Once Again without Credibility

In this era of immediate assessment it took just a few minutes for the Union Budget for 2012-13 to be given one or the other negative appellation – “lacklustre”, “anti-growth”, “back to the 1980s”, “without reform” and the like. Such evaluations forget that union budgets have long since ceased to be statements of macroeconomic policy for the short and medium term. They are now entirely accounting exercises geared towards meeting just one objective – producing a fi scal deficit that is acceptable to the stock market, foreign investor and pundit. Fiscal fundamentalism is, of course, itself a definite policy. But this obsession means that all other economic policies are made hostage to narrowing the deficit or rather to producing an artificial number that will convince the market.

The fiscal deficit of 5.1% of the gross domestic product (GDP) which Union Finance Minister Pranab Mukherjee has come up with as the budget estimate (BE) for 2012-13 has few takers. The numbers for revenue and expenditure have been played around with so much that they have lost all credibility. Consider, for instance, a major item of government expenditure – petroleum subsidies. In a year when the west is orchestrating action against Iran and there is uncertainty about the movement of global prices, petroleum subsidies in Budget 2012 are expected to decline by Rs 24,901 crore. Or is the government planning a major revision in product prices, which it has chosen not to mention in Budget 2012? Either way, few believe the numbers.