A K Bhattacharya: The real deficit

The fiscal slippages aren't as much of an issue compared to the lack of good ministers to handle key infrastructure posts

In less than a fortnight from now, a new government will be in place at the Centre. In all probability, the new government will be formed by a new coalition of political parties. Who will be in that coalition and who will be out is anybody’s guess.

This does create uncertainty particularly in the minds of civil servants who occupy key positions in important central ministries. Indeed, civil servants are now engaged in an intense debate among themselves on the kind of ministers who will be appointed to head important ministries and which coalition partners will get the responsibility of which ministries. A quick look at their wish list of what they expect from the new ministers and coalition partners should be of some interest.

 

The first big item on the new government’s agenda will be the Budget for 2009-10. The interim Budget that Pranab Mukherjee had presented to Parliament last February had sought a vote-on-account for government’s expenditure only up to end-July 2009. The full Budget for the current financial year will have to be presented before July ends.

This will not be a tall task. Governments in the past have presented a full Budget in about a month. The famous instance of this quick work was Manmohan Singh’s first Budget as finance minister. The Narasimha Rao government was sworn in on June 22, 1991. Manmohan Singh presented his full Budget in less than four weeks. From all available indications, it seems the full Budget for 2009-10 is likely to be presented by the first week of July.

Finance Ministry bureaucrats do not have much time though. The advantage is that all the key secretaries in the finance ministry are in place. Even if the new finance minister may not like the faces of some of the key secretaries, he can very well use them to present his first Budget at least and effect a reshuffle, if necessary, later. Remember that Manmohan Singh presented his first Budget with S P Shukla as the finance secretary and Deepak Nayyar as the chief economic advisor. Both Shukla and Nayyar left the finance ministry before Singh presented his second Budget in 1992.

The big issue before the new finance minister would be the extent of the fiscal stimulus needed to be provided for the Budget. That would largely depend on the new finance minister’s perception of what a manageable level of fiscal deficit ought to be. Already, by some account, the gross fiscal deficit for the Centre and states have widened to over 10 per cent of GDP. On the fiscal policy reform front, the new Budget will also have to outline the road map for the goods and services tax proposed to be introduced from April 2010.

Finance ministry bureaucrats are ready with a plan for both the fiscal stimulus measures and fiscal policy reforms. And they are hoping that this time too they would get a minister who is a professional. Since 1991, the finance ministry has consistently been steered by ministers who were professional and competent, even though they may have been associated with controversial proposals.

In sharp contrast, the quality and competence of ministers supervising other key economic ministries have been suspect on occasions in the last decade and a half. Apart from B C Khanduri, it will be difficult to recall another minister for roads and highways, who excelled in his job in this key portfolio. Apart from Suresh Prabhu, there was no other power minister (Jairam Ramesh had too short a stint!) who understood the sector’s problems and tackled them judiciously. The Railways got reasonably competent ministers in Nitish Kumar and Lalu Prasad, but bureaucrats in Rail Bhavan still shudder to think of their days when Mamata Banerjee was their minister. Civil aviation ministry may have got a competent minister in Praful Patel, but his interventions were often controversial and created avoidable problems.

Yet, every government that was formed after 1991 recognised that infrastructure was the biggest hurdle for India in achieving faster growth. But when it came to allocating a competent minister to head the infrastructure ministries, most governments in this period failed to meet the desired need. The absence of well-intentioned and professional ministers in charge of the infrastructure sectors has also resulted in a poor choice of civil servants at the head of many of these ministries. One way the effectiveness of the new government will be judged is the manner in which it chooses competent ministers to steer the half-a-dozen infrastructure ministries at the Centre.