The Hindu Business Line : A review of the economy — Good intentions must lead to tangible results

If the Government is to successfully launch the twin rural schemes for generating employment and ensuring basic amenities, the allies from within and without need to come on board the reform agenda. If the Government is unable to go ahead with reform measures due to lack of policy autonomy, the alternative courses for resource mobilisation need to be explored, says G. Srinivasan

Mobilising resources for the National Rural Employment Guarantee Scheme is going to be a lot of work. — P. V. Sivakumar

AS THE economy enters the last month of the first half of 2005-06 fiscal, the outlook appears mixed with the relentless rise in crude oil prices threatening to play spoil sport. Undeterred, the Government is going about its business as usual.

The quarterly review of trends in receipts and expenditure in relation to the Budget for the first quarter performance of the economy was presented in Parliament. It stated: "The concerns arising out of high and volatile level of international crude prices and recent natural calamities notwithstanding, the economy has demonstrated considerable resilience."

The Finance Ministry, in consultation with the Planning Commission, also presented the Outcome Budget 2005-06, setting out a compilation of outcomes/outputs identified by various Ministries and Departments. Together these two documents form the basis next year's budgetary exercise, which will be customarily launched when the Expenditure Secretary, Mr Adarsh Kishore, meets in New Delhi on Tuesday the financial advisors of 56 Union Ministries/Departments to ascertain the broad contours and progress of ongoing policy and programmes.

In the extended monsoon session of Parliament, the historic legislation for the National Rural Employment Guarantee Scheme (NREGS) that guarantees at least 100 days of employment per year per member of every rural family was passed. Whether the scheme is going to be implemented in 200 districts to begin with or will eventually embrace all of Rural India is a matter of policy. But as the quarterly review concedes, getting resources to run the scheme will be a tall order. Even as this scheme subsumes all current rural development/employment schemes, it will be a Herculean task to check wastage when multiple governmental agencies are involved in implementing the scheme.

The latest quarterly review of the Finance Ministry on the use of funds released in States and others aptly noted that while the Government remained committed to providing adequate budgetary support to various public policy objectives, it would be increasingly difficult to counter the tendency to cover up inability to gainfully spend by diverting or parking funds for possible future use. It further stated that financial propriety required that money should be drawn from the Government account only when imminently required for final expenditure. Rules also provide for refund of unspent grant back to the government.

Nearly Rs 33,000 crore was released up to June 30 to the States and other implementing agencies for which feedback on actual utilisation for intended purposes is awaited. Nearly a third of this amount was to the Ministry of Rural Development. Other Ministries getting significant shares included those of Health and Family Welfare, Human Resource Development, Agriculture, Tribal Affairs, and Urban Employment.

Considering that the Ministry of Rural Development could not spend the allocated resources on various employment generation schemes in the past, how the NREGS will provide employment to every rural household for 100 days in a year remains unclear. . It is a sad reflection of the country's political reality that none of the parties questioned how the scheme was going to be run and how the usual obstacles would be countered.

The United Progressive Alliance Government seems to have taken the softer option of committing less resources without ensuring how effectively this can help tackle the endemic problem of rural unemployment.

Perhaps there are answers in the observations made by the Prime Minister, Dr Manmohan Singh, when he intervened in the debate in the Rajya Sabha on the National Rural Employment Guarantee Bill.

Dr Singh made no bones about the fact that there is a case for rationalising subsidies, improving the investment climate and accelerating the pace of industrialisation so as to maintain economic growth of 7-8 per cent and fund schemes such as Rural Employment Guarantee.

He said that an annual economic growth of 7-8 per cent would be enough to fund schemes such as Bharat Nirman on which Rs 1,74,000 crore is to be spent over the next four-five years for constructing rural roads and providing rural electrification, safe drinking water and a telecom network in every village.

If the country is to successfully launch the twin rural schemes for generating employment and ensuring basic amenities, the allies from within and without need to be broad-minded enough to come on board of the reform agenda that Dr Singh chartered for the country 14 years ago, when he was the Finance Minister. The moot question is whether the Left parties that took umbrage at the Government's announcement to disinvest a 10 per cent stake in BHEL and refused to take part in the UPA Coordination Committee, would support second-generation economic reforms, such as the removal of rigidities in the labour market, privatisation of public sector companies and financial sector liberalisation.

So, in the absence of consensus among coalition partners and leading Opposition parties, the odds for the success of welfare-oriented schemes designed to achieve progress in the rural economy through liberalisation of the real economy are at best nebulous and at worst disastrous because of the conflicting signals they send to investors, both domestic and foreign.

It is time the leadership stopped playing with the rising aspirations of a thriving middle-class, a yearning lower-middle class and a vast majority of the poor who look for a modest improvement to their dreary life.

If the Government is unable to go ahead with its economic reform measures due to lack of policy autonomy on account of political parties supporting it from outside, the alternative courses for resource mobilisation need to be explored. The Government could look at a number of measures to tone up the tax administration and rationalise expenditure management practices in order to bring fiscal correction back on course and consolidation of gains through purposive action.

Here, the recent quarterly assessment of the Finance Ministry claims that the Government intends to encourage voluntary tax compliance, facilitate taxpayers and seal the exit routes of tax evaders.

The Government has also asserted that it remains committed to providing adequate budgetary support to various public policy objectives and intends to shift focus form mere `release of funds' (outlays) to `actual utilisation for intended purposes' (outcomes). If these good intentions of the Government are translated into tangible results by the concerted action of all departments involved, perhaps much could be gained.

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