of 16 per cent. On further reading, it turns out that the six slabs have been reduced to five. One had hoped that a finance minister who will continue, it seems, for another four years, at least, would be more bold.
The second area where it has failed us is more serious. In last year’s budget, he talked about the poor, the education of their children, and their means of livelihood. This year, he has been totally silent on any major changes in the policy regime. The mindset seems to be the same as that of his predecessors — throw some money at the problem and it will go away. Well, it has not gone away since independence. We still have too many poor people, who are illiterate and outside the modern economic system. In this budget, there is nothing they have not seen before.
However, this budget does have a few positives if one is to believe what one reads in the budget documents. The easing of restrictions on the operation of venture capital is a welcome departure from the past. The commitment to reduce government shareholding in non-strategic public sector units to less than 26 per cent, and in banks to less than 33 per cent, is to be commended. Of course, one has to wait and see how credible these commitments are.
There are a number of reasons why I question the degree of commitment. First, he has promised us that no bad banks will be closed down. Who decides on that, if the government holds only 33 per cent of their equity? Second, he has made allowances for only Rs 10,000 crore as the proceeds from PSU disinvestment. I can think of many non-strategic public sector units where disinvesting down to those percentages will generate revenues many times over Rs 10,000 crore. Which do we believe? The 10,000 crore figure, or the 26 per cent promise?
It seems that, in India, the elite is unable to change when it comes to economic thinking. This is as true of the currently bankrupt Congress leadership, as it is of the incumbent and well-meaning finance minister. The simple economic logic, when detached from misplaced ideology, tells a simple story.
Let people decide on their future, the society’s job is to enable them to take decisions. Things like primary education, health and a social safety network are what the state should provide. It need not worry about science and technology, or knowledge-based industries. In its budget, it should make provisions for collecting revenues to finance primary health, elementary education, water management, and so on.
It does not need to provide credit or insurance to the poor — food stamps, or direct income transfers are more effective. But, maybe, we have to wait till the next millennium for our elite to start thinking differently from what they are accustomed to.
The author is economist in the planning unit of the Indian Statistical Institute, New Delhi
No doubles to cause trouble
Sir — Contrary to what Amit Chaudhuri writes in “Double Trouble” (Feb 27), a writer these days, especially if he is the media’s darling, hardly suffers any “self-division”. His public and private selves are one and the same. He writes with the singleminded objective of making money. Here there is no dichotomy. Neither is there any division between art and business. They remain intertwined like a pair of copulating snakes. Even the million copy selling authors — Salman Rushdie to Vikram Seth — only “sell” ideas to publishers. Contracts are drawn on that basis and advances made. The publisher, or his editor, breathes down the writer’s neck and almost dictates to him what masala to put in and where. Indian fiction in English pours out dollops of “exotic India” into readers’ ears. The writing over and done with, it is time for hype in the international media, following which the book finds its place on the shelves in supermarkets along with carrots and cabbages.
Double edge of culture
Sir — The Congress seems to have decided that whatever the sangh parivar can do, it can do better. There can be no other justification for its taking to the streets in protest against the screening of Hey Ram. Kamal Hasan’s film is one of the better films made in recent times. The film’s message is that no individual can be held responsible for cataclysmic events like the Partition and the murder and mayhem that followed. It is the parochial sentiment of the people that should be changed if these events are not to be repeated.
It is especially unfortunate that the film has been dragged into controversy in Calcutta, a city known for its rich heritage of cultural tolerance. More distressing is the way the Congress has adopted Nathuram Godse’s methods — violence — to preserve M.K. Gandhi’s legacy.
Sir — The news item, “Voice of saffron in loyalty lecture” (Feb 18), reports that M. Karunanidhi had suggested, with reference to a scene from the film, Hey Ram, that the minorities should be taught lessons in loyalty to the country. Karunanidhi should view Sarfarosh, especially the sequence where the police officer, played by Amir Khan, congratulates his junior, by the name “Salim”, for gathering information about an underworld Pakistan agent. Salim tells his boss that if only the minorities were trusted more in India, ten thousand Salims would come forward to do their duty to their motherland. In his next speech, Karunanidhi might consider opening the gates of the research and analysis wing as well as the other intelligence agencies to the minorities.
Sir — The youth and students’ wings of the Congress which vandalized cinema halls screening Hey Ram might have taken their cue from the recent Water controversy. Or their leaders may not have educated them about their duties as citizens of a democracy. The point here is that no party or social organization has the right to stop anyone from viewing a work of art. It is the public which will decide on its merits and accept or reject it.
Sir — Amit Roy (“Eye on England”, Feb 20) lets the cat out of the bag when he asserts that Deepa Mehta’s films are “aimed primarily at wooing audiences in London, Toronto and other Western capitals”. “She would be marginalized,” says Roy, “if she turned up, say, in London to make a film about the widespread evil of child abuse in Britain. Nor would The Guardian publish a 5,000 word essay by Arundhati Roy if she wrote attacking not Indian but British, French or American nuclear weapons.” At least the author of The Romantics, Pankaj Mishra, candidly admitted that the business of selling India through films or novels denigrating Indian culture has tremendous lucrative potential in the West. This exposes Mehta’s claim of being a social reformer as a complete myth. Her sole aim is to capture Western markets and earn huge profits in the process.
Notwithstanding all this, left intellectuals continue to accuse the saffron brigade of muffling an artist’s freedom of expression. They have even decided to let Mehta shoot in Calcutta to prove their liberal credentials. It would have been better if they had bargained with Mehta for a share of the profits of her film in exchange for supporting her, and used the funds for the development of West Bengal. Look at how the author of City of Joy has been carrying out medical and other relief work for the poor in the state.
Sir — The source of the ongoing media hype regarding everything to do with the Rashtriya Swayamsevak Sangh lies in the events that led to the downfall of the first non-Congress government that came to power at the Centre in 1977 with a comfortable majority. The Janata Party leader, Madhu Limaye, with the support of Chandra Shekhar, Krishna Kant and the infamous “Young Turks” group, masterminded the “dual membership” issue to shut out the likes of Atal Behari Vajpayee and L.K. Advani from the government. The rest, as they say, is history, as the Congress went on to exploit the lack of coherence among the constituents of the Janata Party and was returned to power in the elections that followed.
Thus Jayprakash Narayan’s dream lay shattered. Two things about that sequence of events are important. One, the RSS was made the scapegoat to bring down a government, and two, the loyalty of a particular group, among which were Vajpayee and Advani, to the RSS was underlined. The same game is being played now, but in a different context. The Bharatiya Janata Party’s allies in the National Democratic Alliance are being made to be uncomfortable about RSS connections. The lesson of history is that man rarely learns from history. It remains to be seen how long the BJP’s allies will stomach the RSS bashing by the media and the opposition.
Sir — The call for a ban on Valentine’s Day celebrations by the Shiv Sena chief, Bal Thackeray, made a lot of sense. But why has he left out birthdays, marriage anniversaries and honeymoons? And what about children addressing their parents as Dad and Mom and elders as Uncle and Auntie? Ignoring or erasing India’s long connection with the West, is not easy. This will entail referring to the drawing room as baithakkhana, discarding the dining table or calling it the bhojpatra, placing bathrooms outside the house, and smoking beedis instead of cigarettes.
Sir — The first time the organization that now chooses to call itself the Kashi Sanskriti Raksha Sangharsh Samiti made its presence felt in Varanasi was during the screening of Fire. It raised its head again to prevent the shooting of Water, passing off its unilateral agenda against Deepa Mehta on the people of Varanasi. The organization has an extremely selective perception of threats to morality and Indian culture. Why does the question of morality come up only when it has to do with an honest representation of women’s condition in the country? Why is it that run of the mill pornographic movies and their posters do not elicit even the feeblest of rebukes from them? The organization had better to look to other means of gaining political mileage than by propagating its brand of cultural nationalism.
Sir — The suggestion implicit in the editorial, “With a little bit of tact” (Feb 6), that artists should take recourse to craftiness to ensure their work finds acceptability, is unfortunate. Almost every facet of public life has come under the influence of crafty politicians; if artists too started to behave like them the nation will be left with very little to cherish.
Sir — The Central government’s whimsicality is becoming more blatant these days, especially with regard to the conferring of Padmashree, Padma Vibhushan and such other national awards to classical musicians. Till date, such awards have been presented to many musicians whose contribution to the field of music is not equal to that of others, who, despite their fame and superiority, have not received due honours from the national government.
It is needless to mention the names of those who have received national awards in spite of not being worthy of them. Had they adequate respect for senior musicians, they would have refused the awards. They should have insisted that the musicians who deserve recognition for their lifetime achievements should have priority in the honours list.
Sir — The controversy which erupts annually around the awarding of the Republic Day honours has focussed public attention on the need to evolve proper and transparent criteria for these awards. It has also triggered off a debate on whether such awards for civilians are proper at all in a republic.
There are a number of prestigious awards for accomplishments in various fields and these are given to deserving persons by established organizations after proper scrutiny. What is of concern, however, is the emergence of an “award” industry. Nondescript organizations send letters to businessmen, professionals and others, conferring on them “awards” for their “achievements”. “Award functions” are arranged in five star hotels, and elected representatives or politicians, who are only too ready to lend their names, are called upon to “give away” the awards.
Some multinational organizations, too, have joined the game. Rare indeed is the recipient who, on getting intimation of such an award, replies: “I do not deserve the honour. Therefore I beg to decline the great honour you have proposed.”
Sir — The Deshikottama awards of the Visva-Bharati University for 1999 have gone to film actors, directors, musicians and painters of uncertain calibre because of the supposed lack of outstanding personalities in the educational, cultural and intellectual fields. Only politicians remain out of the awards purview. But surely not for long. Such carelessness in choosing awardees harms the university named after Rabindranath Tagore more than the recent desecration of the prayer hall at Santiniketan.
Sir — Vilayat Khan has rightly refused the Padma Vibhushan conferred on him by the government of India. Favouritism, nepotism and regionalism play key roles in the process of choosing the awardee; eligibility is the last thing on anyone’s mind. Take the instance of the politics behind the awarding of the 1996 Dada Saheb Phalke award. Reportedly, Soumitra Chatterjee, Shivaji Ganesan or Dev Anand, was to have got the award. But once H.D. Deve Gowda came to power, he and the information and broadcasting minister, C.R. Ibrahim (both are from Karanataka) decided to confer the award on Rajkumar. Without intending any disrespect to the Kannada actor, it might be safely assumed that the decision was politically motivated.
Sisir Kumar Bhaduri and Hemant Mukherjee both rejected the Padmashree. Then there was the decision to honour Subhash Chandra Bose with the Bharat Ratna. For one, Bose’s stature is beyond all awards the state might think of giving him, and two, the Bharat Ratna has been given to many lesser lights like Rajiv Gandhi and M.G. Ramachandran. Even after the French president personally visited Calcutta to confer on Satyajit Ray that country’s highest civilian honour, the authorities in India did not think Ray fit for the Bharat Ratna. Only after he won the Oscar, did the Indian government give him the award — on his deathbed. While Japan honoured Rashbehari Bose with the nation’s highest honour, the country whose independence he sacrificed his life for has consigned him to oblivion.
Sir — The refusal of the sitarist, Vilayat Khan, to accept the Padma Vibhushan was disheartening (“Slighted Vilayat spurns award”, Feb 8). It merely shows Khan does not mind offending the sentiments of his admirers for the sake of his ego. The jury was wrong to offer him the award a second time after he had refused it once. However great a sitar player, he cannot be above honours. The jury represents the nation. It might not be above politics, but there should have been a dignified way of showing displeasure.