Economic Outlook 2008

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World Economic Forum summit in Delhi that action in the financial sector namely banking, insurance and pension was disappointing and hoped that even in the balance period of this government progress was possible. We need to encourage him to move in this direction. Incidentally incorporating them yet again in budget announcement is pointless because they have been said earlier but implementation remain mired in coalition politics. So between the Prime Minister and himself a negotiating strategy is necessary to transit from this stalemate. This of course raises the larger issue of reactivating action in many stalled areas because no credible government can remain in a holding mode or lame-duck state for the balance 14 months on its remaining tenure.

Fourth, the pace and quality of public expenditure remains worrisome. Infrastructure projects in general are lagging behind with clear evidence of cost and time overruns. Public-private partnership is still in a nascent phase. Chidambaram has been wary about the efficiency of public delivery systems and project implementation. We are overloading the state apparatus and more so at the district level with projects that are ill-equipped to cope. Ask any diligent district official and he will not be able to truthfully recount the number of development projects he is expected to oversee. Each year we add more projects but subtract none. While increased public outlays for infrastructure and social sector will remain inescapable, dependence on the traditional machinery for project implementation needs a basic rethink. We need to learn from better international examples. Increasing reliance on civil society and NGOs can ameliorate the situation, but we need to think beyond them.

Finally, budget making would have just commenced. Those who expect election in the near term believe that this would be a populist budget. Others looking at the current political configuration, expect the government to last its full term and the forthcoming budget may be the penultimate one. Irrespective of this government must redeem its many unfulfilled promises. Announcing more populist schemes or a large provision for additional emoluments of public servants can cripple the fiscal health nurtured carefully. There is ample evidence that new projects take time; the leads and lags are significant.