The Economic Survey, the annual pre-budget,
state-of-the-economy report issued by the Finance Ministry is meant
to be an exercise in stocktaking that provides the background for initiatives
to be launched in the Budget. But in recent times, as the neo-liberal
agenda and the obsession with the fiscal deficit it entails has constrained
the maneuverability of the government, the budgetary exercise has had
little to do with the actual state of the economy.
To start with, additional revenues are virtually impossible
to mobilize within the neoliberal policy framework. Additional direct
taxes cannot be mobilized as that would adversely affect private initiative,
customs duties have to be reduced as part of trade liberalization, and
excise duties have to be cut in the hope they would generate additional
demand for industrial goods from the upper-‘middle’ class.
As a result, tax revenues as a percentage of GDP fell from 10.1 per
cent in 1990-91 to 8.2 percent in 1998-99, and though provisional figures
for 1999-2000 point to a marginal recovery, the evidence of decline
is clear.
With the tax base shrinking, and revenue expenditures
burdened with irreversible outlays on interest payments, capital and
social expenditures have to be cut to keep the fiscal deficit in control.
Within the neo-liberal framework there is only one alternative available
in this context to sustain capital and social expenditures: that of
divesting equity in profitable public sector undertakings to garner
resources that can be frittered away to keep the government’s expenditure
figures rising. Despite the irrational, short-run nature of any such
initiative, the government has been desperate to adopt such as policy,
targeting sums of up to Rs. 10,000 crore as “revenues” from
privatization. Unfortunately, the logic of the market is such that any
such desperate effort to divest equity to garner resources could succeed
only if public assets are undervalued massively, as has been sought
to be done in many recent instances of regular and strategic disinvestments
of large public undertakings to bargain-hunting domestic and foreign
capitalists. Since, there are limits to which this can be pushed ahead
within a democratic framework, the privatization effort has, fortunately,
been a complete failure.
This essentially means that the State can no more
serve as the stimulus to growth. Nor has the much promised boom in private
investment led by exports materialized despite ten years of liberalization
of trade and foreign investment rules. As a result fiscal paralysis
results in an underlying tendency in the system for growth to slacken.
It is not surprising therefore the fundamental message delivered by
the statistics incorporated in the Survey is that of an overall slowdown
in growth and a slump in the commodity producing sectors, viz., agriculture
and industry. GDP growth has fallen from 6.6 per cent in 1998-99 to
6.4 percent in 1999-2000 to an estimated 6 per cent in 2000-01. In three
of the last four years, the index of agricultural production has registered
a decline varying between 0.7 per cent and 6.1 per cent, making the
7.7 per cent growth in the good monsoon year 1998-99 inadequate to ensure
a positive trend growth rate. And industrial production growth during
those years has fluctuated between 4.1 and 6.7 per cent, which is well
below the 8 per cent average growth rate registered during the 1980s.
It is not just growth that has been the casualty.
Movements in social indicators and the incidence of poverty reflect
clearly that progress on the human development and poverty alleviation
fronts have substantially slowed and in certain instances have even
been reversed in recent years. The Survey skirts this issue in many
areas, but in others such as the poverty reduction front it resorts
to an obvious sleight of hand. Evidence of consumer expenditure surveys
from the NSS have revealed that till 1998 the incidence of poverty has
at most stagnated or perhaps even increased during the 1990s, as compared
with the significant reductions recorded in the 1970s and 1980s. To
counter this, the Economic Survey cites the completely non-comparable
estimates yielded by the contaminated 30-day recall figures in the 1999-2000
consumer expenditure survey by the National Sample Survey Organization,
to suggest that poverty may have declined significantly during the 1990s.
Realizing that this judgment is unacceptable given the change in methodology
in the 1999-2000, 55th Round NSS Survey, the Survey itself
notes that the 1999-2000 poverty figures are not “strictly comparable”
with earlier estimates. This half-hearted honesty has however a deeper
motive. It helps divert attention from the available figures, which
suggest that progress on the poverty alleviation front during the so-called
reform years has been disastrous. But clearly, those who seek to divert
attention from a set of facts, are obviously cognizant of those facts.
Faced with these circumstances, the message which
should have been derived from the survey’s figures is that there
is need to reconsider the tax and spending strategy underlying the neoliberal
reform policy, and a new beginning that reverses such reform should
be made in this budget itself. But clearly the dominance over policy-making
under the NDA government of interests, especially international financial
interests, which back neo-liberal reform is so overwhelming that this
option cannot be countenanced.
