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Why we should not have any unrealistic expectations from the NDA Budget

"Beyond those 10 points, the government also needs to restore the somewhat more intangible aspect of government being credible," says Bibek Debroy.

, ET Bureau|
Updated: Jun 15, 2014, 04.27 PM IST
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Beyond those 10 points, the government also needs to restore the somewhat more intangible aspect of government being credible.
Beyond those 10 points, the government also needs to restore the somewhat more intangible aspect of government being credible.
After the 2nd Cabinet meeting, the first proper one, we have a 10-point agenda.

(1) Focus on economy and infrastructure ministries; (2) Better inter-Ministerial coordination; (3) Restore confidence of bureaucrats; (4) Use IT and social media to maximize public interaction; (5) Focus on education, health, water and roads; (6) Improve the government machinery; (7) Ensure a stable and sustainable government; (8) Transparency in government; (9) E-auctions for government tendering; and (10) People-oriented systems.

These have been described as a 10-point agenda, but they are more like governance principles. If one adheres to the 10-points, not all are on the same footing.

For instance, (2), (3) and (6) are clearly different from (1) and (5). On (2), (3) and (6), some elements are administrative, others require legislative changes. Scrapping GOMs, rehabilitating Cabinet and PMO is immediate. But restoring confidence of bureaucrats requires deterrent for mala-fide action and protection of the bona-fide. While executive action can partly restore confidence, overhaul of bureaucracy also requires legislative changes, documented in reports of 2nd Administrative Reforms Commission.

Citizen expectations centre on growth, inflation and corruption. The (2), (3) and (6) and some bit of positive sentiments can restore the investment cycle, but only partly. These streamline clearance processes and unclog projects stuck in the pipeline. Fresh investments are however contingent on something being done about land, forest and environmental legislation. These are not that tractable, apart from the obvious point about decentralization to States, a welcome point repeatedly stated by PM.

However, the FM’s task, with a budget in the 1st week of July, is not going to be easy. Signaling return to FRBM and fiscal consolidation is one thing, reducing deficits in 2014-15 is another. A deficit overhang, not yet visible amidst the statistical jugglery, has been left by the preceding government. There is the compulsion of increasing Plan/capital and defence expenditure. Capital infusion is required in banks, with dilution of equity in PSU banks a viable option.

Most expenditure items (interest payments, wages, pensions) are frozen in the short-turn. Subsidies require discussion with States. This is equally true of tax reform (both GST and DTC), apart from retrospective provisions and cleaning up the tax-related dispute mechanism (including appeals).

 
Other than dilution of equity in PSU banks, privatization/disinvestment are unlikely. Therefore, one shouldn’t have any unrealistic deficit-reduction expectations about the 2014-15 budget. The growth improvements will be incremental, not big-bang. This also applies to supply-side changes, necessary for both agro and manufactured inflation. While one should argue for changes in APMC Acts, ECA and perhaps even MSP, or even for cold storage, processing and other forms of better intermediation, these do not kick in immediately.

On the corruption part, such as in (9), IT and reduction of human interfaces do indeed contribute to reduced corruption. But these are typically State issues. Rare is the scope for e-auction alone solving problems for a government in Delhi. In addition, for something like (8), the point is the following. Can one completely eliminate subjectivity in decision-making in Delhi, despite being transparent about it? Since one can’t, how does one ensure decision-making in this climate of greater public scrutiny?

This governance problem isn’t easy to solve. However, (4) and (10), if they are indeed two-way traffic, make governance more participatory and thereby restore faith in government. That (1) and (5) are important is obvious. But here again, delivery is a state subject and the sooner discussions start with the states, the better. If nothing else, there will have to be tweaking of centrally-sponsored schemes.

Two additional points deserve mention. First, in the first cut of Cabinet formation, there hasn’t been enough rationalization of Ministries/departments. One hopes the reported second cut (in July) will address this better. Second, though expectations are sky-high, it is always best for a government to under-promise and over-deliver, rather than the other way around. Specifically, on growth and inflation, the earlier government had a terrible track record of getting both sets of numbers horribly wrong. Beyond those 10 points, the government also needs to restore the somewhat more intangible aspect of government being credible.
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