When Mr P. Chidambaram left the finance ministry in late 2008 to become the home minister, everyone was happy. The 26/11 incident that year had destroyed the citizenís confidence in the administration and in its ability to protect her. The home minister designate was expected to bring back the confidence that Mr Shivraj Patil had done so much to destroy. And no one was disappointed in Mr Chidambaramís no-nonsense approach as home minister. Everyone heaved a sigh of relief as he slowly, but surely, improved the confidence level of all citizens. He has been brought back as finance minister this fiscal year for much the same reasons that prompted the leadership to take him to the home ministry in 2008. Last yearís budget was a disaster; businesses and everyone else were wondering whether the government was at all interested in running the country, and, by the middle of last year, the country was on the brink of a financial crisis, according to the Kelkar Committee on Fiscal Consolidation. The government brought Mr Chidambaram back.
The Kelkar Committee had suggested a cap of 5.3 per cent for this year and 4.8 per cent for next year. He made two immediate promises: he will keep the fiscal deficit in 2012-13 within 5.3 per cent of GDP, and that he will do nothing that will further harm the economy. In his usual no-nonsense approach he made this clear within a very short span of time through his dealings with businesses and with the other ministries. Not surprising, therefore, that he announced in the budget speech that the fiscal deficit this year was 5.2 per cent of GDP. And, in his entire budget speech, no one could fault him for any act of commission or, putting it another way, he committed no harm as promised. Well, that is not altogether true, Iím afraid. He has announced a Womenís Bank, whatever that means. It would have been nice if, in the interest of transparency and of taking the citizen into confidence, he had said a little bit more about what is meant by that. Does a Womenís Bank give loans to women only? Are all its personnel going to be women? What about its depositors? Is it going to be a public-sector bank with branches all over the country? Will it be subject to competition from private-sector womenís banks? Or, was the only purpose of announcing it was to see Sushma Swaraj and Sonia Gandhi simultaneously bang on the table in Parliament ó an event never seen before?
Many of the criticisms of his speech, however, are for acts of omission. People are complaining that he has done nothing to give a big boost to the economy. He has not, the critics point out, done anything to unravel the capital locked up in finished projects that are still not on-stream. When will the land acquisition bill get passed and in what form, and so on? Unfortunately, this is misplaced expectation and, Iím afraid, one cannot hold him responsible for peopleís wrong hopes. These things are outside the turf of the finance minister and, however much we may want them sorted out, to expect the finance minister to sort them out in his budget speech is grossly unfair. This is the responsibility of the Parliament and, may be, the management of the Houses by the government.On the other hand, what stands out in this speech is the clear and explicit statement on the importance of growth for sustained development and greater equity through inclusion.
The other act of omission people are faulting him for is the lack of expenditure cuts. Indeed, most people appearing on budget shows and writing for the media seem to be disappointed by his inability to cut subsidies and other government expenditure. For instance, let us look at two sets of figures: (a) the budget estimates for 2012-13 as presented by Mr Pranab Mukherjee (the erstwhile finance minister) and how they compared with the actual figures for 2011-2012 , and (b) the budget estimates for next year (as presented by Mr Chidambaram) versus the revised estimates for this year. Non-plan expenditure has gone up from 8.73 per cent for (a) to 10.82 per cent for (b); for plan expenditure, the corresponding figures are 26.35 and 29.39, respectively. So, clearly, there has been no reduction in expenditure. However, two things need to be noted here. First, drastic expenditure cuts ó and the focus is mostly on subsidies here ó require changes in government subsidy policies and the finance minister has as much say as any other cabinet minister. Second, if one were to look at the capital and non-capital expenditure, the non-plan expenditure on the capital account went up from 30 to 43 per cent, while the similar figures for plan expenditure are 28 and 31 respectively.
Many have questioned his calculations. The main point being made here is the following: expenditures have gone up, revenues are not going to grow that much and neither will there be great leaps in GDP growth, given our own situation and the general gloom in world markets. So, how is he planning on a 4.8 per cent fiscal deficit next year? Well, the answer probably lies in the ďother receiptsĒ under ďcapital receiptsĒ in the Budget at a Glance publication of the documents placed in Parliament. Are we expecting some cash inflow from disinvestments?
It is time to look at the positives. The finance minister, in an earlier avatar, had followed the recommendations of the Kelkar Committee on tax reforms even when the committee was set up under the NDA. This time, he himself set up the committee on fiscal consolidation under Dr Kelkar and is seriously following it, as is evident in the fiscal deficit figures. He has done what he can to boost investment by announcing the investment allowance ó a deduction of 15 per cent for three years running for investments above Rs 100 crore. He has also announced that many of the benefits reserved for the small-scale sector will continue for three years after they have stopped being small. Companies need to grow to become efficient and for better employment opportunities in the country. At last there seems to be someone who is aware of this. He has also increased expenditure on education and health, and integrated the rural and urban areas within the National Health Mission. And, most important, there has been no holding back on the governmentís flagship programmes.
Imagine what would have happened to the just-concluded first test match against Australia if our bowlers were hit all over the ground by the Australians in their second innings. Kohliís century would have gone waste. Would you have blamed him for not making a double century and taking a few wickets himself? Much of the criticism against the budget, Iím afraid, is of that kind. As finance minister, Mr Chidambaram has played his part well. If one wants India to win, it is now up to the other members of the team ó and this includes both the ruling party and the Opposition ó to get to work and pass the pending bills. It is unfair to expect every Kohli to be a Dhoni.