A K Bhattacharya: A full-fledged budget now

RAISINA HILL

With elections expected, finance ministry officials were preparing for an interim budget, with not much thought being paid to new initiatives. All this will change now.

The mood in the key central economic ministries has already begun to change. Till even last week, a general election in early 2008 appeared to be on the cards. But today senior bureaucrats are more or less convinced that, with the Indo-US civilian nuclear deal in the cold storage, the United Progressive Alliance (UPA) government has got a fresh lease of life. Understandably, this has made a difference to the kind of work that they had planned to undertake in the coming months.

In North Block, the exercise to prepare the Budget for 2008-09 began a few weeks ago. But several bureaucrats were reasonably certain that a full-fledged budget in the last week of February 2008 was unlikely. So, while work on preparing the revised estimates of expenditure and receipts was under way, not enough attention was being paid to planning for new initiatives.

An interim budget (for that is what was to have been presented if a general election was to be held in February or April) does not offer much scope for listing new fiscal initiatives or expenditure programmes. Remember Jaswant Singh's interim budget presented in March 2004? All that Jaswant Singh could do was to talk in general about what his government's plans were for the coming year. There was no specific mention of any programme that would have required precise allocation of funds. But now in all probability, a full budget will be prepared and should be presented to the Lok Sabha on the last day of February 2008.

With that has resurfaced one of the big worries for the finance minister on the revenue front. A 12 per cent appreciation in the value of the rupee against the dollar in the last one year has choked growth in customs revenue. With excise revenue also not doing too well, the big worry for the finance ministry bureaucrats is how to make good the shortfall in excise and customs duty collections through better mobilisation of revenue from the service tax and direct taxes.

Similarly, Rail Bhavan mandarins will get down to putting together a full-fledged railway budget. Just before the crisis got defused, several Left members were of the view that if they did not immediately withdraw support to the government, making it constitutionally incapable of taking any policy decisions, Railways Minister Lalu Prasad would use the railway budget exercise to announce populist schemes to gain political mileage for himself and his political party. But now these Left members can hardly complain since Lalu Prasad will have an opportunity to make all kinds of promises through the railway budget that he is expected to present in the last week of February 2008.

Petroleum and Natural Gas Minister Murli Deora will face a difficult problem. With elections round the corner, Deora had taken a decision to postpone a review of petrol and diesel prices till at least the completion of the elections. The Cabinet has already taken the decision to issue bonds to the oil companies so that the adverse impact of rising international crude oil prices on them could be reduced. Now that mid-term elections have been ruled out, pressures on Deora to reconsider the proposal to hike prices of petrol, diesel and liquefied petroleum gas will increase.

Several bureaucrats, however, feel that even though the UPA government may have got a fresh lease of life, the Left parties will keep interfering in the functioning of the key economic ministries. Thus, the UPA ministers cannot entertain any notions of bringing about key policy changes in the months to come, unless the Left leaders agree to them. The Left's pressures on the government will only increase when the general and the railway budgets are prepared.

Most governments in India face a major crisis after completing three years in office. And only a few of them survive to function effectively after recovering from that crisis. The Vajpayee government was an exception. The Manmohan Singh government too faced a crisis soon after it completed three years in office and almost fell. There is now an illusion that the government has got a fresh lease of life. It is true that the government has been saved. But it is equally true that the government's ability to govern independently has been permanently jeopardised.