'Show me the money'

The Common Minimum Programme as it has finally emerged is less appealing than the optimists might have hoped. The negatives clearly outweigh the positives and reflect the government's dependence on Left support.

Whether it is the electricity law, labour policy, disinvestment/privatisation, subsidies and user charges, there is little to get enthused about. This may have been predictable, but it is disappointing nevertheless.

The document welcomes foreign investment, but such investment will not come into an economic environment riddled with contradictions and inefficiencies. So it is no surprise that Dr Manmohan Singh sounded diffident and even uncertain when answering questions on television.

Looking for the positives, there are stated intentions of huge increases in public expenditure commitments without any credible signs of how those commitments are going to be financed.

The government has accepted the fiscal discipline inherent in the Fiscal Responsibility and Budget Management Act legislated last year by committing to eliminate the revenue deficit in five years. It has intentions of imposing a cess of unknown magnitude on central taxes to fund education, and it expects to raise expenditure on education to 6 per cent of GDP from the current level of about 3 per cent.

Central tax revenues (net of transfers to states) are around 11 per cent of GDP. Any reasonable cess, even if it is fully complied with, cannot hope to plug even a small proportion of the desired jump in spending on education. The programme is silent on where the rest of the money is going to come from.

The disconnect between objectives and resources is made even more stark by the rigidity of the stand on disinvestment. Last year, the government raised over Rs 13,000 crore by simply diluting equity, with no loss of control over any of the enterprises.

Does the fatwa against selling off profit-making public enterprises issued by the programme foreclose on this option as well? Even if it doesn't, the attractiveness of public enterprise stocks to investors was influenced by expectations of eventual ceding of control.

That hope is now stifled, and for those who own these stocks, there is always the risk of profits being whittled away by some form of covert subsidy. There is some comfort to be gained from the announcement that subsidies will only be financed through the budget, but experience suggests that the temptation to skim the cream from public sector profits is very high.

How, then is all the public investment promised to the rural areas going to be financed? Not to mention the 100 days of guaranteed employment, which the programme promises to enact into law?

If all the constraints on revenue-raising are taken into account and the expenditure commitments are central to political survival, not to mention stability, there is a dire need for innovative methods of both raising resources and delivering services.

Unfortunately, not one finds mention in the document. As reassurance of the financial feasibility of the government's strategies to meet its objectives, this is not very convincing. As the football player in the film Jerry Maguire kept telling his manager: "Show me the money".