The Hindu : Economy on road to disaster: Manmohan

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Wednesday, Mar 12, 2003

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Economy on road to disaster: Manmohan

By Our Special Correspondent

NEW DELHI MARCH 11. The former Union Finance Minister, Manmohan Singh, today described the budget as a "slideback in growth, agriculture, industry and employment'' and said it would lead the economy "on a road to disaster'' by pushing up fiscal deficit.

Initiating a discussion on the budget, Dr. Singh said it did not provide any cushion — in the case of a war in Iraq — against the potential of rapid increase in international oil prices and our foreign remittances getting affected which will influence the balance of payment. "If energy prices go up, further inflation will become a major problem," he said.

"I do not think the prices of diesel, petroleum products can be kept at a level if international prices go up. This will hurt consumption. The budget does not reveal any strategy to tackle this.''

Dr. Singh said the country was capable of reaching the growth target of eight per cent in the 10th Plan, but the way the economy was sliding down does not inspire confidence. ''To believe that tax concessions and growth in the private sector will take care of the GDP is complacency of management especially when you do not provide cushions.''

"The picture that emerges from the Mid-Term Appraisal and the Economic Survey is that our economy is performing far below its potential, more so in the last four years since the NDA Government came to power. The GDP average for the last four years is no more than five per cent as against the seven per cent when the Congress was in power."

With the fiscal deficit hovering around six per cent in the last five years, Dr. Singh said the health of the economy was not good and he expected the deficit to shoot up by 0.5 per cent of the target of 5.6 per cent of the GDP.

`Cavalier attitude'

Regretting the "half-hearted measures" and "cavalier attitude" of the Government in fixing allocation for various sectors in the budget, Dr. Singh quoted from the budget proposals to show that the allocations for agriculture, irrigation, rural development, education and health were much the same as last year.

He pointed out that the budget had ignored the reforms in the tax structure as recommended by the Kelkar Commission. "That report was grossly ignored. I do not find any major effort to implement it. There is an attempt to distribute patronage, not streamline the tax structure."

The budget had not made any growth projections even though it was claimed to be a growth-oriented one.

"No attempt has been made to improve the tax-GDP ratio, contain expenditure and cut down revenue deficit."

The former Minister said it was not known what the projected growth rate was in the budget. "Probably the Finance Minister is working for a 11.3 per cent growth of GDP , but how much of it will be inflation, is not told".

Appreciating the health insurance scheme and the initiative for debt restructuring, Dr. Singh said the budget has "some" initiatives, but it falls short of facing the challenges before the nation. "All parties have an obligation to set aside communal divide if the vision of India as a front-ranking economy has to be realised," he said.

The Telugu Desam leader, C. Ramachandraiah, said the budget proposals had dealt several areas of economy poorly including agriculture, the most important sector.

He emphasised that in the anxiety to step up investment in infrastructure the Government had to draw lessons from the case of Enron and other fast-track power projects. Taking advantage of the Government's counter-guarantee there was overstatement of capital costs. As a result, most of these projects which came up in the private sector did more damage than serve the cause of privatisation.

Rama Shankar Kaushik (Samajwadi Party) charged that the Government with acting under pressure exerted by international funding institutions.

The AIADMK member, S.G. Indira, demanded rollback in the prices of fertilizer and diesel.

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