Budget 2012: A survivor’s budget, at best

As he rose to present his seventh full length budget, Pranab Mukherjee began on an unusually frank note admitting vocally to the credibility gap the UPA government faces today. “I know words are not enough. What is needed is a definite roadmap,” said Mukherjee, setting the tone for this year’s budget to walk the talk.

But did the budget draw the definite road map or else it just achieved what a politician chained by coalition strings ought to best achieve in the given circumstances?  

As the FM read out paragraph after paragraph carrying truck loads of data, the politician in him was right up front. Yes, he did in between make the right noises to strike a balance: need to reduce subsidies, build consensus on FDI reforms, improve supply side management, and initiate social sector spending reforms.

Let us begin with what he said on subsidy this budget. “The government will endeavour to restrict the expenditure on central subsidies under two per cent of GDP in 2012-13 and over the next three years it would be further brought down to 1.75 per cent of GDP.”

Is there a roadmap for achieving this considering the revised estimates for our subsidy bill for this fiscal are said to have already overshot the initial layout? Not even a word about petrol price hike in view of runaway global crude prices, diesel deregulation, not to mention bringing urea too under the revamped subsidy regime, a promise made by the UPA government couple of years ago. Yet, the FM wants the country to believe that he would cut the subsidy budget.   

As a consolation Prime Minister Dr Manmohan Singh did say on Doordarshan that, “We have to bite the bullet on subsidies”. By now even a diehard fan of Singh would need a lot of conviction to believe him on his ability to do anything dramatic leave alone go back to his 1991 avatar and actually bite the bullet.     

The Economic Survey presented a day earlier wants the government to undertake some big ticket reforms. Did the budget provide a roadmap there? Not really!  For instance the FDI reforms (multi-brand retail, aviation and insurance), agriculture reforms, reducing specific timelines on Goods & Service Tax (GST), Direct Tax Code (DTC), and reducing overall government expenditure, did not find any road map this budget.

On FDI reforms in the multi-brand retail, the FM did pay a lip service when he said consensus was a priority (read the politician in him taking a toll of the reformist). Further, you may recall, he said right at the start of his speech that the objective of 2012-13 budget was to address supply bottlenecks; but not a word beyond that in the about two hour budget speech. This is something that might have well been addressed without worrying about the coalition politics strains. That ultimately leaves agriculture haplessly dependant on a few marginal escalation in outlays.

Reforms would not make you popular with your allies. But what about tackling hardcore pressing issues of inflation, fiscal deficit and corruption? As it is the entire effort to tame inflation so far has been skewed in favour of monetary policy and not fiscal correction and a correction was due this budget. But it did not come at all. The projection of a 5.1 fiscal deficit pegged to a 7 per cent plus growth rate is maths perhaps not based on facts as they obtain today. On corruption, the ‘out of box’ thinking came through the promise of a white paper on black money.  

Does not this all point to the budget document being quite high on promise? But if past delivery is any indication this might yet be a case of another story of just words without any roadmap. Consider three key pronouncements this budget: a) setting a disinvestment target of Rs 30,000 crore for the next fiscal knowing well the extremely poor track record of UPA on the subject (as against a disinvestment target of 40,000 crore it just achieved about 3 per cent at Rs 1,144 crore this fiscal, actually UPA never actually met its disinvestment target); b) as part of his ‘big-ticket’ infrastructure push FM this budget announced a target of 8,800 km of national highway to be build in FY 2012-13 (as against a target of 7,300 km for the current fiscal, National Highway Development Project (NHDP) just completed about 4,374.9 km). Gap between promise and delivery, indeed!   

The finance minister sought to show a dream to the working class this budget, as he talked about bringing about a scheme to make it attractive for them to invest in the stock market: A risky proposition indeed given the vulnerability of exposing the uneducated to the stock market with their hard earned savings. Yes, ‘Dada’ got an opportunity thus to remember the first family naming the new tax incentive scheme for equities as Rajiv Gandhi Equity Savings Scheme (forcing the world of twitter to hire a statistician for counting schemes named after the Nehru-Gandhi family). Worse, for Mukherjee, stock markets did not quite find it loyal.  

Mukerjee’s sense of inclusive growth did not stop there: he now wants tier 2 and 3 towns to invest in the Initial Public Offer (IPO) market bringing a new set of guidelines. Noble thought indeed but for the fact that the recent past has witnessed a blood bath at the IPO market: Another promise in search of that headline? The FM would know it well that actually just about Rs 5,000 crore plus were raised the whole of 2011 at the IPO market. When the big guys have deserted the ship, how do you expect the small guys to come running to invest?

Budget fans would indeed argue that the move to empower ‘Aadhar’ in a big way as a panacea to all ills facing the government money distribution has been the biggest of them all bold reforms initiated by Mukherjee this budget. But is not ‘Aadhar’ itself at the centre of a huge controversy? PM Singh did admit to the controversy part in his customary post budget interview though arguing weakly that controversies are central to technology induction all over the world.

Yes, FM might go back home a happy man thinking he has fulfilled his political agenda of serving the common man. Is that quite correct?  With service tax and excise duties back at pre stimulus levels, people like you and me, would indeed have to keep a tighter watch on the wallet. The dole in the income tax relief can at best be described as modest. LCD getting cheaper is not what majority of India would buy as a great ‘aam admi’ incentive.                                      

Indeed, as N K Singh (back end boy of many budgets) pointed out in one of the television debates, that the budget expectations have to be measured in context of political reality. Survival, of course, is paramount, he asserted from his personal knowledge of Prime Minister having worked with him very closely. 

As for Mukherjee he can indeed accuse his critics of being cruel but did not he offer the permit in his budget when he said, “You have to be cruel to those who are kind to you.” Has he been kind to himself? Will he ever get the shot at the job again?       

The author is Editor-Zee Research Group (ZRG)