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COVER STORY: UNION BUDGET
Good Economics Risky Politics
By promising bold
reforms Sinha has tried to free the budget from populism. Is he being
overambitious?
By Rohit Saran
February 28, 2001
divided India into two distinct sects: the believers and the non-believers.
The believers were clearly in a vocal majority, showering epithets like
"historic", "for the record books" and "best
since July 1991" on the Union Budget for 2001-02. The man of the
moment was Finance Minister Yashwant Sinha, the only non-Congressman to
have presented four consecutive budgets. The accolades echoed across TV
channels, newspapers and corporate boardrooms. "The finance minister
has done a great job. The budget will kick-start economic growth,"
hailed Bajaj Auto Chairman Rahul Bajaj who only two months ago had publicly
challenged Sinha on the speed and efficacy of the economic reforms.
 Is
it fourth time lucky for Sinha? Stuck with a sluggish economy, sagging
business sentiments and a crisis-ridden agriculture, the finance minister
has rekindled sentiments of a better future among the most vocal section
of the economy-the industrialists. He has done so by slashing interest
rates, by cutting tax rates and by promising-yes, promising-higher investments
in infrastructure, labour law reforms, a leaner government, a new approach
to subsidies and further SSI dereservation. Such bold commitments would
impress anybody, particularly Indian industry which has of late had to
operate under intensifying competition and lacklustre governance. "The
budget has clearly created a feelgood factor," remarks B.V.R. Subbu,
marketing director of Hyundai India.
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NEW SINHANOMICS
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# Low tax rates
mean high tax revenues
# Bad economics is not good politics
# Quality of spending is more important than quantity
# Commit more than you can deliver, it helps sentiments
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Not everybody is a believer though. A small section
of economists and almost the entire Opposition are looking at the half-empty
portion of the glass. Promises, they contest, are after all promises.
Barring the interest-rate reduction, the budget hasn't actually delivered
very much-at least, not as yet. Reasons T.C.A. Anant, professor at the
Delhi School of Economics: "We have to see how much the finance minister
can deliver." Between what Sinha has proposed and what Parliament
will eventually dispose lies a big political battleground. Warns former
finance minister and leader of the Congress in the Rajya Sabha Manmohan
Singh: "A lot of the second-generation reforms depend on new legislation.
It's up to the Government to create a national consensus for such changes."
The BJP's fraternal organisations in the Sangh Parivar, Swadeshi Jagran
Manch and the Bharatiya Mazdoor Sangh (BMS) have already sounded warnings
on labour law amendments and SSI dereservation.
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"This budget
has certainly brought back the feelgood factor."
B.V.R. Subbu,
Director, Hyundai
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On his part, Sinha is betting on the fond hope
politicians have realised that bad economics is no more good politics.
The efficacy of the budget will be tested by his ability to push through
his six major commitments.
-with V. Shankar Aiyar, Lakshmi Iyer,
Farzand Ahmed and Malini Goyal
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