The Union government’s response to the many comments and criticisms of the 2009-10 Budget was explored by Karan Thapar for Devil’s Advocate, the CNN-IBN channel programme, with Deputy Chairman of the Planning Commission Montek Singh Ahluwalia. Edited excerpts:
Here’s a comment that says: ‘Strong content, lousy presentation’. Was this a poorly-drafted Budget, which ignored or failed to mention important signals and messages which, ironically, were part of not just the documents tabled, but also statements made by ministers and officials thereafter?
What the Finance Minister did was to touch on the main points of the broad strategy. He may have not talked about everything which is in the documents.
On Devil’s Advocate a month ago, you said if you have a fiscal deficit of, say, seven per cent in the current year and that incidentally is what the fiscal deficit exactly is, it is very high. But if you set it in a set of policies that lets people know it is going to be five per cent and then four per cent and then three per cent, I don’t think people will care too much. The FM had the capacity to set it in precisely that context but chose not to do so.
The Budget documents clearly put numbers to the objective of bringing it down. The fact that he did not mention it in his speech is a matter of choice in terms of presentation. We should take a cool look at the Budget and then see if it is good or not.
A second example is disinvestment. It was an important part of the President’s Address, in the Economic Survey, but when it came to the Budget speech, beyond merely indicating something, the FM said nothing. On this show on June 7, you said the signal we should be giving is that we are willing to do a significant amount of disinvestment over a three to four year period, that it’s important to determine and lay down a clear programme for the next three years.
The Budget speech is made under a very tight time deadline. It’s been a very short time since the government took over. Whether we have it now or a month later...
A third example, on the enormous borrowing requirement of Rs 4 lakh crore the FM announced in his Budget. People were frightened by the amount and particularly because they feared this would kick up interest rates and squeeze the private sector. What happens 24 hours later? The Finance Secretary announces that the government will ask RBI to undertake open market operations, buy up bonds worth 50 per cent of the government’s requirement, thus infusing liquidity into the system and easing the pressure on interest rates and the private sector. What if that message had been given 24 hours earlier?
I am one of the people in the Planning Commission who have been arguing that we need that extra stimulus, because the global economic situation is very difficult. I am not sure if the view is that it would have been better not to have this stimulus.
No, the view is that you have to make clear how you are going to get your borrowing without affe-cting the private sector. The Finance Secretary had the answer but the FM hid it.
Quite frankly, whatever they are going to do, it is going to be a certain drawing of resources and a basic logic of 6.8 per cent is that the private sector in this year is not going to be doing that much, otherwise there is no case for it.
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When I interviewed you on June 7, we spoke about the need to use the moment to deregulate oil prices. You said, ‘there is no question that price reform is important. It’s a significant part of the agenda’. And then you added, ‘Anything else is not economically sustainable. This could be a good time to bring about that rationalisation’. But what did the FM do? He appointed yet another committee - the fourth one overall and the third one in a year. When you set up committees in India, that’s an excuse for not doing anything.
That depends on how long the committee takes. I would hope that we can take action on this, I hope this committee gets appointed very quickly and acts accordingly.
Did you read the headlines in the international papers a day after the Budget was presented? ‘A Budget for a second-tier developing nation’, ‘Indian Budget disappoints investors’. And, closer home they were, ‘Common Minimum Pranab’ and even ‘Pranab sells a sob story’. Is that the message the government wanted to send out?
You should look at the government’s total message and the Budget’s total message. The FM has said at different times that the Economic Survey is, after all, approved by him. The Survey indicates a broad direction and a broad range of reforms which will get done in due course of time. That’s the key thing.