Budget 2001: Full Coverage

For one, it's perhaps the first time in recent history, finance ministerYashwant Sinha has managed to not just meet his fiscal deficit target (asper cent of GDP), expenditure for the year is actually below the budgetestimate by around Rs 3,000 crore. Now that's clearly a first, given thatexpenditure, like on food subsidies overshot the target by a whopping 50 percent. And the expected shortfall in indirect taxes (thanks to the economyslowing down) was more than made up by a huge exercise in increasing incometaxes through the 1-by-6 kind of schemes.

The arithmetic, impressive as it is, however, is just one part of the budgetexercise. The thrust of the budget really lies in the promises it holds interms of a fresh burst of reforms-it is perhaps fitting that exactly 10years after Manmohan Singh first fired our expectations, Sinha's close tomatched that mood.

And he's done so without attracting too much attention. For long we'vebelieved the role of the Food Corporation of India (FCI) needed to bedramatically slashed as, after the state electricity boards, it is thesingle-largest source of corruption and waste-can you honestly believe thata fifth of the grain gets eaten by rats, as FCI claims? Well, what Sinha'sproposed is that FCI do procurement only for the buffer stockoperations-buying and distribution for the rest will be largely handed overto the states, who will find more efficient alternatives or can ask FCI tocontinue for a while.

What's equally interesting, and what will spur reforms, is the effort spenton ensuring that state governments reform-after all, it is in the statesthat India not only lives in, but also invests in. In keeping with therecommendations of the Eleventh Finance Commission, Sinha's provided for anIncentive Fund to encourage states to reform themselves-this budgetallocates Rs 4,243 crore for this head. To make it absolutely clear, theIncentive Fund is a bit like the IMF-World Bank kind of loans that force youto reform along pre-ordained lines. Apart from the Incentive Fund for fiscalreforms, a similar package (of Rs 1,500 crore) has been designed for powersector reforms in states-they have also been promised more electricity fromcentral utilities, such as NTPC, if they reform faster, as well as moreinvestment by these PSUs.

And, after having opprobrium for giving in to babus all the time, Sinha'sfinally taken some kind of plunge, promising to cut their strength by around2 per cent annually. It's certainly a beginning, but it must be pointed outthat Sinha's efforts here just skim the surface-instead of downsizing, he'sstill allowing for a 1 per cent hike each year, and gets a reduction onlydue to the fact that 3 per cent of babus retire each year.

Given the enthusiastic response to the handsome voluntary separationpackages by banks in the recent past, it's obvious that theprotect-labour-at-any-cost lobby's suffered a huge setback. Sinha's takenadvantage of just this, to try and ram through some policy moves which couldbe the thin end of the wedge as far as this section's concerned. Industry isto be given greater freedom to retrench staff (though it's become a lotcostlier), and closing down units we're promised, is to be simplified inforthcoming legislation.

This, of course, is the strength as well as the weakness of Sinha's budget-alot of the hope, the second-generation reforms, are critically dependent onsupport legislation, and given Parliament's record, there's just no sayingwhen it will actually (if ever) pass such bills.

Given Sinha's efforts, of course, it would be churlish to carp on theyes-but-will-it-happen. That applies to all budgets, including Manmohan'sSingh's historic 1991 one-he promised massive slashing of red-tape, but asany corporate captain will tell you, very little of this really happened.Great going, Mr Sinha.