The real question before union finance minister YashwantSinha this morning is whether he should be thinking of the medium term orthe short term. Whether his coalition partners and the compulsions ofelectoral politics will allow him to think of the next three years in officeor force him to think of the next three months in crafting the budgetarystrategy. It is easy for editorial writers to urge politicians to behavelike statesmen, but as former Finance Minister Manmohan Singh once observed,politicians have to win elections before they can afford to becomestatesmen. The pragmatist that Mr Sinha is, he will prefer to be on DrSingh's side in the rhetorical debate that Mr Sinha's predecessorsreportedly had during former Prime Minister Narasimha Rao's tenure inoffice. Dr Singh had reportedly posed the question, "What use is it pursuingreforms if we cannot get elected back to power?" His cabinet colleague andsuccessor in office, Mr P Chidambaram, claims to have responded, "What useis winning elections if we cannot pursue reforms?" Now voted out ofParliament, Mr Chidambaram must at times feel that Dr Singh had a point. Itis this question that will hold Mr Sinha back from pursuing the kind ofreform-minded budget that he must. This day will tell us what lessons MrSinha may have drawn from the exchange between his predecessors.What are the parameters within which Mr Sinha can be expected to frame hisbudget today? There are three defining parameters. First, the FiscalResponsibility Bill. Second, the slowdown in the industrial sector. Third,the concerns being expressed in the agrarian sector. If Mr Sinha should takea medium-term view of his fiscal strategy, then it must be within theframework of the Fiscal Responsibility Bill, which he has introduced inParliament. He has the option of saying that since this Bill is still not anAct, he is not bound by its discipline. This throws up one set ofpossibilities on the fiscal front. On the other hand, he can say that hemeans business and that he will adhere to the spirit of the FRB, even if itsletter has no legal sanction as yet. Such an approach would limit hisoptions and imply a different, a preferred, fiscal policy.
The second parameter by which this budget will be judged is what it does forindustrial revival. Here, three sets of policies are expected: policies toboost investment demand, both public and private; policies to rationalisethe tax structure, both direct and indirect; and, policies that will definethe nature of competition. The last includes tariff policy and management ofthe removal of quantitative restrictions as well as industrial and labourmarket reform.
Finally, the third parameter is the political-economy dimension. TheCongress Party is exerting considerable pressure on the government to slowdown the privatisation process and to focus on the agricultural sector. MrSinha will draw particular attention to what his budget does for agricultureand for the farming community. He cannot ignore the political pressure beinggenerated on this score. It is within these parameters that his budget willbe structured. A good budget will be one which addresses these issues in amedium-term perspective. A weak one will be one that opts for expediency andshort-termism over strategy and statesmanship.
Copyright © 2001 Indian Express Newspapers (Bombay) Ltd.
