Now that the dust has settled on the Indian government budget for 2011-12, one can say that one of the most erudite comments on it came from Jahangir Aziz of JPMorgan (India). In his op-ed for the Business Standard, he explained lucidly as to how the budget deficit calculations could go awry. The government has not provided for the food security Bill because the Bill has not been passed in Parliament. The enhanced subsidy for oil might prove to be insufficient. The allocation to the Mahatma Gandhi National Rural Employment Guarantee Scheme remains unchanged from the previous fiscal year despite the government’s acceptance of the proposal to link the payment under the programme to inflation. Put some numbers on these three omissions, the fiscal deficit for 2011-12 could be 5.3% of GDP instead of the targeted 4.6% of GDP.
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One of these three criticisms might turn out to be unfounded if the rise in the oil price crashes the global economy sooner than most think. With it, the oil price itself would crash. That would save the government a lot of blushes. If it happens, whether the bonanza from the oil price crash would be used to pay down government debt or spent on another hare-brained scheme from the National Advisory Council (NAC) is not a difficult question to answer.
A fortnight before the budget, Amartya Sen and a bunch of other individuals released their Kolkata declaration (http://www.hindu.com/2011/02/20/stories/2011022054511400.htm) in which they proclaimed the right of every Indian to healthcare and demanded public provision of healthcare for all Indians. The only thing that Sen has not yet asked for is the right to happiness for all Indians. Then, he would demand that the government distribute Prozac to all Indians.
Then, Aruna Roy and Harsh Mander of NAC criticized the proposal made in the budget to transfer cash to the public to buy kerosene, cooking gas and fertilizer. Let us pause here and reflect.
The Economic Survey of the government pointed out that policymakers should not assume that morally upright and flawless individuals or emotion-free robots implement government schemes. The leakage of foodgrains from the public distribution system (PDS) is variously put at 30-60% of the grains made available to the PDS. Yet, the NAC members balk at any change that would conceivably reduce this waste and pilferage.
Reasonable individuals would acknowledge, at the minimum, the need for experimentation and alternative methods given that, in their own words, successive Indian governments had not delivered on poverty elimination. Further, if they want the government to keep running the lives of all Indians from dawn to dawn, they should first prepare the government in terms of skills, processes and financial resources before they demand that it delivers all kinds of freebies to all and sundry.
Further, Sen has also criticized the preoccupation with economic growth. On that, he is not entirely wrong. The preoccupation with economic growth has resulted in the United Progressive Alliance government taking upon itself to create such growth through its own spending rather than putting in place an enabling framework for the country to achieve economic growth spontaneously. But, while Sen has the right to criticize the government, it is his responsibility, too, to suggest an alternative policy framework that is more sustainable than this. Without economic growth, there are no tax revenues for the government to spend on his pet ideas.
Further, the NAC has contented itself with the rights of the aam aadmi. What about the responsibilities of aam aadmi? Would the NAC care to advise the aam aadmi of her responsibilities? After the environment ministry finally cleared the Posco investment in January, The Times of India (3 March) reports that a fresh batch of petitions from villagers who could be displaced by the plant has been submitted to the Orissa government.
It may well be the case that their demands are genuine. But is it too much to ask the NAC to conduct an honest debate within and without on the true economic costs and benefits of Posco to the nation vis-à-vis the environmental objections? India exports iron ore to China. The Posco plant would use that iron ore. The plant would give Koreans a further stake in India. Of several East Asian nations, Korea is arguably the only country that has managed to retain its trade competitiveness in the face of the Chinese onslaught. We could learn a lot from them on dealing with and overcoming China’s competitiveness. More importantly, in the process, India would be strengthening an important regional alliance.
After all, the NAC has members who championed the right to information. It is, therefore, incumbent on them to place all facts and arguments in the public domain instead of putting out one side of the story alone. The unquestioned and unaccountable right of the NAC to lead India to fiscal ruin in the process of advocating many rights for fellow Indians must stop.
V. Anantha Nageswaran is chief investment officer for an international wealth manager. These are his personal views.
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