ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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The Budget in the Context of Long-Term Development

The finance minister wanted to provide a growth-promoting budget. But budgets cannot promote growth or even arrest the process of slowing down if the fundamentals are not addressed squarely and carefully. These fundamentals belong to the sphere of political economy and are not just economic or financial. They are the long-term factors which determine the outcomes of policies. The budget of a particular year must be seen against these longterm factors to assess its impact or its likelihood of success.

The union budget 2001-2002 clearly brings out the dilemma of a finance minister trying to push forward market reforms in India today, along the beaten track of his two distinguished predecessors. However much those two predecessors may like to distance themselves from this budget, the philosophy, the method and the language of reforms they pursued during their time were hardly different from those of Sinha. The problems they faced were also similar, as also the accolades they received from the media. Indeed, the hype that has been created this year is almost similar to the one that followed the presentation of the dream budget by Chidambaram a few years ago. In the event, it took just a few months for that dream to disappear. The so-called fundamentals of the reality of Indian political economy asserted themselves. The actual outcomes of his budget fell far short of the intended.

I have an uncanny feeling that Yashwant Sinha’s budget 2001 will also face the same fate. It is a well-drafted budget. Sinha has clearly shown his understanding of the requirements of reforms, and hopes to meet them along the lines that his predecessors would probably have taken. He seems to have fallen prey to the same temptations of the media-hype and international back-slapping, comparing his budget with president Roosevelt’s New Deal. In the process he has ignored the fundamentals of the Indian political economy, and the likelihood is very high that his assumptions will go astray and however well-intentioned his budget may have been, it will remain unfulfilled.

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