Columns: Race Course Road

Columns

India Today, March 1, 1999
March 1, 1999

RACE COURSE ROAD
The Budget Challenge

Vajpayee's real test lies in cutting Government fat.

By Prabhu Chawla

Atal Bihari Vajpayee's adversaries believe this will be the last budget that his Government will present. For the prime minister it is indeed the last opportunity to assert his economic philosophy, if he has conceptualised one. In an environment of competitive populism, it is a tall order for the nation's chief executive officer (CEO) whose interest in economic management so far has been only marginal.

It is true that in the past few months, Vajpayee has been pushing his economic agenda with a vengeance -- but without any visible impact on any of the vital indicators. While the economy refuses to react to the prime minister's proactive policies, core sectors are slipping faster than ever before. Obviously, last year's semi-socialist budget has failed to enthuse anyone.

This time round, the prime minister is being advised to go for the jugular. He has shown some courage by refusing to capitulate to demands by allies on the question of fully rolling back subsidy cuts. But he has not displayed similar gumption when it comes to reducing government expenditure and quickening the pace of disinvestment in public-sector companies. Above all, he has yet to declare his economic intent. Is he for market economy? Or does he, like the Congress, believe in opportunistic policies on economic issues?

No one in the past has taken up the challenge of reducing the cost of governance which has grown by 85 per cent during the past five years. The Centre's intention is to dismantle the monolithic government machinery, but more and more senior officials are added to the bureaucracy every month. For example, while there were less than 50 secretary-level officials at the Centre in the late '70s, there are over 200 now. There were 20-odd ministries in the '60s, the number now exceeds 50. None of the former prime ministers succeeded in reducing the size of the bureaucracy though they boasted they would do so. P.V. Narasimha Rao did announce a 5 per cent across-the-board cut in government expenditure and reduced senior-level posts at the Centre but his fiat lasted exactly 60 days. Each one of the ministers and bureaucrats was back with the same number of telephones and personal errand boys that he had earlier.

Successive prime ministers have ordered a ban on foreign travel by ministers and civil servants. But the cost of their foreign travel has gone up from Rs 50 crore a year in 1994 to over Rs 100 crore this year. In fact burgeoning government expenditure is the major worry not only of the Centre but of the states too. Over 80 per cent of the budget goes towards salaries and establishment, leaving very little for development purposes.

For the past seven years, budgets have been designed either for the chattering classes or to attract invisible foreign funds to boost investments in infrastructure. The prime minister has now been told that even multinationals like Enron and General Electric, despite getting huge fiscal concessions, are borrowing heavily from Indian financial institutions instead of bringing in the promised dollars.

Vajpayee is therefore under pressure not only to be innovative, but also to outgrow this mindset of appeasing foreigners. If he can launch a decisive war against government expenditure in his budget for the millennium, he will have more than compensated for his failure on the political front.

Issue Contents | Write to us | Subscriptions | Syndication