By all accounts, Mr Chidambaram presented a credible and creditable budget. He had to achieve balance in a complex situation – between political compulsions and fiscal prudence, quest for economic growth and concern for equity, and infrastructure needs and populist impulses.
On the whole, the annual budget for fiscal 2005-06 signaled continuity with change. The course of economic liberalization, rational tax structures and growth-oriented policies continues. This is the remarkable feature of our budgeting in the post-1991 era. Gone are the secrecy and arbitrary ways, often leveraged for private or party gain. Increasingly, our economic policies and budget exercise are predictable and stable, rational and responsible, and on the whole, fair and pro-growth. Yet this budget marks a decisive change in favour of the social sector. In the twentieth century, education and healthcare have come to be recognized in all of the civilized world as the best guarantors of vertical mobility for the poor, and the surest means to promote durable growth. Our economic reform process so far has not addressed these two critical areas adequately. Consequently, growth became self-limiting as the bulk of the population could not fulfil its productive potential. And economic reform has been seen as pro-rich, a perception which made consensus on reform elusive.
In many ways, the 2004 Lok Sabha verdict is a wakeup call. In 1996, Congress party suffered as liberalization was seen as being insensitive to the needs of the poor. Again in 2004, the verdict in some measure reflected the failed consensus around reform. A high growth rate of 8.5 percent, competent economic management, political stability, and proven capacity to leverage diplomatic and strategic clout for economic gain would normally have ensured the reelection of any government. But like in 1996, the failure to craft an economic agenda which addresses the concerns of both growth and equity in a credible manner led to an unexpected outcome. The fact that, broadly, the anti-establishment vote of the poor and marginalized sections led to the outcome of 2004 cannot be ignored.
Against this backdrop, this year’s budget is the first serious effort after 1991 to combine growth with concerns for equity. But for this to be durable and successful, we need three conditions to be fulfilled. First, equity should not be confused with populism. Meaningless subsidies which do not touch the lives of the poor and irresponsible slogans deepening the class-divide and provoking hatred do not constitute pro-poor policies. The best antidote to poverty is the creation of genuine opportunities for vertical mobility. Education, which allows the fulfillment of human potential and promotes skills; and healthcare which eliminates avoidable suffering and prevents immiserization and indebtedness, are the two keys to unlock the door to prosperity. These two, coupled with basic infrastructure which facilitates investment and growth, will lead to productive employment and poverty reduction.
Second, mere accent on education and healthcare, and even substantial additional allocations, will not guarantee desired outcomes. Our public service delivery is in shambles, and these two critical sectors are the worst sufferers. Accountability in education is virtually absent, and enrollment, or even retention of a child in school, does not necessarily impart functional literacy, let alone quality education and skills. Given the crisis in higher education, many teachers themselves lack conceptual clarity. In healthcare, the situation is even more gloomy. Public health systems have, in general, collapsed, and the only tangible output is an occasional immunization drive, or family welfare campaign in some pockets. Accountability, choice, competition and quality are all conspicuous by their absence. Any meaningful effort to accelerate social development must strive for these through institutional reforms. Mere money does not take us far, though larger allocations are absolutely necessary.
Finally, we need a stable political climate and peaceful and cordial atmosphere which promotes broad national consensus on vital issues, even as there is space for competition and political contestation. Democratic politics is about challenging status quo and promoting creative tension, while at the same time avoiding conflict, breakdown of dialogue and violence. Our democracy is robust and genuine precisely because we have, in a large measure, succeeded in allowing tension without conflict. Peaceful transfer of power, and underlying respect for the democratic rules of the game have been the hallmarks of Indian democratic experiment. The internal emergency of 1975-77 was a regrettable departure from this otherwise healthy norm. True, there were aberrations like the Jagadambica Pal episode in UP in 1998, or the August 1984 coup in Andhra Pradesh. But the same elements in the system acted quickly to defuse the situation. When such correctives have not been applied, the nation has paid a grievous price.
But in general, the past fifteen years have seen a measure of stability and respect of the rules of the game. All parties came together to enact an excellent political funding law, creating tax incentives for donors. The much-abused Article 356 has at last become what Ambedkar hoped, a dead letter. Governors started behaving like Constitutional heads of state, not omnipotent agents of an all-powerful and partisan Union. Defections have drastically come down, and even party splits are no longer possible with the 97th Constitutional Amendment. A healthy and more balanced federalism has taken shape in the past decade.
Suddenly, all these wholesome developments are in jeopardy. Mischievous and misplaced acts of nominated and partisan state governors, ostensibly in order to protect ‘secularism’, have done immense damage to our polity. In the short term, they undermine the credibility of the Manmohan Singh government severely, whether or not the Union government is involved in these unholy deeds. And this enormous price is paid for petty short-term political gains to a few legislators in small states. With friends such as these, the UPA government does not need any enemies. And the political heat and viciousness generated now endanger the robust economic growth and the welcome emphasis on equity concerns and social development. The belated steps of UPA leadership to retrieve the situation are welcome and necessary.
Once and for all, the major political parties and the influential players who have stakes in our future as a nation must come to their senses. Is power at any cost the end of our pursuits, or is it a means for the larger goals of nation-building, economic growth, and opportunities for all?