Budget Plays And Replays

Written by Subhash Agrawal | Updated: Mar 13 2003, 05:30am hrs
The initial reaction to the latest budget from local media, economists and industry was so positive as to be almost gushing. Phrases such as development-oriented or impetus for growth or a deft act were used liberally across the opinion pages in the country. Even newspapers which wanted to sniff out and brandish the current regimes election game-plan, say via hefty concessions to its main electoral constituency, ended up displaying some amount of grudging respect. Jaswant Singh appeared to have carried the day.

However, a more careful reading of the budget has taken away much of the initial excitement and adrenaline rush amongst investors and analysts. This is especially true for foreign diplomats, international investors and equity researchers who, apart from consumer-driven growth, see little to cheer about. Or, at least, that has been the general reaction so far. For them, the budget has been disappointing because, as the Far Eastern Economic Review put it, the budget didnt adequately address the issue of letting more foreign investment into India.

This is essentially correct. There is little concrete concerning plans for further liberalisation of foreign direct investment rules, fiscal deficit, subsidy, labour retrenchment or even privatisation. In that sense, the budget clearly does not address many of the most basic and urgent problems facing the country, and in the end it is far more an internal housekeeping operation decent, not great rather than a declaration of too many policies.

This is perhaps not such a bad idea. There is far too much obsession in the country over the Budget, as if a single day and single debate in Parliament is a panacea to all problems. The whole media suspends its normal coverage and devotes hours of TV time and hundreds of newsprint pages on very minute analysis of the most arcane provision in the budget, as if it were an all-or-nothing circumstance which would somehow determine the destiny of the nation for years to come. The economic chatteratti have a field day, and cities like Delhi and Bombay are full of seminars where forecasts are made on every minute item, from M3 supply to rural bank credit.

Some of this number crunching may be useful in the narrow sense, but most of it barely touches upon the larger picture. In essence, what India faces above and beyond an annual balancing of books are the ticking time bombs of fiscal deficit, subsidies, bank debts, government size and an abject neglect of fundamental human needs, such as health and drinking water. No amount of microeconomic tampering will solve these problems overnight, though of course the budget is a useful test of government sensibility and a milestone in the larger trajectory. Moreover, once the budget week is over, the government is miraculously allowed to rest easy for the remainder of the year. This extraordinary focus of energy, attention and audit of government policy on just one day (or one week) in the whole year is an archaic absurdity, begging to be corrected.

Economics aside, there are two good things in this budget. First, the Finance Minister has in some small measure departed from the past tradition of pre-budget lobbying by industry groups and in-budget grand promises, a cycle that only bred opacity and insincerity in the whole exercise. The second best thing is that the budget is already largely forgotten, apart from the fertiliser issue. Within two days, it was relegated to the inside pages and buried under coverage about Indias convincing victory over Pakistan in the ongoing Cricket World Cup. Three days after his budget speech, the Finance Minister was enjoying the afternoon at a Polo match.

These things have never happened before in India, and in balance they are a good omen. It is important for any society to occasionally allow itself a feel-good factor, and for businesses to lessen dependency on official largesse. More crucially, the country needs a culture of continuous urgency, debate, initiative, assessment, correction, and even angst, over economic policy. The incompleteness in the budget is welcome if it renews pressure and spotlight on government to address pressing issues throughout the year. Given our problems, or the fun we seem to be having discussing them, every day ought to be budget day.

(The author is an analyst of Indian political and business trends and the editor of India Focus, a political risk report for international investors)