Winter has entered Delhi, and the season of honorific speeches is upon us. The finance minister began his tournament with the annual speech to the India Economic Summit sponsored by the Confederation of Indian Industry.
It may be recalled that last year in his welcoming speech, Claude Smadja, the then managing director of the World Economic Forum, blasted the government’s economic strategy. He caused a rumpus; the only reason why the entire nation did not rise to lynch him is because the country does not quite accord the finance minister the heroic status that it does Sachin Tendulkar. This year, there was no Smadja to torment him, and the finance minister got a suitably gracious welcome.
And he did not disappoint. He gave a ringing call for raising the growth rate to 7 per cent so that 200 million people could be taken out of poverty in ten years. That is very inspiring — if we forget history. No, not the history of beef-eating Aryan invaders, but the history of the past year.
It was a year ago that the Prime Minister ordered the Planning Commission to work out a strategy to raise the annual growth rate to 10 per cent. Only nine months ago the finance minister unveiled an ambitious Budget that was supposed to unleash the forces of growth, and Sebi took away the trading licences of such stockbrokers who did not welcome it. Only four months ago, the Prime Minister listened while McKinsey told him how to achieve the 10 per cent growth.
So when the finance minister said 7 per cent, he startled many listeners, who could not believe their ears. A decline of 3 per cent within a year in targeted growth has no precedent; if the finance minister continued at this pace, he may reach 4 per cent in another year — which may well come to look realistic.
It would be a serious matter if he went in for realism; for Mr Sinha went on to say that he wanted to triple the ratio of direct taxes to GDP. If he really tried that, the socialist income tax rates of 70 per cent plus would come to look generous. But Mr Sinha soon corrected the impression that he might be aiming at realism, when he claimed hydrocarbon administered pricing, small-scale industry reservations and the debt market as examples of ongoing reforms.
The waywardness of the economy, together with his verbal flexibility, has led the public to discount the finance minister’s words. But there is no doubt about his good intentions; and they do sometimes turn into good action. He has, for instance, done a commendable job with excise duties; the fall in the number of rates has led to a virtual disappearance of classification disputes.
So when he says that he will reduce import duties, he should not be entirely disbelieved; he may actually do it in the next Budget. He is also right about having introduced labour market reforms and privatisation into the political vocabulary, even if he may mean something less by them than the so-called reformers. He may still surprise us. Let us keep hoping.
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