UNION Finance Minister Yashwant Sinha's 1998-99 Budget speech was certainly long on hype, starting with the dramatic claim of his presentation of the first Budget of the Vajpayee Government as "a defining moment in history"! Worse followed, with the declaration that "May 11 was surely the first step..." in the process whereby, we were told, "...a new India is rising."
Leaving aside the hype, how does one judge Yashwant Sinha's Budget? It is important to recognise that the annual Budget of the Union Government has a rather more modest role to play in shaping the economy in the months to come than is usually thought. The process of Budget-making occurs within a larger economic structure and an overall policy framework. One would thus not expect any Budget to make a dramatic impact, unless the basic parameters of the policy framework are themselves radically changed, as part of a process of changing the underlying economic structure. Sinha's Budget does not reflect any break with the existing economic policy regime characterised by a basic commitment to liberalisation along lines approved by the World Bank and the International Monetary Fund. The Bank and the Fund, and their G-7 patrons can now rest assured that they have nothing to fear from the BJP's version of `swadeshi'. The Union Budget for 1998-99 has stayed squarely within the framework of the post-1991 economic reform process and its tenets of privatisation, liberalisation and a significantly reduced economic role for the state.
THE key features of the 1998-99 Union Budget include the following: a massive rise in indirect taxation, no attempt to mobilise additional resources through direct taxes, a big push to privatisation, and the articulation, albeit implicit, of an extended notion of `swadeshi', to include the diaspora, Sinha estimates that in a full year his proposals on customs duties will garner additional revenue to the tune of Rs. 3,304 crores. The gain from excise duties will be Rs. 5,009 crores. If one adds to these the imposts of Rs. 450 crores from the Railway Budget and Rs. 270 crores from postal rate hikes, the additional burden on the people amounts to more than Rs. 9,000 crores. Despite paying lip service to the concept of widening the tax net, Sinha does not expect to bring in any additional revenue through direct taxes. He has made no attempt to reverse the enormous tax give-aways to the well-to-do that characterised P. Chidambaram's Budget of 1997-98. He has in fact given away direct tax revenue to the tune of Rs. 950 crores.
Indirect taxes in India are inherently iniquitous, and are highly inflationary as well. The double blow on petrol - both the one rupee per litre additional tax on petrol and the increase of excise duty on motor spirit from 20 to 35 per cent - is bound to have a cascading effect on prices of essentials, and will hit the poor hard.
The refusal to tax the well-to-do - and it is worth recalling here that agricultural income in India is practically outside the tax net - even while administering a stiff dose of indirect taxation makes a mockery of the Finance Minister's claim in his Budget speech that he had recalled to himself the face of the poorest and weakest man, and "... made sure that this budget is of use to him."
Sinha has not only continued the process of privatisation - having taken credit in the Budget for Rs. 5,000 crores from public sector disinvestment as against a mere Rs. 906 crores realised last year - but has in fact accelerated it. He has announced that the Government has decided to bring down its share-holding in public sector enterprises to 26 per cent "...in the generality of cases." The push towards rapid privatisation is also evident in the decisions to open up the insurance sector to private domestic players and to close down many PSUs, offering workers a more attractive compensation package than is currently available.
A special additional customs duty of 8 per cent across the board and the initiative on the insurance sector may possibly be read as evidence of a `swadeshi' thrust. The concessions announced to NRIs may be seen as an attempt to extend the swadeshi concept to the broader Indian diaspora, as is the symbolic proposal of issuing a 'Person of Indian Origin' (PIO) card. But Sinha has also stated categorically that his objective is "...to create conditions in which foreign investors will find India an attractive investment destination" and that he hopes to "double the inflow of foreign direct investment within two years." He has matched his words with a concrete decision to expedite processing of FDI proposals.
Are Sinha's expenditure proposals radically different from those of his predecessors? His comparisons of budget estimates (BE) for 1998-99 with revised estimates (RE) for 1997-98 to show dramatic increases in allocations to agriculture, health, education and infrastructure are rather misleading since the revised estimates for 1997-98 in many of these sectors were significantly less than the budget estimates for that year. The projected increases as per 1998-99 BE look rather more modest when comparisons are made with 1997-98 BE rather than 1997-98 RE. While the Budget provides for a significant increase in the allocation to education over the 1997-98 RE, the reference to a scheme for creation of a 'National Reconstruction Corps', which invited the loud comment in Parliament that the RSS was being nationalised, is rather disturbing.
Of far graver concern than the purely economic aspect is the mindset behind the Budget. The very tone and tenor of the budget speech, beginning with the euphoric and laudatory reference to the Pokhran nuclear explosions of May 11, 1998, are of a piece with Prime Minister Vajpayee's words of May 27, 1998 to the effect that India's self proclaimed nuclear weapon state status "...is India's due - the right of one-sixth of humankind."
Marie Antoinette may well turn in her grave if one were to paraphrase the Prime Minister and the Finance Minister as saying "Let them eat (the) bomb."