I had modest expectations of this budget for two reasons. First, Arun Jaitley is at least as good a lawyer as P. Chidambaram, for whose intelligence I continue to entertain high respect; and Chidambaram was a consistently lousy finance minister. And second, Jaitley did not have much time to prepare the budget, especially since he is Narendra Modi’s right-hand man and gets pulled into all kinds of extra-curricular affairs. I must admit that my expectations have been exceeded; in fact, I find it a very good budget for the present circumstances.
But a few things are not great about the budget. The fiscal deficit is projected to change very little. This, however, can be justified on the grounds of mixed signals. On the one hand, the current account is running huge deficits; that would have called for fiscal tightening. On the other hand, the growth rate, close to 4 per cent, is low for India; industry in particular is doing pretty badly. That would have called for a fiscal stimulus. One can say that pulled on both sides, the finance minister decided to stay where he was. Second, Congress budgets were known for numerous boondoggles with Sanskrit names ostensibly for the poor, children, widows and such other people worth helping. They were all schemes for making corrupt party men, bureaucrats and traders rich; one only has to look at the assets of election candidates in the past twenty years to see how rich they made them. Jaitley’s budget is also replete with such boondoggles. To mention just a few, there is one to “cover every household by total sanitation”, whatever that might mean, another to “deliver integrated project based infrastructure in rural areas”. Third, the gigantic statue of Sardar Vallabhbhai Patel. I am a great admirer of him; I met him for the last time just two months before his death. But a statue of him is of the same order as the elephants erected by Mayavati, only a hundred times more wasteful. Vallabhbhai would have thoroughly disapproved of it. And finally, Jaitley is extremely vague about many of these schemes. Clearly, he has done precisely what Chidambaram did. Every year before the budget, the finance minister is swarmed by opportunists of his party who put up ostensibly philanthropic schemes; for each, he provides fifty or a hundred crores in the budget. But Jaitley did not ask for even minimum details. He was in too much hurry to present the budget; he should have taken another month and done a better job. His good intentions are transparent; everyone would approve of them. But he tells us so little about how he will go about realizing them, that one’s confidence in him is apt to evaporate.
Jaitley has proved receptive to more good ideas than Chidambaram was. But money showered on them without necessary ground work is likely to be wasted. For instance, the idea of giving every farmer a soil health card. Jaitley has provided Rs 100 crore for it; that is roughly Rs 6 per card. I would like to know who in this country would go to a farmer in, say, Jharkhand, and do a soil test for Rs 6. Next, where are the soil testers? If a soil tester could cover 1,500 farmers a year, one would need a lakh soil testers for a year, or 25,000 over four years. Finally, is the effort worth it? Neither the green revolution, nor the fertilizer revolution was spread by jholawalas visiting farmers. Someone sold miracle seeds, or fertilizers, some farmer bought them, tried them out and got a bumper crop, and other farmers imitated him. If soil testing gives good returns, soil testers will be attracted by the profits; otherwise it is a waste of time. My prize goes to Jaitley’s idea of giving unsecured loans to cooperatives of landless farmers. If they have no land, what will they do with the money? How will they pay it back? There is an entire history of microfinance in this country and elsewhere of which Jaitley seems to be ignorant.
I have been arguing for development of a dozen ports with draft of 12-20 feet along our coastline, together with land transport and warehouses to integrate them with the domestic economy. So I am glad that Jaitley has promised work on 16 new ports, and a white paper on ship-building later in the year. But 3P, an institution to support public-private partnerships? PPPs are just registered companies; they are the easiest thing to set up. What is difficult is getting port trusts on board. Port trusts are an outdated, 19th-century institution. They have been a great obstacle to port development; Jaitley should be looking at legal reform to modernize port management.
Jaitley wants to spend Rs 100 crore on “Ultra-Modern Super Critical Coal Based Thermal Power Technology”. What for? Thermal power stations peak at 6 gigawatts. The biggest coal powered station in the world is the 5,824 MW Taichung plant in Taiwan; the largest gas- and oil-fired power stations are just slightly smaller. There is not much point to making them bigger; it only adds to the logistical problems. India’s problem is not lack of technology; it is that it cannot mine more coal without cutting down forests, and cannot import coal without dedicated port capacity.
If Jaitley wants to dream of technology, he should think of floating marine power plants; they will not require land, and can be moved from port to port. When he goes to the Fund-Bank meetings in September, he should take a Finnair flight from Delhi to Helsinki, and visit Wärtsilä. They will take him to see barge-loaded power plants they have supplied to Jamaica and Dominica, both beautiful islands. Marine power plants are small — usually in the 50-80 MW range. Wärtsilä will build bigger ones for Jaitley if he wants them; but he would be better off buying a lot of small ones, which he can plug in and out in different ports of India, depending on whether the state electricity boards are prepared to pay him for the power or not. And he should spend a few days looking at Wärtsilä. Its managers did not say to themselves, “We will make barge-loaded power plants.” They said, “We are good engineers. We will build anything that makes a profit and we can make better than anyone else.”
I have said enough to show that Jaitley needs more knowledge; since no one can know everything, he needs to be more aware of his need for knowledge, and of where he can get it. It is not just him. Finance ministers in general know so little, and are so unaware of their ignorance — or so proud of what little they know — that they waste lakhs of crores of our money. Other finance ministers have already done the damage and left. Jaitley has just started. He has a chance to be different — a chance to put knowledge in the service of the nation. If he does, he will change it far more radically, and it will be far more grateful to him and his party, than if he chooses to play Chidambaram II.