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