There is an old Tamil song describing the plight of a woman suffering the pangs of separation from her lover. The intense longing that she experiences often makes her delusional. One moment she feels that her loved one is standing by her side, only to realise soon thereafter that it is an illusion born out of her fevered imagination. But at all other times, her fate of not being able to join him is the harsh reality. She plaintively asks her best friend why is it that in her state of intense yearning, the moments of joy are ever so fleeting and pain so unending. If that were not bad enough, the joys, such as they are, are to be experienced only in her dreams, but the pain of separation is here and now.

And so must Mr Pranab Mukherjee, the country's Finance Minister be feeling in his courtship of economic reforms. The liberal instinct in him may want him to embrace reforms in one passionate sweep, but his circumstances are such that they would forever keep him from savouring the joys of such a union.

OVERLY CAUTIOUS FM

Take his Budget speech, for instance. He says that he wants fiscal consolidation. The situation calls for, according to him, ‘efforts both to raise the tax-GDP ratio and to lower the expenditure'. He then goes on to draw a pointed reference to the need to take a close look at subsidies. He sets for himself the goal of ‘endeavouring' to keep it at 2 per cent of GDP in the coming fiscal and hopes to reduce it to under 1.75 per cent over the next three years.

He needn't have been that cautious. He just needs things to keep going the way it has been, and he would get there in the coming fiscal instead of waiting for three more years. Sounds incredible? Not really, for mathematics would be at hand for his rescue. But first, we must assume that Mr Mukherjee is not thinking of increasing the subsidy from the current year's levels. That means in nominal terms subsidies are already at around 2 per cent of GDP in 2011-12. Now, let's see what happens if the economy performs at the same level in 2012-13 as it did in 2011-12.

The GDP is estimated to grow at 6.9 per cent in real terms in the current fiscal. Inflation had ruled close to 9 per cent for the better part of this year.

In nominal terms, the GDP has grown at 16 per cent in 2011-12. Even if inflation stays marginally lower at, say, 7 per cent in 2012-13, the nominal value of GDP would have grown by 15 per cent, assuming that the real GDP grows at the same rate (6.9 per cent) as in the current year. In other words, the two rupees of subsidy on Rs 100 of nominal GDP in 2011-12 would now apply on a larger base of Rs 115 in 2012-13 to give an effective subsidy rate of 1.75 per cent.

But so cautious is the Finance Minister that he wants to give himself three years for what is his for the taking!

No great risk-taking instincts are at work with regard to the UPA Government's much talked about Food Security law. He says that his Government has decided that expenditure relating to it will be fully provided for. Considering that the Bill in this regard is yet to be passed, the Government is a long way from spending top dollars on a comprehensive food security plan for the India's poor.

A similar note of caution is evident in his approach to tackling the fertiliser subsidy. The Finance Minister is promising nothing more than mobile-based Fertiliser Management System (MFMS), as he puts it, ‘to provide end-to-end information on the movement of fertilisers and subsidies'.

Again, considering that subsidies are paid to manufacturers who are a mere handful, one doesn't really know why anyone would need a mobile-based system at all in the first place. A direct transfer of subsidy to the retailer and eventually to the farmer, which is really what the fertiliser subsidy reform is really about, will be implemented in subsequent phases — whenever that is.

POLICY STATIS

The Minister is also candid enough to admit that the decision in respect of allowing FDI in multi-brand retail trade up to 51 per cent has been held in abeyance. Efforts are on, he says, to arrive at a broad-based consensus in consultation with the State Governments. Well, good luck, FM.

Mr Mukherjee would need similar good fortune with regard to the legislative agenda he has set for himself.

He wants to pass no less than eight Bills in the current Budget session, when past record would clearly show this to be nothing short of the ambitious.

Even the relatively modest measure of policy reform — that of permitting foreign airlines to participate up to 49 per cent in the equity of a domestic airline — is only under the active consideration of the Government, he informs the public. Being so is a lot different from actually allowing it.

No wonder Mr Vijay Mallya is saying that the FDI rules stymie foreign investment in the aviation sector.

The ultra conservatism and caution that the Finance Minister has displayed in the Budget, despite his vast political experience, is in sharp contrast to the performance of his junior Cabinet colleague, Mr Dinesh Trivedi, in presenting the Railway Budget.

Here was a Minister who knew that in hiking passenger fares across the board, he was picking up a political hot potato for a cause.

Yet Mr Trivedi chose to pay the ultimate political price, because he believed that Railways badly needed tariff reform to shore up its finances, dented by years of pandering to narrow political considerations by his predecessors.

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