| Little conviction
West Bengal’s finance minister, Asim Dasgupta, is an honourable man. Generations of students, whom he taught in the postgraduate economics class on the Calcutta University’s Kantakal campus, would vouch for it.
So when West Bengal’s financial crisis reached a near-breaking point, Dasgupta thought that the only honourable course open to him was to lay the facts bare to the people and hope they would understand. He released his document to the press and, obviously, not satisfied with the media doing scant justice to it, decided to serialize it in four parts in the Communist Party of India (Marxist)’s Bengali organ, Ganashakti.
For over a year, Dasgupta has been put in the dock by both the opposition parties and some partners in the ruling Left Front for the state’s dismal finances. The document is his defence, and Dasgupta knows that in sport, as in politics, offence is the best defence. So the entire document reads more like an accusation of the Centre than an admission of failures and responsibility.
That is, however, not to say that Dasgupta does not have his reasons for complaint. He is partly right in laying the blame at New Delhi’s door because the state’s finances are largely a result of the Centre’s financial and economic policies. West Bengal is not the only state that is struggling to make ends meet. Indebtedness is not a problem only for the states. As Dasgupta says, citing Reserve Bank of India estimates of 2001, the Centre’s debt burden of Rs 1,100,000 crore is more than double the states’ combined debts of Rs 500,000 crore.
West Bengal’s debt burden too doubled in the past five years to reach Rs 70,000 crore in 2002. According to the planning commission estimates of last October, the state is paying a collective interest of Rs 7,500 crore every year. The estimates suggest that West Bengal’s revenue balance will touch a negative Rs 5,805 crore at the end of this financial year.
Dasgupta’s own account hardly pictures the viciousness of the debt trap. If the planning commission estimates are any guide, there is little hope of West Bengal getting out of this trap in the foreseeable future. In fact, chances are that the state will sink deeper into it because, despite the present debt burden, the state plans to borrow another staggering sum of Rs 45,594 crore over the next five years. The finance minister doesn’t tell us this and it is possible that his intentions are entirely honourable — he wouldn’t like to panic government employees who have already started worrying about regular payment of salaries and other dues.
That is also Dasgupta’s main worry — managing money to pay just the salaries, pension and other dues of the government employees. His document says that these payments have risen from Rs 6,177 crore in 1997-98 to Rs 12,239 crore at present, due mainly to the pay revisions recommended by the fifth pay commission. But here too he is giving us only the half-truth.
The planning commission projects that the rise in the state’s monthly wage bill alone will be to the tune of Rs 2,100 crore and the expenditure on pensions will be a mere 10 per cent less than the wage bill in the next few years. Where on earth is Dasgupta going to get the money from' Even in this fiscal year, the state’s expenditures on salary, pensions and loan repayments are likely to amount to 110 per cent of its total revenue.
Dasgupta outlines his recipe for adding to the state revenue. The areas he identifies for increased revenue collection include land , stamp duty, excise, motor vehicles, cess on petrol and diesel, and services outside the tax net such as health, education and water. Besides, he lays much emphasis on cutting down government expenditure.
The problem is that even his projections for additional revenue from these will fall far below the requirement. Hence, his ultimate hope lies in a restructuring of the the Centre-state fiscal relations. Not only West Bengal, but all states want a larger share of the Central taxes, easier terms for loans and a new regime for devolution of funds for various development projects.
What is missing in Dasgupta’s document is an admission of the state’s failure to generate its own resources. Successive Union finance ministers as well as the planning commission have warned the states against this basic fiscal indiscipline. The advantage West Bengal once had in small savings has largely been lost after cuts in interest rates. But the former professor of economics didn’t seem to have practised what he preached to his students — that one has to earn money before one can spend it.
It is only now, when it has become a hand-to-mouth situation, that the finance minister is talking basic economic sense. Hence the government’s late awakening to the fact that it cannot afford free lunches. After 25 years, the government is now asking people to pay for services and to increase fees.
But even these will remain half-measures if Dasgupta’s document is any indication. The political rhetoric against economic liberalization that prefaces his document suggests that he refuses to accept the logic of the market and is still bound to the old economy ideas of public finance. It is a desperate situation and half-baked solutions will simply not redeem it. What the state needs is bold new initiatives to raise revenue and cut down unproductive expenditure, even if that means turning drastically away from the left’s traditional political economy.
Unless this is started immediately, the state’s economy will slip further down. Last year the government paid only 50 per cent of the bonus it had earlier offered to its employees and reportedly saved Rs 100 crore. It is a ridiculous idea of social commitment that forced it to pay even this much because the situation actually does not warrant any such payment at all. Dasgupta pats himself on the back saying that, unlike some other states, West Bengal has not yet defaulted on payment of salaries or pensions.
But he is defaulting on something far more important than that. Practically all development work in the state has come to a halt. One has only to look at the condition of roads. Funds meant for such work are used to meet non-plan expenditures like salaries. The consequence of this will be not only the failure to build a new socio-economic infrastructure but also a collapse of whatever of it is available now.
Agricultural growth has so far sustained West Bengal in the midst of an inexorable trend of economic decline. That hope too is fading fast, with falling farm prices and the agriculture department projecting a shortfall in the near future. Dasgupta knows better than even the chief minister, Buddhadev Bhattacharjee, that his kind of fire-fighting will not do. Unfortunately, his document reads much like his zero-deficit budget statements of yesteryears — long on jargon and short on reality bites.