The Hindu Business Line : Deviate not from fiscal prudence

The economy has responded positively to the easing of practically all constraints; indeed it is booming. But this should not be a temptation to get lax on the fiscal front. The FRBM must be inviolable with any attempt to do so being tantamount to fiscal sinning. To achieve this the entire process of Budget-making should be transparent, as also the various departments, says A. SANKARAKRISHNAN.

It is strange that the world's fourth largest economic power is not able to provide more than 2 per cent of its GDP for education and about as much for the health of its people.

A remarkable feature of India's economic journey of nearly six decades is the ability to experiment. When the country was created on August 15, 1947, the leaders of the 451 million people tended to lean towards Leftist thought. The models that had evolved out of revolutions in Russia and China seemed attractive, and out of this came the idea of a socialistic pattern of society that was the bedrock of the country's thought and economic progress.

The hybrid concept, which neither adopted all of communist philosophy nor accepted a wholly capitalist orientation, had its own dichotomies. From 1952 till as late as 1985 there was marked intent by successive governments to follow the socialistic pattern rigidly. But that did not quite happen.

A break from past

In 1985, Mr V. P. Singh presented a futuristic Budget that tried to draw a roadmap for five years. This break from the conventional thought was a paradigm shift in the nation's thinking; it was starting to look for alternative approaches as those in practise were ineffectual.

But this five-year experiment was not wholly successful either. The economy was left in chaos and in 1991, a conscious decision was made to shift to the market system.

The country's ability and the people's patience to take such experimentation with equanimity surely deserve more than a footnote in the nation's economic history.

But at long last, the adoption in 1991 of a market approach seemed to have unleashed the animal spirits of the Indian worker and entrepreneur, not merely to survive but for the first time to dominate. The world was increasingly run by information technology, and India took the lead. In a milieu where the rules were yet to evolve, the Indian entrepreneur could take the lead and quickly came to dominate the world software market.

IT leader

The leadership role in the IT sector gave Indians the confidence that they were capable and could make a mark, even if lagging economically. The latter was a legacy of policy myopia. The years following 1991 were remarkable. In these last 15 years, India has been able to overcome many hurdles. It was barely impacted by the Asian currency crisis. It could take in its stride the many rises and falls in the stock market. It could withstand even the recent unrealistic rise in crude oil prices.

All these go to establish that India, as a nation, has arrived. I would like to perceive a future for the country that embodies principles of prudential fiscal management, as contained in the Fiscal Responsibility and Budget Management Act. The FRBM must be inviolable with any attempts to do so being tantamount to fiscal sinning.

What should the government do to provide healthy governance? Develop the human resource. For far too long, this — education — has been left to the individual and the family. It is strange that the fourth largest economic power in the world is not able to provide more than 2 per cent of its GDP for education and about as much for the health of its people. Contrarily, it is able to provide large amounts for the development of industries and to create an industrial climate. In 1991, it was declared that the Government would make an exit from businesses. Fifteen years later, this is yet to happen.

Make it transparent

It is not my intent to prescribe the methods by which Budgets will actualise the aspirations of Indians. Only, that the entire process of Budget-making should be transparent.

The ministers concerned should adopt the cyber route to publicising what they wish to achieve in, say, five or ten years. This should also include the financial outlays they would desire to execute their proposals. Also, the emphasis should be on the social sectors.

This is at one end of the spectrum. At the other, productive sectors such as agriculture, manufacturing and services need to evolve a pattern of development, with their own vision.

Leaders in various areas and top organisations and industry associations/chambers should exercise their mind in visualising the scenario, say, 20 years from now.

As the President, Mr A. P. J. Abdul Kalam, has said, we should accept the dreams as the medium to look at a brighter future. Not so much for us, as for the generations that will follow.

(The author is President, Madras Chamber of Commerce and Industries.)