3/14/2016

ThisBudgetisnotbusinessasusualTheHindu

OPINIONCOMMENT

Published:March14,201601:26IST|Updated:March14,201602:18IST
March14,2016

ThisBudgetisnotbusinessasusual
N.K.Singh

Photo:SATYANARAYANAGOLA
ThesuggestionsbyTRAIofusingpublicprivatepartnershipforafasterimplementationofAadhaarnowdeservepriority.Picture
showsaseniorcitizeninHyderabaddisplayinghisAadhaarcard.

InconjunctionwithaninnovativeEconomicSurvey,itembedsseveralinnovativeideas.Thesewillcrystalliseinthecomingweeks.
Isitpossibletobepopularwithoutbeingpopulist?ThisBudget,whichhassoughttocombinethevirtuesofmacroeconomicstabilitywith
growth,isagoodexample.Keyneshadsaid,Thedifficultyliesnotsomuchindevelopingnewideasasinescapingfromoldones.So,have
weatleasttriedtoescapefromsomeoldideas?Therearesomemediumtermissueswhichdeserveattention.
Pathoffiscalconsolidation
First,thepreferredpathoffiscalconsolidation.WeknowthattheBudgetachievedthefiscaldeficittargetof3.9percentforthecurrentyear
andwouldsticktoatargetof3.5percentforthecomingyear.ThisisconsistentwiththepathoffiscalconsolidationstipulatedintheFiscal
ResponsibilityandBudgetManagementActof2003(FRBMAct).IthasdonethisnotwithstandingexpenditurepressuresofRs.1.02lakh
crorefromthePayCommissionandRs.7,500crorefromtheOneRank,OnePensionscheme.Addedtotheseareglobalheadwinds,rural
economyinstress,withtwosuccessiveyearsofdroughtwithsubduedprivateinvestment.
TheBudgethasalsoannouncedtheconstitutionofaCommitteetoreviewtheimplementationoftheFRBMActandgiveits
recommendationsonthewayforward.Historically,highfiscaldeficitwasacontributortothebalanceofpaymentscrisisof1991.TheFRBM
Actwasenactedinthecontextofthedeterioratingfiscalhealthin2000.TheBillwaspresentedtotheLokSabhaonDecember22,2000.It
wasthereafterreferredtotheStandingCommittee.Itsreportobserved:Numericalceilingsandthetimeframessetforattainingthesaid
levelsinduceexcessiverigidityintodecisionmaking,deprivinggovernmentsoftheflexibilityneededtorespondtotheexigenciesinan
appropriatemanner,toservethenationalinterestbest.Theydidnotfavourspecifiedlevelsofdeficitswhichmightleadtodeclineoflow
leveloffundsalreadyavailablefordevelopmentalpurposesandtowardsprovidingbasicservicestovastpopulationsbelowthepovertyline.
Instead,theysoughtthemodificationofthewordsprespecifiedlevelstobesubstitutedwithprespecifiedprudentlevels,aslaiddown
undertherules.ArevisedBill,however,withoutreflectingtheseconcerns,waspassedbyLokSabhainMay2003andRajyaSabhainAugust
2003.ItwasnotifiedonAugust6,2003.
Theintellectualrationalefora3percentfiscaldeficittargetremainssomewhatopaque.ItsmostproximatesourceliesintheMaastricht
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3/14/2016

ThisBudgetisnotbusinessasusualTheHindu

Treaty,namelytheStabilityandGrowthPact.ThemagicalnumberisnotavailableintheliteratureoftheInternationalMonetaryFund(IMF)
inthepublicfinancesandmodernhistorydatabaseof200yearsofbudgetdeficitscovering55countriesovertheperiod18002011.
ContemporaryliteraturearguesthathighdebttoGDPratioscausemacroeconomicinstability,whichisnotgoodforgrowth.However,
economistEvseyDomarhasarguedthatthepropersolutionofthedebtproblemliesnotintyingourselvesintofinancialstraitjacketbutin
achievingfastergrowthinGNP.ItisinthiscontextthattheG20ministerialmeetinginMarch2009examinedtheIMFpaperonfiscal
multiplierswhichmeasurestheratioofachangeinoutputtoanexogenouschangeinfiscaldeficit.Thesizeofthefiscalmultipliersare
country,timeandcircumstancespecific.ThesearerelevantintheIndiancontext,sincethedebt/GDPratiohassignificantlycomedownfrom
83.3percentin200304to66.1percentatendMarch2014.Sincefiscalsustainabilityistheequivalentofpublicdebtsustainability,a
decliningdebtratioenlargesfiscalspace.Acceptinga3.5percentfiscaldeficittargetfornextyearenhancescredibilitybutcrampsdemand.A
higheroutlaybothforinfrastructureandagriculturecouldhavemultipliergainsinspurringprivateinvestment.Thesehavesoughttobemet
throughextrabudgetaryresources,asabelowthelineentryfromnontaxrevenues.
Spurringgrowthremainsouroverarchingobjective.ThemandateoftheproposedcommitteeonFRBMshouldbebroaderthanrecalibrating
fiscaldeficittargets.ItshouldevolveanacceptableframeworkforaMacroStabilityResponsibilityAct(MSRA),toreplacetheFRBM.Itneeds
toencompassawidersetofcriteriawhichshouldalsoenablecontracyclicalmeasuresdependingontimeandcircumstances.
Alsoread:AfinebalanceontheBudget
ImplementationofAadhaar
Second,afteryearsofprevarication,thegovernmenthasintroducedthefarreachinglegislation,TheAadhaar(TargetedDeliveryofFinancial
andOtherSubsidies,BenefitsandService)Bill,2016,enablingtheAadhaarplatformtobeeffectivelyusedfordirectbenefittransfers(DBT)
formultiplebeneficiaryprogrammes.ThesegobeyondLPGtocoverfertilizers,health,educationandthenowrationalisedcentrally
sponsoredschemes(CSSs).ConcernshavebeenraisedonwhetheritshouldhavebeenaMoneyBill.Article110oftheConstitutionstipulates
thataBillshallbedeemedtobeaMoneyBillifitcontainsonlyprovisionsdealingwiththemattersspecified,moreimportantly,
appropriationofmoneysoutoftheConsolidatedFundofIndia.ThisrevisedBillensuresthisbydeletingallnonmoneyaspects.Inanycase,
theBillmeetsthesatisfactionoftheSpeakersinceArticle110(3)stipulatesthatifanyquestionariseswhetheraMoneyBillisaMoneyBill
ornot,thedecisionoftheSpeakeroftheHouseofthePeoplethereonshallbefinal.BeyondtheBill,itmustberecognisedthattheobstinacy
oftheOppositiontoblocklegislationearliersponsoredwhollybythemplacesthegovernmentinanunenviableposition.Governmentsin
officeareenjoinedtodeliver.Cantheybefaultedtoseekinnovativeways,legalengineeringifyoulike,forensuringpassageofimportant
economiclegislation?Bettermentofthelivesofthepeoplecannotsufferthepalpablyirrationalactionofalimitedgroup.Theotherconcern
aboutprivacyhasbeenovercomebyprovisionofclauses28to47.Issuesofsecurityarenodoubtparamountandanypossiblemisuseby
politicalpartiesinofficetosecureinformationusingthesecurityrusemustbejealouslysafeguarded.
TheimplementationofAadhaar,however,needsthreefurtheringredients.First,interoperabilitybetweenplatformsincaseotherplatforms
areusedtodeliverbenefits.Second,thetendencytoadoptnonverifiablealternativeplatforms,bypassingtheAadhaar,canleadtoabuse.
Third,whiledisbursementsthroughDBTusingAadhaarcanbequicklyeffected,withdrawalswouldrequireasignificantlyfasterpaceof
ensuringreliableconnectivity,coveringall2,50,000Panchayats.ThesuggestionsbytheTelecomRegulatoryAuthorityofIndiaofusing
publicprivatepartnershipforafasterimplementationnowdeservepriority.
Third,theBudgetseekstoredefinetherelationshipbetweentheMinistryofFinanceandtheRBI.TheproposedamendmentoftheRBIActof
1934andtheconstitutionofaMonetaryPolicyCommitteewilldispelcurrentambiguitiesandwilladdalotofvalueandtransparencyto
monetarypolicydecisions.Agreatdealwilldependonhowthiscommitteeworks.Notonlydomainknowledge,thebalanceofdecision
makingintheCommitteewiththefinalwordoninterestratesrestingwiththeGovernoroftheRBI,fosteringgreaterpublicdebateon
evolutionofMonetaryPolicy.Indeed,monetaryandfiscalpolicyneedtoactintandem,keepinginviewthetwinobjectivesofgrowthand
acceptableinflationband.
ThisBudgetisnotarunofthemillact.InconjunctionwithaninnovativeEconomicSurvey,itembedsseveralinnovativeideas.Thesewill
crystalliseinthecomingweeks.
(N.K.SinghisaformercivilservantandRajyaSabhaMP.)

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