An inflationary budget - Yashwant Sinha

Opposition view

Yashwant Sinha

“The FM has not provided any growth impulses for the economy—especially for an economy—that is on the downstream. It was important to take some tough steps”

It’s almost like the French monarch Louis XVI words: “after me the deluge”. These Budget proposals certainly would create huge problems for the economy in future. I am left in no doubt that the economy is going to face grim days. In fact, for the first time after liberalisation, the next phase of economic reforms was not spelt out during a Budget. Suffice it to say, it’s just an election stunt and has set no long-term goals for the rural economy, or for industry. Nothing that seems like a vibrant step for a progressive economy was heard in the FM’s speech.

It is not a growth-oriented Budget at all; neither is it an inclusive Budget. The Economic Survey clearly spelt out the challenges before the government. It appears as if the Finance Minister did not read the Economic Survey; he has completely ignored the policy prescriptions encapsulated in the survey. Where will the growth come from when the interest rates continue to be high? It will have a dampening effect on the overall growth as well as individuals.

Then there is nothing big in terms of infrastructure, project or industry, so investment demand will slow down and this will lead to a further slowdown in the economy. The Budget has fallen much short of my expectations though industry leaders have a tendency to praise it initially. The FM has not provided any growth impulses for the economy—especially for an economy that is on the downstream. It was important to take some tough steps. Merely increasing the expenditure will not do; in fact, that will add to the inflation.

I would term it as an inflationary Budget. Huge hikes that the FM has provided would certainly add to inflationary pressure. He has nothing to further economic reforms. The only highlight of the Budget is the loan waiver though I don’t know how he will work this out. While the Finance Minister said that he would provide liquidity to the banks over the next three years, he does not know how. His successor will inherit an economy which is already in a slowdown phase. His budgetary proposals would further intensify the slowdown trend. He has postponed the FRBM (Fiscal Responsibility and Budget Management) target with regard to revenue deficit by another year, so his successor will face that challenge also. And in a Budget what goes up does not come down. So, whatever concessions the Finance Minister gives, it’s very difficult to take them back.

I think there should have been some determined steps to control inflation, steps to ensure that the godowns were full, so that we are able to influence prices in the open market. We should have adjusted tax rates to encourage imports wherever it was necessary. Also there was a need to moderate inflation and take steps to moderate interest rates. Situations should have been made favourable for banks to cut rates rather than ordering them to do so. The government should have picked up the bill rather than burdening the banks.

— As told to Amit Mukherjee