As I see it, the 2011-12 Budget can
be viewed through one of two lenses. One perspective
is that it was a ploughman’s exercise — a long
speech and a document that puts forth a plethora of
numbers, touching here and there without clearly
outlining a reforms path, especially when it was
probably the UPA government’s last chance to signal
significant changes for the better. The belaboured
work of a veteran ploughman not born to imagine and
loathe to take chances.
The other perspective of the Budget is from Bertolt
Brecht’s Life of Galileo. At the very end of the
play, when Galileo and his student Andrea are at the
border of Italy, banished by the powers that be,
Andrea moans, “Unhappy is the land that breeds no
hero.” To which Galileo replies, “No, Andrea.
Unhappy is the land that needs a hero.” In other
words, India has reached a stage where we don’t need
fiscal heroes; the country is doing brilliantly; all
we need is a sensible, workman-like budget with
neither trumpets nor fanfare; leave the rest to our
entrepreneurship and our energy. We are now a happy
land. Ergo, no need for heroes. Especially on the
last working day of February.
Where do I stand between these two perspectives? As
I have argued here and elsewhere, given the
character of Finance Minister Pranab Mukherjee and
the evidence of his previous budgets, I was
expecting it to be a ploughman’s exercise. And if
truth be told, it was. Barring some laudable efforts
to attract greater private investments in
infrastructure and the promise of direct cash
transfers to families below the poverty line for
kerosene, LPG and fertilisers from March 2012, I saw
little that would have fired the imagination of
reformers.
Moreover, the numbers are bothersome. For a
hardnosed realist like Pranab-babu, it is worrying
to see the chances that he is taking. It is critical
to realise that because of the 3G auctions, the
government received way more revenue in 2010-11 than
budgeted. The 2010-11 budget estimate (BE) for
‘other non-tax revenue’ was Rs.74,571 crore. Thanks
to 3G, the government garnered Rs.147,794 crore.
This extra Rs.73,223 crore accounted for almost 74
per cent of the additional revenue receipts and
helped bring the fiscal deficit down to 5.1 per cent
of GDP, versus the BE of 5.5 per cent.
There is no such windfall in 2011-12. Yet,
Pranab-babu has budgeted the fiscal deficit to fall
further to 4.6 per cent of GDP. How? As far as
revenues go, he expects net tax revenue to grow by
17.9 per cent to Rs.664,457 crore. Given an assumed
nominal GDP growth of 14.1 per cent, this is doable.
Maybe even a tad more. However, without a 3G-type
bonanza, total revenue receipts for 2011-12 are flat
at Rs.789,892 crore. The magic wand is expenditure.
Pranab-babu wants to restrict expenditure growth in
2011-12 to a mere 3.3 per cent above the revised
estimate of 2010-11, or Rs.1,257,729 crore. Is that
credible?
I think not, for four reasons. First, it will be the
second slowest expenditure growth in budget making
over the last 45 years and, therefore, might be
doomed per se. Second, we are now getting into
election mode in various states, and I expect
demands for arbitrary increases in social sector
expenditure which would be difficult to resist,
especially if these were to come from the High
Command. Third, all we need is oil prices to rule at
around $115 per barrel for a quarter, and numbers
get unstuck. And fourth, along with crude oil, I
expect fertiliser prices to rise as well, thus
raising the subsidy bill.
In Pranab-babu’s favour is the record of unspent
heads of expenditure. There are many such. If none
of the negatives mentioned above comes to pass, and
the Expenditure Secretary instructs his colleagues
in all administrative ministries to often come to
work without ink in their pens, then cheques will be
held back. It has happened before. And given our
cash based system of accounting, the finance
minister may get his numbers. But it is a damned
hard ask. Tougher than defending 250 runs on a
placid batting track with lousy bowlers. Pranab-babu
has readily acknowledged the difficulty in his
post-Budget chats with various TV anchors.
Back to the beginning. Is the budget a ploughman’s
exercise, or a workmanlike act in a country
economically mature enough to need no heroes? Most
commentators are veering to the Brechtian
interpretation. Let me differ. It is a budget
largely devoid of imagination not because India
needs none of it; but because it just wasn’t there.
It is a ploughman’s job. And being so, it depends on
huge dollops of luck.
Published: Business World, March 2011