Chidambaram’s Interim Budget an exercise in self congratulation

P Chidambaram did whatever he could to pat himself and his government in his interim budget. While the vote is yet not out on whether he exceeded his brief by hiking budgets of several schemes as also going for excise cuts to appease Aam Aadmi, he did not deem it fit to utter a word to explain the reason for the growth rate fall under UPA charge to alarming levels. This is where he squandered a great opportunity to come clean as a politician who knows best to separate wheat from the chaff.

UPA leadership is already in a self congratulatory mode saying Chidambaram pointed out that the economy was improving during the last two years and that India was doing quite well within the emerging economy pack.

The truth is that while both the savings and investment rate have by and large sustained, how is it that the growth rate has faltered? As regards the comparison, he conveniently forgot to mention the growth achieved in China. He also conveniently forgot to say that for first time in post-1991 history, we have had two years of below 5 percent GDP growth.

Chidambaram ironically presented a 10-point growth agenda charter for the next government without specifying what prevented him and his government from implementing it during the last five years to revive the growth story. This falsehood explains lack of confidence in India story globally.

Indian economy`s growth is expected to be "below trend" even as neighboring China and most developed nations are expected to see better prospects, according to Paris-based think tank OECD. "In the emerging economies, the Composite Leading Indicators (CLIs) point to growth around trend in China, Brazil and Russia, and to growth below trend in India," OECD said earlier this month. India`s CLI slipped to 97 in December last year from 97.2 registered in November. The country`s CLI has been falling since August 2013 when it stood at 97.7. It dropped to 97.5 in September and then to 97.4 in October.

The Finance Minister went out of way to rubbish the charge that the UPA government suffered from policy paralysis. It does not need rocket science to see the way economy has been debilitated because of almost no decision making. He said 296 projects worth Rs.6.6 lakh crore have been cleared, but did not say why corporate confidence and investment was so low? A look at the order book of the capital goods industry would highlight the truth.

The political management of the economy has been dismal. Yet he used the interim budget to praise the government. Look at Aadhar for which the Bill is yet to be cleared by Parliament. It takes a budget speech for him to make a commitment to UIADI but he did not explain his earlier objection to the idea critical to making direct cash transfer a reality.

He used the budget to launch a blistering attack on opposition accusing it of blocking improved taxation laws, especially the goods and services tax. Implicit in the charge is its own failure to achieve consensus and assuage states of protecting their due revenue interests. Ironically, his future roadmap wants states to bear a responsible proportion of the financial costs of implementing flagship social schemes.

The FM wanted us to believe that “we will not do anything to damage the economy”. Key numbers show fiscal deficit at 4.6 percent for 2013-14, with target of 4.1 percent next year. But revenue deficit is the same as in budget at 3.3 percent. Therefore, no real correction has come about on fiscal profligacy. There, however, have been cuts in plan expenditure.

In making UPA look handsome, Chidambaram did what he should not have done. He conveniently passed on a huge burden to the next government. Total subsidy bill for next year - on food, fuel and fertilizer will move up marginally to Rs 2,46,397 crore from Rs 2,45,452 crore previous year. The fuel subsidy bill provision is being questioned since the figure is linked to petroleum prices globally being pretty soft.

Presenting his full budget last year, Chidambaram said that you cannot buy an election through populist giveaways. Yet he spent considerable time focusing on schemes which have either no or poor accountability. Additional outlays for minority schemes, SC/ST targeted (Rs 200 crore) schemes, additional allocation for Nirbhaya Fund. One Rank One Pension for defence forces is a politically welcome decision but would put fiscal burden on the government. Thank Rahul Gandh for then nudge.

The effort to wrest the initiative on Aam Aadmi was evident in excise sops for cars-small and big (surprising the SUVs patronized by the rich too form a part of the cuts). The moratorium on student loans billed to benefit several lakh students’ shows scant respect this government has for fiscal discipline. Like the farm waiver loan scheme Chidambaram brought in 2008, there is penalty here for those who pay their installments in time.

Must grant it to the finance minister that he really worked hard to conceal more than reveal this time presenting his first interim budget post his eight full length budgets. Of course, he was kind enough to let history judge him and his government!