Thursday, March 4, 2010

How this budget perpetuates feudalism and celebrates me diocrity

How is it that we almost always lose sight of the big picture? How is it that we use the word ‘vision’ as oft en as a bully uses threats and then singularly fail to walk the talk? How is it that we get away year after year by hoodwinking people? I don’t think the ruling class in India indulges in such philosophical concerns and doubts. No wonder, the Union Budget for 2010-11 is at best an exercise at maintaining mediocrity in vision and the big picture. At work, it tries very hard to perpetuate the feudal system of the country where those residing in ‘India’ are subjected to momentary bouts of titillation while those residing in ‘Bharat’ are condemned to an eternity of dependence and doles. If Pranabda were a bestselling author, the Budget can actually be seen as a set of two books. The first would be titled ‘How to Say No Even if You Can Say Yes’ and the other book (meant for poor Indians) would be titled ‘The Art of Living on Doles’

I am quite astonished at how so many pundits seem to be in a state of self inflicted denial when it comes to talking straight on the Budget and the repercussions it will have. So many of them seem unhappy and yet say in the same breath that the Finance Minister has done a great job of a difficult balancing act. Of course, the fearless and peerless captains of India Inc. as usual bow, scrape and crawl when they don’t even need to bend when it comes to evaluating the Budget proposals. Worse, the media seems full of accolades, once again confirming a known fact that the Indian media cares primarily for middle class, upper middle class and rich Indians while it cares two hoots for the 700 odd million citizens who dance on the peripheries of poverty. Just ask yourself this question: how would have TV channels, newspapers and magazines reacted if the Finance Minister announced that no Indian living in a ‘pucca’ house will get an LPG cylinder at Rs 300 and instead pay the actual cost which is in excess of Rs 450? And imagine how all hell would have broken loose if income tax exemption limits were not raised? Do remember, just about 2% to 3% of Indians pay income tax.

I won’t bore you with the nitty gritty and the gory details of this number crunching exercise. Let’s just look at the vision the Finance Minister unfolded and the set of 3 challenges he identified for the medium term. The first was to restore GDP growth rate to 9% a year and take it up to double digits. The second was to ensure that this double digit growth is more ‘inclusive’. And the third was to eliminate bottlenecks (leakages, corruption, loot – call it whatever you like) in delivery of goods and services by improving the quality of governance.

For almost a week, I have scratched my head to find out a single substantive measure or policy initiative in the Budget that could actually help India confront and surmount even one of the three challenges listed by the Finance Minister. I have failed.

Let’s look at double digit growth rates of GDP. In the first place, virtually every economist who is honest to her profession and answerable to her conscience knows that the 9% plus rates of GDP growth rates achieved during 2005-08 were not because of wonderful policies launched by the government, but despite India being one of the most difficult places in the world to start and run a business. Part of the amazing growth story was the amazing ability of Indian entrepreneurs – both big and small – to seek opportunities and exploit them ruthlessly; part of it was the simple fact that the pace of technological change simply outpaced the ability of Indian bureaucracy to throttle opportunities (IT, ITES and telecom are the best examples of this); and part of this amazing growth story was a spillover effect of the bubble that was rampaging across the global economy till 2008. Do remember this when you talk the next time about India being insulated from the global economy – the annual GDP growth rate dropped a massive 3% in the immediate aftermath of the meltdown and is still 2% below the peak rate of 9.3% despite the ‘recovery’. Worse, the track record of the government in building physical infrastructure – so critical to reach the double digit growth rate in GDP – has been simply abysmal in the last 5 years or so. The worst performance is in the power sector, ports highway construction and mining. How many mega power projects have started supplying electricity to the national grid? Why are Indian steel companies being forced to import more than 40 million tons of coal when India is supposed to be sitting on the second or third largest reserves of coal in the world? Why are pundits not asking these uncomfortable questions?

The yawning gap between intention and deed is even starker when it comes to the second challenge – ensuring that the high GDP growth rates are more inclusive. Has the government done anything to ensure that the poor acquire the ‘skills’ and ‘capability’ to earn a livelihood and that their children are not denied the opportunities that children of shining ‘India’ so blithely take for granted? Go back to this Budget speech and try to recall anything on that front. Of course, the Finance Minister has generously increased allocations for social welfare programmes like NREGS and Sarva Shiksha Abhiyaan. But even the most generous description of NREGS would admit that it is actually a dole. Since when have doles replaced genuine investments in social infrastructure the long term weapons to fight poverty?

A complete failure to even honestly face the third challenge – tackling corruption and unaccountability in the government – is the most disgraceful of all. In 2004, Prime Minister Manmohan Singh had identified reforms in bureaucracy as one of the most important priorities of his government. You won’t find him talking much about that. What has he done instead? Both quite a few honest and hardworking – and many, many more venal, corrupt and inefficient government ‘servants’ – have been rewarded with a 50% pay hike through the Sixth Pay Commission and this Budget has doubly rewarded them generous income tax relief.

So please spare me the rubbish about this Budget being a ‘good’, ‘positive’ or ‘pragmatic’ one. It is no break from the past. In fact, it perpetuates the past by rewarding mediocrity and venality and it is steeped in double standards and cynicism. But of course, the Indian economy will grow at high rates despite all this!



  1. great write up wish more youth read it

  2. you are absolutely right. india is most difficult place to start and grow business. and only IT ITes businesses flourished in india. india is still far behind in manufacturing, infrastructure , chemicals. because these sectors need govt support. so the success story of brand india is not at all belong to govt but indian businessmans