The consensus opinion that has developed about the 2012-13 Budget presented by Finance Minister Pranab Mukherjee on Friday is that it was unambitious, especially in terms of reworking government spending. It delivered little in terms of a vision for reform, the argument goes, constrained as it was by the spending-hungry allies in the United Progressive Alliance (UPA) and the entitlement-hooked Congress leadership. A closer, more informed reading, however, reveals that this view is mistaken in important respects. Indeed, this Budget contains within it time-bound plans for a significant transformation of how the state spends and gathers its finances. It also suggests that a long-standing argument about India’s policy direction within the UPA establishment has been won by reformist, progressive elements.
Questions were sensibly asked, immediately after the Budget, as to how precisely the government intended to keep the subsidy bill within two per cent of GDP. Those have now been answered, by the finance minister, the prime minister and the deputy chairman of the Planning Commission: a hike in fuel prices, particularly diesel. But even more than that, the time frame set up for the reform of transfers is of interest. The FM pointed to three projects: one selling liquefied petroleum gas at market price, with beneficiaries being directly reimbursed, in Mysore; another transferring the kerosene subsidy directly in Rajasthan; and a third being used to support food distribution in Jharkhand — that, he said, would be replicated and expanded in 50 districts nationwide within six months. Further, the National Information Utility, linked to Aadhaar and PAN numbers, will be ready as a tax-related backbone in August, and as a support for the public distribution system in December. There should be no mistake about it: those who called for time-bound subsidy reform have been given it by this Budget.
If this has not been recognised as a display of economic reform vision, it is because doubts may still linger about the government’s ability to adhere to the schedule given in the Budget, and that the new announcements are not packaged in the obvious legislative and deregulatory form to which observers are accustomed. However, it certainly reveals a major change in the power equations within the ruling Congress party. The entitlement-heavy politics associated with the activists brought into policy making by Congress President Sonia Gandhi – especially in the National Advisory Council, or NAC – has been sidelined. Outlays for the National Rural Health Mission have not been expanded; indeed, barely enough has been added to roll out its long-promised urban component. Universal healthcare has apparently been shelved for now. The food security Bill has been partly budgeted for, but it may not be fully implemented this year. The Mahatma Gandhi National Rural Employment Guarantee Scheme has seen its funding cut for the first time since its inception. Meanwhile, transfer reform has been given a time frame. It appears that the Congress leadership has bought the argument of reformers within the government that welfarist expansion cannot work any longer without reforming its pipeline to citizens, and that fiscal consolidation is a prerequisite for healthy, inclusive growth.
