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A tale of six Budgets

Ranabir Ray Choudhury

ON WEDNESDAY, the Finance Minister, Mr Yashwant Sinha, will rise to present his fourth full Union Budget and, as usual, expectations are running high. After all, this is the moment players in the stock markets have been waiting for. Some of them will make a pile while others will suffer heavy losses based on whether their expectations of what the FM will announce turn out to be right or wrong. Some industrialists will be ecstatic if Mr Sinha reduces duties on their products and input s thereby making their goods cheap in the market, which could hopefully lead to higher sales and profits. Others will be down in the dumps if the FM shows them his thumb in the national interest, of course. Companies and direct taxpayers wil l be hoping for relief although the point must be made that the noises which the Government has already made over the tough financial imperative forced on it by the Gujarat earthquake does not hold out too much hope for them.

This is the importance of February 28 to the entire nation. But then, come to think of it, this has always been the case every year at the time of Budget presentation. For a change, it may be of some interest to know how successive Finance Ministers have behaved. More specifically, what have they promised every year and how many of these promises have they kept?

The Interim Budget presented by Dr Manmohan Singh on February 29, 1996, was the last Budget document prepared by a one-party Government which had lasted for its full five-year tenure. Understandably, since elections were looming on the horizon, Dr Singh tried to present to the people the achievements and failures of the Narasimha Rao Government during its full term. Looking back into the past, the then FM said in his Budget Speech: ``We took office at a time when the economy was on the brink of collapse . Inflation was out of control, exports were declining, foreign exchange reserves had declined to no more than two weeks' imports, and industry was virtually crippled''.

What was the task before the Rao Government? As Dr Singh saw it, the growth rate of the economy had to be ``accelerated'', ``broad-based development'' had to be achieved (``which alone can ensure a rising standard of living for all our people''), the eco nomy had to be ``modernised'', efficiency had to be increased, and productivity had to be improved. This apart, the economy had to be ``integrated more effectively with the world so that we can compete successfully in world markets and also attract large r volumes of investment as so many other countries in Asia have done to their advantage''. What was the result of this approach? In his typical self-effacing style, Dr Singh said: ``The journey of the past five years has been both difficult and rewarding .I would not say that we have achieved all that we wanted. But, I believe we can honestly say that the results we have achieved amply vindicate our approach and aspirations''.

The full 1996-97 Budget was presented by the United Front Finance Minister, Mr P. Chidambaram, on July 23, 1996. Looking back on 1995-96, he said in his Budget Speech that the ``economic indicators point to high growth but there are significant areas of weakness'', which he identified as the ``fiscal deficit, sluggish agricultural growth, inadequate infrastructure, high interest rates and the trade deficit''. His Budget contained seven ``broad objectives'', the most important from the structural poin t of view being ``to remain steadfast on the course of economic reforms and liberalisation aimed at accelerating economic growth''. As far as performance is concerned, in the 1997-98 Budget (presented on February 28, 1997), Mr Chid ambaram smugly declared: ``On the last occasion, I had made over forty specific promises on policies and programmes... and Members will be pleased to know that I have fulfilled all these promises, save one'', namely, the setting up of an Expenditure Management and Reforms Commission. An ungrateful nation was not impressed, for the I. K. Gujral Government failed to return to power following the elections held in early 1998.

The next full Budget (1998-99) was presented by Mr Yashwant Sinha on June 2, 1998, (an Interim Budget was placed before the House on March 26) on behalf of the coalition Government led by Mr Vajpayee. After referring to ``some disquieting trends'' in the economy's performance, he listed at least 10 ``key objectives'' for the year which included, among other things, ``acceleration'' of the development of infrastructure and ``calibration'' of the ``pace and character of integration with the world economy' '. In the following year's Budget Speech (1999-2000), Mr Sinha described the calamitous situation facing the world economy (the Asian financial crisis and all that) and by extension India, but said that despite the pressures ``we have withstood the impac t of these challenges''. He went on to list the achievements of the economy (quite a substantial list, in fact) but nevertheless issued the warning that only a ``limited impact'' had been made ``on the problems of poverty and unemployment''. A six-point ``broad strategy'' was outlined for the 1999-2000 Budget which included, among other things, ``deepening and widening'' the economic reforms process and beginning a ``medium-term process of revenue and fiscal deficit reduction''.

How did actual performance fare? In the 2000-2001 Budget, Mr Sinha said that a ``broad-based industrial recovery'' was under way, overall economic growth was expected to be ``nearly six per cent'', the infrastructure sector was performing ``much better'' , the inflation rate had ``stayed below four per cent for 42 consecutive weeks... for the first time in 17 years'', public foodstocks were ``at record levels'', and exports had achieved ``a remarkable turnround''. As regards the Budget's objectives, he s aid: ``With this, my third Budget, I propose to put India on a sustained, equitable and job-creating growth path of 7 per cent to 8 per cent per year in order to banish the scourge of poverty from our land within a decade''. And what were the elements of the strategy with the help of which Mr Sinha sought to drive out poverty from this land of ours? There were seven, the most important of which was the establishment of ``a credible framework of fiscal discipline, without which the other elements of our strategy can fail''. It remains to be seen whether the 2001-2002 Budget will bring any message of cheer on this score not merely in terms of statistics (which in view of the expected favourable outcome following an indiscriminate clampdown on exp enditure will probably be emphasised out of all proportion by the Finance Minister) but also from the point of view of the aspect of discipline where, for all practical purposes, the Government's performance has been noth ing short of pathetic.