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G. Srinivasan

THE 2003-04 Budget boasts of "a lot of token measures to create feel-good factors but does nothing to deal with the basic structural problems of slow economic growth, sustaining investment momentum and taking effective steps to reduce the incidence of poverty and bringing about investment in social sectors," according to the former Finance Minister, Dr Manmohan Singh.

In an interview to Business Line, the Congress leader deplored the distinct slowdown of the economy during the last five years of the BJP rule with the average annual growth rate in the last three years at less than 5 per cent per annum.

"The current year happens to be the first year of the Tenth Plan which has an ambitious 8 per cent growth target per annum when the estimate is around 4.4 per cent. This growth rate does not figure in the budget speech."

Pointing out that in the last six years in a row, savings and investment rate had declined and the primary deficit (less interest payments) deteriorated, Dr Manmohan Singh felt that "if the combined deficit of the Centre and States exceeding 10 per cent of GDP this year as stated in the Survey is kept in view, the harmful consequences of these deficits by way of inflation and by way of balance of payments need to be reckoned."

Taking into account the continuously high revenue deficit of 4 per cent of GDP, he said: "What sort of fiscal consolidation the Budget is talking about?''

Dr Manmohan Singh said that this Budget "does not tackle the problem of reviving the growth momentum including the investment trend in the economy that we need to achieve the 8 per cent growth and other social policies which need to be pursued." He said that "if you look at the investment side of the Budget, the Central Plan of the next year is higher by only 5-6 per cent and the Central Plan allocations for transport and communications are no higher than the figures in the current year's budgeted." In this regard, Dr Manmohan Singh wondered "where from the Rs 60,000 crore infrastructure investment the Finance Minister is talking about will materialise? The leverage of public money through private sector partnership is in many ways deceptive. So long as India's financial institutions remain in the public sector, I think that the bulk of resources flow will come from the public sector — they will come from public financial institutions (FIs). To assume that large flow of private resources would be available is, I think, wishful thinking." There is also the danger that the non-performing assets (NPAs) of the FIs and banks who will lend money to this programme will also move in the "wrong direction," he warned.

Underscoring the need to strengthen the prudential norms in the banking system, Dr Manmohan Singh said that "the important thing is that the government is owner of public sector banks. There should be a clear arm's length relation established that the government is not managing the banking system. In the absence of such an arm's length relationship between the government and the financial system, there would be lack of accountability and transparency in the functioning of these institutions which would only worsen the NPA of the system."

Dr Manmohan Singh said that when the Congress was in power, in the early 1990s, there had been improvements year after year in the terms of trade for agriculture.

"But in the last three years, it is in the reverse direction. What is more important is that per capita agricultural productivity has decreased in the BJP rule in absolute terms. This is also a year in which we have an unprecedented drought. So what sort of message we want to send to our farmers. There are suicide deaths with farmers in great distress. Superimposing upon them, there is a rise in fertiliser prices announced in the Budget, when you are reducing the prices of motor cars, refrigerators. You are giving bonanza to rich people by way of tax exemption from capital gains. This is an anti-farmer attitude of the BJP which essentially is representative of the trading class."

On the reliefs on the indirect tax front for industry, Dr Manmohan Singh said that "whether these tax sops would really help to revive industrial production is doubtful. We need to achieve 8 per cent growth rate and I don't think Mr Jaswant Singh or the Government as a whole has outlined policies which would move us in the direction. I think BJP policies can at best stabilise growth at no more than 5-5.5 per cent — eight per cent (growth) is all tall talk."

On the issue of services tax, Dr Manmohan Singh said that Mr jaswant Singh has promised Constitutional amendment since services are under `Residual' List, and it is not clear as to who has the responsibility for taxing services and we need a holistic vision to bring services into tax net." He said that on the question of compensation for States for giving up sales tax and going in for value-added tax, how the losses could be calculated and this problem of uncertainty and how to bring traders have all not been resolved."

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