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'Budget shows up govt's failure to demonstrate vision'

Mohan Dharia

Prime Minister Atal Bihari Vajpayee may have termed the Budget as excellent, balanced and pro-poor, but a close study, however, shows up the government's failure to demonstrate vision, capacity and political will to face up to the challenges confronting the nation.

I am aware that the country is passing through the most critical economic situation and to present a Budget acceptable to all sections, is impossible.

However, it was expected that the Budget would squarely face the existing problems with the country poised to enter the next century.

As much as 27 per cent of the total expenditure of Rs 2.83 trillion will be for repayment of interest on the existing loans, as against the total borrowings of 25 per cent in the next year. It is thus clear that the additional borrowings to be taken during 1999-2000, will not be able to pay even the amount towards repayment of the interest.

Even though many experts in the government have been forcefully denying, it is clear that the country has already entered the debt trap and it is not possible even to pay the interest through her own revenue. It is agonising that the amount of interest should be equal to the total amount of the defence expenditure and the central plan.

The finance minister has made some efforts to bring down the fiscal and revenue deficit. However, with regard to the performance of the current year, it is difficult to believe that the expectations of the minister will be realised. Thirteen per cent of the total expenditure is reserved for the central plan and surprisingly 13 per cent are for non-plan expenditure.

It has been the experience of the past that the non-plan expenditure always crosses the limits which results in curtailment of the central plan. As against the amount of Rs 720.02 billion for plan expenditure in last year's Budget, the revised estimates show that this will come down to Rs 683.71 billion. It is thus obvious that the plan expenditure in the next year will come down perhaps more in view of the atmosphere of general elections and affect all developmental plan programmes.

Efforts of the finance minister to change the existing tax structure with a view to boost growth and employment will have to be taken with a pinch of salt. The allocation of Rs 27.64 billion made for rural development is lower by Rs 1.16 billion, compared to the current year. In real terms, it would be much more. Although certain measures have been introduced to simplify the existing procedures, the Budget miserably fails in facing the acute and serious problems in the country.

I had personally suggested to the finance minister to mobilise the existing resources available within the country, instead of depending on foreign loans. Introduction of gold bond was one of my suggestions. The finance minister has partially accepted my suggestion with the introduction a lucrative gold bond scheme in the Budget.

Since Indepedence, the gold imported or smuggled into the country is of the order of Rs 1.5 trillion! Gold was treated and even today is being treated as the safest form of security in all families.

Although it is difficult to quantify the amount of gold in the country, it is estimated to be worth Rs 5 trillion or more. Investment in gold is absolutely unproductive. I had therefore suggested that having regard to our traditional or religious feelings, gold above 1.5 kg should be treated as luxury item and luxury tax of five to ten per cent on the existing price should be levied on all those who do not invest their gold in gold bonds.

I had also suggested that it should be made compulsory to declare the amount of gold held above 1.5 kg, both in urban and rural areas. This introduction of luxury tax, would have forced most of the gold holders to deposit their gold in the gold bonds.

With this single measure, it would be possible to mobilise gold of the order of Rs 4 trillion and to pay the external and internal debt to a considerable extent. This could have also brought down the amount of interest.

Under the Voluntary Disclosure of Income Scheme, about Rs 70 billion have come to the government. That measure was defective as it had no teeth and local officers were allowed to compound the black amount at the local level, giving way to further corruption.

Although the black money to the tune of Rs 250 billion has been regularised through the earlier scheme, it is expected that nearly Rs 1 trillion worth of black money is still in circulation. This has resulted in creating a parallel economy.

I had, therefore, suggested to the finance minister to reintroduce the VDIS with rigorous measures of penalty and punishment. I had proposed that all those who possess black money, may be given one final chance to voluntarily declare the amount of black money possessed by them before a prescribed date.

Mohan Dharia is a former deputy chairman of Planning Commission

UNI

Budget 1999-2000

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