Taking time off their busy schedules, Planning Commission members Abhijit Sen and Arun Maira share their views on the Union budget with The Hindu .
What are your general reactions to the budget?
Abhijit Sen: The budget essentially concentrates on getting the fiscal deficit numbers right. It has been done under tight conditions, so it is not surprising that the market has not reacted too well.
It is not a giveaway budget. Throughout this year, the expenditures, especially on the Planning Commission, were kept much below what had been budgeted earlier. The Finance Minister (P. Chidambaram) is building on that. It is because it was cut so much, this year he is able to show large increases.
Arun Maira: The Minster has adjusted the taxes, increased excise duties on luxury items. It is easier for him to do that without affecting growth.
I am most intrigued by manufacturing and infrastructure. There is an appeal to make things happen, which is not up to him to do himself. He has done what he had to by himself correctly — encouraging investments, manufacturing capacities.
The business environment must become more efficient as the Minister has said.
Is the budget populist or not?
Abhijit Sen: There are elements of populism. There are certain things which, in a sense, are not really part of a budget, for instance, setting up a bank for women. It all sounds very nice but it is not clear what it is supposed to do.
There aren’t too many things which his opponents could call populist. There are certain symbolic things e.g. women’s bank, equity financing for farmer-producer organisations. Some of these are non-budget things.
There are things that he is able to show without making much of an impact on the budget.
Arun Maira: Not a populist budget, the Minister has taxed the super rich. It is good. It is usually said that if you are doing things that please the aam aadmi then you are being populist, but if you are doing things that please investors then what are you doing?
I am happy that the Minister has taken a balanced view. There have to be some sacrifices somewhere. The aam aadmi cannot make any more sacrifices, those who can contribute should do so. They will buy SUVs and high-end phones anyway.
If he is taxing the rich and appealing to the hearts of the aam aadmi , it is a good thing. The government needs to win the confidence of the aam aadmi as people have lost confidence in institutions. This is very bad to even attract investments. If you do not make these reforms, it will be discouraging to investors who are watching.
The lack of reforms is also due to the lack of confidence that the aam aadmi has.
There is need for institutional changes that affect the lives of people.
Many schemes have good intentions and are set up with the right purposes but they do not get delivered properly on the ground; for this, administrative reforms are the need of the day.
What will be the likely impact of this budget on social sector?
Abhijit Sen: Even for health and education, the Minister is talking about a 10/17 per cent increase from last year’s RE (revised estimate). If you actually look at it from last year’s BE (budget estimate) it’s much less. It is positive but it just about keeps up with inflation.
Essentially, these numbers show that last year it was very tough on expenditure, that is the way the Minister has gotten the fiscal deficit at 5.2 per cent. Since the squeeze has taken place there is slight room to expand more without being very heavy on taxes.
The budget has not provided for universal health coverage at all. It had not been last year as well and this year’s budget is not much larger.
Food security is manageable. There are a lot of people claiming it will cost huge amounts that is actually not true. The Minister has provided adequately in the budget. I am not either surprised or worried and the allocated amount can pay for it.
I do not think this allows much space for health or universal health care. It is not going to get any better than the previous year (public health). The plan provides for larger expenditures over the next 2-3 years.
Arun Maira: With regard to the food security Bill, it is not the amount of money that has been lacking/making the difference. We need to get much more bang for the buck. There are many leakages in the schemes that do not reach the intended people. Putting more money will not help very much, the delivery mechanism has to be made more effective.
The Minister can only give more or less money. Giving more money will not solve the problems, there need to be improvements in the administration.
To get the country moving, there needs to be coordination, where the Planning Commission’s role should be.
What is the overall impact of this budget on the current state of the economy?
Abhijit Sen: There are people who will be happy since the Minister has given inducements to buy new houses and investments. His priority is fiscal deficit, which he has accomplished by having a tight control over spending as promised.
Any cut in expenditure will have an impact in growth rate. Since he is planning to expand the expenditure this year, he feels growth can pick up.
Will taxes pick up? He has made some assumptions. That’s where this will play up.
This was the budget of a Minister whose priority is fiscal consolidation.
Arun Maira: If the Finance Minister says we are committed to addressing the root cause of the slowdown, it is to get the systems to work. The investors will find this real. The real people would feel good about this. There need to be improvements in the financial systems.
People are saying that there are no big bang reforms. I want big bang reforms in the improvement of many things in many spheres.