A Question of Answers: Budget carries a political message

The first budget presented by the Bharatiya Janata Party (BJP)'s Finance Minister Jaswant Singh was watched closely by the economic and political experts for some hidden or not-so-hidden message. Singh took over the key portfolio last July after Yashwant Sinha presented four consecutive budgets.

Singh, who moved from the external affairs ministry to the finance ministry, was expected to give a political spin to the annual economic exercise of the budget, especially with elections coming up in key states like Rajasthan, Maharashtra and Maharashtra later this year, and the parliament elections in October, 2004.

The question that was asked after Singh presented his maiden budget on Friday was whether he had succeeded in pleasing the supporters of the BJP, and the answer that is coming from both the BJP and the opposition circles is that he has managed to present a middle class friendly budget.

Member of the Congress economic cell and columnist Jairam Ramesh in an interview with Gulf News yesterday afternoon said that the budget for 2003-2004 had a clear political message, and that it was an attempt to recapture the lost constituency of the BJP.

He also said that though there was no trace of reforms fatigue or suspicion of reforms, the focus was more on pleasing different sections of society, and that the big picture was missing.

Excerpts from the interview:

Is there a political message in Jaswant Singh's first budget?
Yes. There is a clear political message. It makes an attempt to win back the lost constituency of the BJP – the middle class and the shopkeepers. This is a budget which has offered something to different sections. It is more a micro-budget. The big picture is not there.

Has he been able to achieve anything through the budget?
Let us look at the five priorities he has set for himself. His first priority is eradication of poverty. He has done well on this. He has brought in five million people above the poverty line under the food aid scheme of Antyodaya. He has not done much on his second priority of agriculture.

On infrastructure, his third priority, I would give him six points out of 10. He has talked of private-public partnership, an idea which was mooted by British Chancellor of Exchequer Gordon Brown five years ago. On fiscal consolidation, his fourth priority, he would get only four of 10.
He has done well again on industrial growth. I would give him even seven out of 10. But he has not done anything for boosting the growth of the economy.

He has taken the apparently unpopular step of reducing interest rates on public provident fund and small savings. Will it really boost investments?
In a developing country like India, the logic of lower interest rates does not really work. It is wrong to say that there is stagnation in investments because of high interest rates. If that were so, Japanese economic growth should be very high because the interest rates there are very low.

As a matter of fact, there is a corelation between interest rates and the growth of gross domestic product (GDP). In the U.S., the interest rates are low, but so is the GDP growth. In South Korea, the interest rates are seven per cent, and the GDP growth is also at seven per cent.

In the budget speech, Singh said that there was a current account surplus, and he flaunted it as an achievement. Is it of major significance?
A current account surplus in itself is a good thing. But a current account surplus for a developing country like India means that dollars are coming in, but they are not going out. There is investment stagnation. The country is not importing enough to boost growth in domestic industry.

Is the sluggishness in the global economy slowing down the Indian economy?
India is not dependent on the global economy like the East Asian countries. If there is a cold in the global economy, the East Asian economies catch pneumonia. India shows no greater symptom than a cough, which can be controlled. Indian exports form only 10 per cent of the GDP, while that of China is as high as 40 per cent.

Is it possible to see the personal touch of Jaswant Singh in this budget?
Jaswant Singh prides himself as a big picture man. He does not like to involve himself in details. This budget is uncharacteristic of Jaswant Singh. It has only the details. There is no big picture.

Has the BJP given up on economic reforms?
I do not think so. There is no trace of reforms fatigue, or even suspicion of reforms. Many of the limits on foreign investment have been removed, and there are plans for greater privatisation.

He has been able to defang the Swadeshi Jagran Manch, the right-wing affiliate of the Rashtriya Swayam Sangh, which is opposed to economic reforms. But the BJP has not defanged the other troublesome element of Vishwa Hindu Parishad, which is set on creating communal dissension.

What does the electoral defeat of the BJP in Himachal Pradesh mean?
The BJP's defeat in Himachal Pradesh is a slap on Hindutva, and even a slap on Prime Minister Atal Bihari Vajpayee, who had made the deplorable claim that there is evidence of a temple at the site of the demolished Babri mosque in Ayodhya.