The Hindu Business Line : Great Budget expectations — Buoyant mood, congenial setting

With all systems go, powered by an enthusing confluence of favourable factors, the Finance Minister, Mr P. Chidambaram, must be a happy man ready to make Budget. There is no mistaking the great expectations for the future brought on by a mood that has never been this buoyant in recent times. In these days of free flow of traffic of ideas and information, Budget-making must be made an open, transparent and participatory exercise, says B. S. Raghavan.

The Finance Minister, Mr P. Chidambaram... In the run-up to the Budget, the numbers are on his side. — Vino John

THE Finance Minister, Mr P. Chidambaram, must be feeling very like a pilot in a plane on the runway giving a final check to make sure that all systems and controls are in place to ensure a smooth take off and safe flight. He must be feeling happy that all systems are indeed go, powered by an enthusing confluence of favourable factors.

The kind of opportunity he has been handed on a platter to produce a landmark Budget will not come knocking again for a long while. There is no mistaking the great expectations for the future brought on by a mood that has never been this buoyant in recent years.

In a snap poll of CEOs taken by the Confederation of Indian Industries (CII), close to 64 per cent of them predicted a GDP growth rate ranging between six and seven per cent in 2005-06, 38 per cent expected a sales growth of 10-20 per cent, another 38 per cent putting it at 20-30 per cent. Their profits growth scenario in the coming year is positively rosy, 27 per cent of them being sure of 10-20 per cent, around 17 per cent expecting it to be 30-40 per cent, and 14 per cent even taking it as high as 40-50 per cent.

A large part of the surging optimism is no doubt derived from the often-quoted economic fundamentals which are so robust as to seem enduring. The iAch (itch to achieve) coefficient of the Indian business community, not the least in sectors that are the propellants of prosperity such as manufacturing, exports, services, pharma, textiles and automobiles, with many of the Indian firms making their presence felt abroad through mergers and acquisitions (totalling nearly $8 billion in 2004) and expansion of their operations, has never been as high or as intense. Indeed, in its innovative mettle and on both absolute and relative merits, it is proving to be equal, if not superior, to foreign enterprises.

The private sector has graduated to a position where its share of GDP and total investment is spectacular at around 75 per cent. The Sensex, at the time of writing, has some what receded from its whopping best.

Foreign institutional investors have brought in $8 billion and foreign direct investment has risen by 54 per cent; the fact that it is still at three-quarter per cent of GDP compared to 2-3 per cent in many emerging market countries is something to be celebrated, and not bemoaned. The foreign exchange reserve has crossed $116 billion, of which the short-term debt which can create all the trouble (as it did in the Mexico meltdown a decade ago) accounted for only four per cent.

The AT Kearney-sponsored FDI Confidence Survey 2004 ranked India the third most attractive investment destination after China and the US. The buffer stock of foodgrains has been providing the best assurance of fulfilling the criteria of food security in regard to adequacy, affordability, accessibility at the household level.

Distinguishing characteristics

Thus, the Finance Minister has all the numbers on his side, but there is more to the making of the Budget than numbers. The Budget has to lift the spirits and sustain the tempo not just by additions and subtractions, but by being wafted on certain characteristics of the political and economic landscape that are imperceptible and intangible, but, nevertheless, are significant and substantive enough to put the country on the centre stage. A quick once-over of the ones that distinguish the period 2005 and beyond will not be out of place at this point.

First, the calibre of leadership. Never before has the nation had in positions crucial to charting its economic course persons of the credentials and capabilities of Drs Manmohan Singh, Montek Singh Ahluwalia and Y. V. Reddy, and Messrs. P. Chidambaram, Kamal Nath and Dayanidhi Maran.

Each one of them is a broadband personality who can hold his own before the best anywhere in the world in terms of a creative mind, professional competence, grasp of essentials and unblinkered vision. Adding value to their endeavours is an impressive repertoire of second-to-none expertise almost in every field in the many think-tanks and academic institutions, and things in this respect can only get better.

Next, marginalisation of politics. The country can now be said to have reached a watershed in which economics rather than politics would be the driver of its destiny. Deregulation and liberalisation are making it so, by taking discretion away from the Government's hands and enabling economic players to come into their own.

In a situation of optimal division of labour, the Government should do no more than frame appropriate policies and establish regulatory set-ups to mediate, monitor and hold the scales even, side by side with creating and nurturing social capital in all its connotations and a supportive environment of quality governance, enforcement of law and order, promotion of peace and goodwill in external relations, and keeping the powder dry to ensure defence and security.

A good example is the US. See, how its economics and politics move on two separate tracks, and business, industry, trade and commerce are left free to make their decisions, subject to umpiring by regulatory authorities to safeguard competitiveness, transparency and accountability in dealings, while politicians are confined to issues such as social security, health care, abortion, gay rights, counter-terrorism, crimes, drug trafficking, and war and peace and the like.

In India, too, games politicians play among and against themselves in their little fiefdoms and turfs become immaterial so long as the emergence of an informed intelligentsia versed in issues touching the quality of life and conducing to progress and prosperity helps accelerate the pace of economic development, and its concomitants of employment and wealth generation.

Tsunami of globalisation

Third, the broad national consensus on the reforms process and policies for growth. Such differences as there have been are over dotting the `i's and crossing the `t's and the disputations they spark from time to time have actually done a great service by deepening the understanding of the nuances and contributing to collective economic education.

On the economic front at least, labels of left, right and centre have ceased to make sense with the realisation that the tsunami of globalisation and the accompanying homogenisation and harmonisation of practices and standards cannot be stalled. In particular, the Finance Minister has ready at hand an explicit blue-print in the nature of a National Common Minimum Programme on the contents and thrust of which all parties within and outside the United Progressive Alliance can be said to be in open or tacit agreement.

Finally, and never ever underestimate this, a canny electorate which knows its mind and votes what it wants. It has earned the healthy, and, may be, even fearful, respect of elites, academics and intellectuals on the one hand and the political and governing classes, business persons and media, on the other.

Which means that it is incumbent on the Government of the day to attune its approaches and strategies reflected in its Budgets and public policies flowing from them, to the greatest good of the greatest number (comprising the rural masses) and not simply to suit the interests of the vociferous and glamorous. This lesson, which the National Democratic Alliance (NDA) Government had to learn the hard way, will not be lost on any Government or the Finance Minister now or in the future.

It is in this setting that the task before the Finance Minister has to be viewed. The success of his effort at helping the economy reach the critical mass will depend on manner rather than on matter, in the sense of his being able to mobilise the support of all sections of opinion to whatever proposal he deems necessary in the present context. No longer need he be mealy-mouthed or mysterious about his plans.

In these days of free flow of traffic of ideas and information, Heavens will not fall if the making of the Budget becomes an open, transparent and participatory exercise and he holds discussions beforehand with all the stakeholders of the polity in order to ascertain and build on their feedback.

Especially if the Prime Minister, the Deputy Chairman of the Planning Commission and Ministers in charge of important areas such as commerce and industry, transport and communications are associated with it, the ready and willing acceptance of the resultant Budget from all quarters will give a tremendous boost to the economic performance envisaged by it.

(To be concluded)

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