A little over two decades ago, Prof Amartya Sen caused a stir when he wrote in the New York Review of Books that an estimated 100 million women have gone missing in Asia.
He had looked at the sex ratio in the West (marginally tilted at 1.05 in favour of women for every man) and applied it on the Asian population to arrive at a normative number of women that the Asian population should have had.
He then compared it with the actual population of women to arrive at the astonishing figure of a 100-million shortfall. That he attributed it to the Asian preference for male child (and abortion of the female foetuses) and the general neglect of the girl child both in nutrition and healthcare is another story.
The Indian economy too has a similar tale to offer. The policy paralysis of the last two years has cost it several lakh crore of rupees in terms of lost output. Here is how.
Between April 2004 and March 2012, nominal output in the economy grew at a compounded rate of roughly 15 per cent. This is the potential rate, with all the warts and moles of governance that are endemic to the Indian growth story.
But the year 2012-13 is likely to see the Indian economy registering a growth of only 12 per cent, according to the advance estimates compiled by the Central Statistical Organisation.
In other words, had it succeeded in registering, in 2012-13, a growth performance that is comparable to the long term average during the UPA rule till then, the incremental output would have been another Rs 3 lakh crore than the Rs 100 odd lakh crore that it posted.
The outlook for 2013-14 does not appear any brighter, with the Budget document anticipating a modest 13 per cent growth in nominal terms. The year 2013-14 too should thus witness another Rs 2 lakh crore, making it, in all, Rs 5 lakh crore in lost output (See Table).
Blaming it on global slowdown
The Finance Minister seems to suggest in his Budget speech that it is attributable to the slowdown in the global economy as a whole. For added emphasis, he has marshalled some additional evidence to show how deeply integrated Indian economy is, in the course of that speech.
If the quality of governance had nothing to do with the lost output and the anaemic growth had to do entirely with the global slowdown, it leaves the listener with a troubling question.
What if the global economy fails to regain the lost momentum in growth?
There is enough evidence to suggest that things are not going to get better, anytime soon.
Fault lines are getting wider in Europe with the recent Italian elections throwing up an outcome that should make rulers in France, Germany and elsewhere in the European Union worried. Italy, after all, is no Greece to be shrugged away as an outlier.The outlook for the US isn’t looking any brighter, with conservatives in that country threatening every now and then to sequester ‘stimulus’ expenditure.
China too is finding that there are limits to ‘infrastructure spending’ ways to growth. Rebalancing the output between consumption (more sustainable) and investment is proving to be an intractable problem for the policy makers in that country.
Where then does it leave India, if it is so dependent on the global growth story? Indeed, his subsequent assertion, “Achieving high growth, therefore, is not a novelty or beyond our capacity. We have done it before and we can do it again.” sounds more like a person whistling in the dark for reassurance.
Problems lie within
If anything, the root cause of the problem seems to lie within. The Finance Minister says that he had to scale down the total expenditure for 2012-13 as the anticipated global and domestic economic recovery hadn’t materialised.
He needn’t have bothered. The administrative machinery (including that perhaps of the States, as well) had failed to show the energy needed to sustain an expenditure performance even that of the previous year. The year would have ended with the actual expenditure falling well short of the Budget estimates.
The statement of Union Government Accounts as of December 2012 released by the Controller General of Accounts (CGA) is revealing in this context.
In head after head, the expenditure incurred by the Government had failed to keep pace with the record of performance posted during the same period of the previous year.
Non-Plan expenditure at 71.7 per cent of the Budget was a good four percentage points lower than the record of the previous year.
On the Plan expenditure front, the performance was even worse — a good six percentage points lower. Ironically, for all the talk of a slowdown in the economy, the tax receipts have kept pace with collections at close to 63 per cent of the Budget estimates, a level almost on par with that of the previous year.
Anecdotal evidence suggests that the Council of Ministers constituting the Cabinet had failed in meeting a fundamental responsibility of governance, namely resolving conflicting claims of stakeholders in an investment project.
This newspaper carried the story of a power project wherein the Power and Coal Ministries could not agree on where a particular plant should come up for 12 long years. It needed the intervention of the Cabinet Committee on Investments to rule on the issue.
Common sense shouldn’t be as uncommon as all that. It is early days yet to pin all hopes on the administrative solution of a Cabinet Committee on Investments (a super cabinet of sorts) for fast tracking contentious projects.
For, that may run into another imponderable known as ‘Coalition Dharma’. After all, there would have been no 2G scam if that ‘Dharma’ had not been allowed to prevail.
The Budget may have new schemes of expenditure; there may be tax proposals too. But it is difficult to see it as anything more than curtain raiser of what to expect when the CGA puts out the statement of Government finances every month.