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The limits on Finance Minister Yashwant Sinha's budget this year are political. He has the prescription to put the economy on a high growth track, but hampered by vested interests, vote-bank politics and stubborn opposition parties, he is unlikely to deliver.

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COVER STORY: BUDGET 2001

BECAUSE any price hike will be unacceptable to politicians in an election year.

Fuelled more by political expediency than the needs of the poor, subsidies today eat up 15 per cent of India's national income (GDP). That's more than Rs 2,50,000 crore. According to the Government's own estimates, two-thirds of the total subsidies are of "non-merit" variety, e.g. money lost in tax exemptions or in postponement of tax arrears and investment in PSUs yielding very low returns. By eliminating just half of the non-merit subsidies, the entire fiscal deficit of the Government of India, which is hovering around 5 per cent of GDP for years, can be covered. But a simple logic like this isn't politically acceptable. Result: Subsidies continue to surge.

Parties like the TDP, Akali Dal or the Lok Janashakti won't even entertain a discussion on subsidy cuts. Union Chemicals and Fertilisers Minister S.S. Dhindsa rules out a possibility of raising fertiliser prices, even though the Finance Ministry's Expenditure Reforms Commission (ERC) has recommended a 7 per cent hike to bring down the current fertiliser subsidy bill of Rs 13,200 crore. "Subsidy is the need of the hour. We can't justify any hike in fertiliser prices. Where will the farmer go?" argues K. Yerran Naidu, TDP's parliamentary party leader. That being the view of one of the more progressive partners in the NDA coalition, Sinha will not find support for subsidy reduction within his own government.

The Congress seems to have a more open mind on the matter. Senior party leader and former finance minister Pranab Mukherjee proposes an all-party discussion on subsidies before the Government decides what subsidies to cut. That isn't a new suggestion though because an open discussion on subsidies did happen in 1997 when the United Front government had prepared a white paper on the subject. But the discussions didn't lead to any reductions. With elections less than two months away, subsidy cuts will be bypassed this year too.

		Congress YES: But we shouldn't be seen saying it "There should be an all party meet on the issue" Pranab Mukherjee

		Telugu Desam Party NO: We have a little problem at home "Subsidies are needed. Where will farmers go?" K. Yerran Naidu

		Akali Dal YES: Today's subsidy is tomorrow's vote "We can't put a further burden on the farmer." Sukhdev Singh Dhindsa

II GOVERNMENT WILL NOT DOWNSIZE

BECAUSE a 24-party coalition run by a 72-member Cabinet lacks conviction to cut the flab.

It was an innocent Sinha who made the following commitment in his 1999 budget speech: "The high rate of growth of non-developmental expenditure is a source of concern. The most effective and lasting solution to this problem is to begin the process of downsizing government. We are making an immediate beginning by abolishing four secretary-level posts through a process of merger and rationalisation of Central government departments. This will take effect on April 1, 1999." Two years later, nobody knows which four posts were abolished. If at all they were.

Sinha also announced setting up of the ERC in the speech. The ERC has been diligently submitting its recommendations, but there are no takers. Officially all three ERC reports have been accepted. Only acceptance doesn't mean implementation. Looking back on his speech, Sinha must feel naive about having made such specific commitments on the downsizing of government. After all he is part of a Union Cabinet that is one of the biggest in India's history. That will dent the credibility of any promise that Sinha may make on downsizing.

"After 10 years of liberalisation the role of government in the economy has decreased, but the size of government has increased. There are more ministers and secretaries than ever, with less work and higher perks," comments Ajit Singh, former industry minister and president of the Rashtriya Lok Dal. Chidambaram, who first proposed the setting up of an expenditure reforms panel, blames the Government squarely for its failure to cut the flab. "It's purely due to lack of political will. There is no constituency against downsizing of administration," he says. He cites the phenomenal success of the bank VRS schemes to prove his case. Beyond downsizing, Sinha is betting on the passage of the Fiscal Responsibility Bill to rein in government spending. The bill, tabled in the Lok Sabha in December 2000, sets out targets for deficit reduction starting with the forthcoming budget. But since the bill not going to be cleared soon, chances of any expenditure control are no higher than they had been in the past.

		Tamil Maanila Congress YES: Easier prescribing medicine than administering the dose "It's lack of political will. people are not against downsizing." P. Chidambaram

		Rashtriya Lok Dal YES:It doesn't pay politically to talk about such lofty matters "Government's role has decr- eased, but its size has increased." Ajit Singh

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Looking Glass

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