Financial Daily from THE HINDU group of publications
Monday, Feb 17, 2003
The first grand-slam for economy
R. C. Rajamani
With the Economic Survey, the Rail Budget and the Union Budget all presented in rapid succession, there is no dearth of issues that will vie for the attention of Parliament in the Budget session.
AN AIR of excitement always pervades the start of the Budget session of Parliament. For one, it is during this session the nation prepares its blueprint for its economic house keeping for the next 12 months.
For another, the government announces its intentions on how best to steer the ship of the nation through a customary opening speech by the President. As the name suggests, the three-month long session preoccupies itself with major economic issues.
In a manner of speaking, the Budget session is a grand-slam economic event comprising the Annual Economic Survey, the Railway Budget and the Union Budget, all presented before the end of February in a breath-taking rapidity.
After a recess of three weeks from mid-March, Parliament meets again in the first week of April to have a closer look at the Budget proposals and pass the Finance Bill which puts a seal of approval to the Budget as whole.
During the recess, Parliamentary Standing Committees scrutinise the performance and the Demands for Grants of various ministries and prepare reports, which are later placed before Parliament.
The three-month session is unique in a climatic sense in the nation's capital as it meanders through winter that is departing and can at times be severe, a cool but sunny spring and a hot and harsh summer that often has a soporific effect on the members of Parliament as they debate national issues.
The current Budget session is the first for the Head of State, Dr Abdul Kalam, who took over the nation's highest office in July last. It is also first for the Speaker, Mr Manohar Joshi, who took over from his predecessor, the late after the last budget session.
And, finally, it is also first for the Finance Minister, Mr Jaswant Singh, who will be the main focus of the nation during the three-month session.
Apart from the Budget proposals, there is no dearth of issues that will vie for attention of Parliament. The war clouds over Iraq and Pakistan's continued support to cross-border terrorism are likely to be two major international issues dominating proceedings.
A host of political, economic and social concerns will form the domestic issues. Among them are the ever-present Ayodhya, the political shenanigans in UP, the Kelkar Committee report, the telecom war and the Cauvery water row.
The session will also see introduction of a new Electricity Bill envisaging complete delicensing of power generation. It also seeks to give power companies access to transmission and power supply directly to consumers.
The session opens amidst speculation whether it is going to be the last before the next general elections, which are due only in October 2004, thereby providing for one more Budget session next February. According to political analysts, the outcome of the February 26 elections to four Assemblies in Himachal Pradesh, Meghalaya, Nagaland and Tripura, and a few more in major States such as Madhya Pradesh and Rajasthan and politically significant Delhi before November would be a major factor for determining the exact time of the next general elections.
The Bharatiya Janata Party, leader of the ruling National Democratic Alliance (NDA), is apparently sitting pretty and has in fact exhibited cocky confidence in recent weeks. This was evident from the way it went about the last reshuffle of the Cabinet.
It was not only a pure BJP affair but also sure indication of performance being the criterion for continuity as well as fresh induction. Of course, the exit of the high-profile Mr Pramod Mahjan has raised eyebrows.
Analysts attribute this to the likely raking up of his name in the Shivani murder case which is due to be heard in the coming weeks, thought BJP itself has said he is needed for party work.
Be that as it may. The immediate interest of the people at large is how it is all going to affect the current Budget.
As always, the middle class is beset with hopes and anxieties, the rich and the corporate sector keep their fingers crossed and the poor continues to be in an interminable wait for deliverance.
The much discussed Kelkar Committee Report on Direct and Indirect Tax Reforms has been virtually rejected by the middle class, while receiving general approval from the corporate sector.
While trying to simplify the tax regime, the Committee has antagonised the middle class by seeking to remove several tax concessions such as on housing loans and savings on insurance, etc. By suggesting reduction in the rate of corporate tax, the Kelkar Committee has gained approval from the industry. It has also sought to remove certain concessions being given to women employees. It has failed to suggest any rise on the income limit for tax, thereby giving away nothing at all to the all-influential middle and salaried class.
Realising the potential political fallout involved in these proposals, government hurriedly set up the Rajnath Singh Committee, which is now engaged in damage control.
The severest criticism of the Kelkar's Committee report is about its recommendation on removing tax rebate on housing loans. The concessions in this area over the last few years have galvanised the housing sector. The nation is now witness to a feverish construction activity as never before. The consequent demand on cement, steel and other allied material has seen a new boom in the manufacture of these articles.
This has been possible by the new entrants to job market immediately going in for house construction after being bolstered by hefty loans on low interest rates with easy repayment schemes. The benefits to the economy are sure to come to naught if the concessions are taken away. The Rajnath Singh Committee is believed to have made a strong point about this aspect.
Of course, the Budget is not just about pleasing people or catching vote banks. Any government worth its salt realises this. It is a serious exercise, trying to mach income and spending. The continuous mismatch in this regard over the years has given rise to a runaway deficit into crores of rupees. The sheer enormity of the figure is demoralising which a responsible government can ignore at its own peril.
Interestingly, the Budget session begins against the backdrop of the Tenth Five Year Plan, which has set an ambitious growth target of 10 per cent. Achieving this target is indeed a Herculean task with government needing to clean many unproductive areas of expenditure without income. The Government needs to find resources to fund crucial areas of health and education that are imperative for the development and progress of a truly modern nation state, the dream of and vision of Dr Abdul Kalam.
Mr Jawant Singh, of course, is a suave and sophisticated communicator when it comes to dealing diplomacy. Sophistry is far different from hard economics. In the coming days, the nation will watch the slick diplomat with interest and perhaps empathy as he does the tantalising economic tightrope walk. Best of luck Mr Jaswant Singh!
(The author, a former Deputy Editor with PTI, is a New Delhi-based freelance journalist.)
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