That's all, Your honour!: Mar.11-17

1. The Railways minister of India, Mr. Dinesh Trivedi presented his maided railway budget last week. After he presented the budget, he was asked to resign by his party chief!! Such kind of bizarre events can happen only here! So what exactly happened? 

Dinesh Trivedi increased rail fares. It is the first time in the 8 years rule of UPA that the fares have been increased. 2 paise/km increase for lower class. 5 paise/km increase for sleeper class. 10 paise/km increase for 3rd AC. 15 paise/km increase for 2nd AC. 30 paise/km increase for 1st AC. That is what has been proposed in this budget. And Mr. Dinesh Trivedi did not discuss this issue with his party chief - Mamta Banerjee! It apparently came as a rude shock to Mamta who was furious at being bypassed. Hence she shot off a letter to the Prime Minister asking him to replace Trivedi with Mr,. Mukul Roy. 

At his press conference after presenting the budget, Dinesh Trivedi has said more than a couple of times that the Railways is in the ICU. If this increase is not implemented, we can say "tata bye bye" to the railways! The seriousness of this enormous comment cannot be wished away. The new Railway minister of the UPA tells us that the old railway ministers of the same UPA have screwed up the railways so much that the only option left to bring them out of the ICU is this increase. Which begs the question - why was this screwing up allowed? What exactly happened that Lalu Prasad Yadav and Mamta Banerjee have inflicted this pitiable state on the railways? Yashwant Sinha of the BJP asked the right question - The Prime Minister should explain why fares were not increased for the last 8 years! 

But ofcourse, he won't explain that! The next day, opposition parties question the government on the status of the railway budget and the railway minister. As always, Finance minister Pranab Mukherjee stood up - says that neither the PM nor the cabinet has to approve this. Only the finance minister has to approve it and now the budget is the property of the parliament! As always - the Prime Minister has nothing to do with this. The uncertainity still continues. If the Prime Minister accepts the resignation, then this will be yet another low in his already near-full basket of lows! Why should a minister be punished for trying to do his job? After a long time, we have seen a minister talk about cleanliness in the railways. This budget promises bio-toilets, which will replace the existing open discharge toilets. The budget also talks about some "green" initiatives like use of solar power etc. The budget also placed importance on the safety of passengers and announced a slew of measures. 

Now, why wouldn't the traveller be willing to pay a little more, to avail facilities? Why should there be no hike in fares for as long as 8 years? This is exactly what happens when you don't raise fares for 8 years - you have to do it at one go. And the ensuing ruckus will ensure you cannot do it peacefully also! Hail UPA! 

2. 2 days after the Railway Budget was presented, finance minister Mr. Pranab Mukherjee presented the General Budget. As always, there was massive hype before the budget. Will this be the reform budget everyone is waiting for...blah blah blah. And quite expectedly, this budget turned out to be a damp squib. No reforms announced - only increase in indirect taxes that will burden the consumer (or the aam aadmi). So now your cars, ACs. fridges, two-wheelers, gold jewellery, flight travel, AC travel in train, eating in hotels, cosmetics etc etc will cost more. Some taxes have been cut - like the ones on imported drugs for treatment of cancer. Overall, this budget was aimed to making more money through indirect taxes - you can't blame the FM for trying so. The reason being - this government is undertaking massive social sector spending for which they need income too. How to get income? The tax-payer is there no! Burden him more, he will  whine for a day and then continue to pay taxes! That's all, your honour! 

Disinvestment; and number crunching on budget

There were two very excellent articles in The Hindu today.

The first one (click here) is related to the disinvestment policy that the UPA government is proposing to follow. Siddarth Varadarajan begins with why some of the decisions of the NDA government failed and then continues to suggest how to get back to the basic principles. I felt this article is a very good one to gather a nice understanding of the process.

A brief excerpt:

"Before going down this route, however, it is essential that the case for privatisation be discussed anew from first principles. And that this discussion be conducted rationally, without the free market dogma and leftist sentimentality that has tended to cloud the real picture. Broadly speaking, one needs to ask four questions. First, is public ownership of industry inherently inferior to private? Second, is private ownership the only way to deal with managerial inefficiency? Third, is there a difference in the positive and negative outcomes produced by privatisation through the strategic sale route and through the sale of shares to the public? Fourth, is plugging the fiscal deficit a sound rationale for disinvestment?"

The second one (click here) is related to the number crunching from the Budget 2009. S. Gurumurthy exposes some of the claims made by the FM in his speech, and provides us with concrete numbers to prove why the increase in deficit has less to do with "fiscal stimulus" and more to do with subsidies etc. He ends the article on a very interesting note - "But that calls for a different leadership which no party in the country seems to possess."

The Good, Bad, Ugly of Budget 2009!

The Good:

• Spending to be increased on the social sector.
  
• Instead of just announcing sops to the agricultural sector, the FM announced some practical measures to help farmers. The increase in the farm credit target is a good step. Also, the FM proposed to reduce the interest rate from 7% to 6% if the farmer pays back the short term loans promptly. The best step is the proposal to move to a system of direct transfer of subsidy to the farmer. If implemented, this will be a very far reaching decision in enabling the farmer to get rid of middlemen.
  
• I think the disinvestment policy, started by NDA, is back! This ministry was scrapped when the Left insisted during the first term of UPA rule. FM says that this time, the public also will be involved in this process. Maybe they will open up shares to the public this time, we have to wait and watch.
  
• Rs.2,000 crore has been alloted for higher education, which is a huge amount. This amount has to be invested into improvement of infrastructure, and research and development. Otherwise, it is money wasted. If anything, we need more research to be happening in our country. That's the only way innovation can be nurtured.
  
• Though expected, the outlay for Commonwealth games has been increased too. I have no doubt that we will succesfully conduct the games but we need to pump in more money into developing our sportspersons!
  
• Our economy hasn't broken down despite the turmoil all around! The FM said that this was primarily because the RBI took a lot of steps to ensure flow of cash into the economy.
  

The Bad:

• Spending on infrastructure is gone for a toss! I think the government has to choose between spending massively for social sector versus the infrastructure sector. UPA choose the former. A fine balance between both these sectors would have helped better in the development and growth of the country. It is important that we invest in roads, irrigation projects, sports facilities, law and order, power etc. Allotments have been made to these sectors, and FM concentrated on % increase in these sectors instead of the actual numbers.
  
• The salaried class got nothing! If anybody is being affected with the economic downturn, it is the salaried class. The massive rise in food prices is affecting the middle class the most, and they got nothing from this budget.
  
• Nothing in the budget says about how the government proposes to reduce the spiralling food prices. It would really have been good to hear about this in the budget.
  
• I am not a big fan of the National Food Security Act, primarily because it talks only about providing Rice and Wheat at Rs.3 a kg for BPL families. Most of the state governments are already providing these at Rs.1 or Rs.2/-. Even in states that don't provide at these rates, rice and wheat are provided at Rs.5-6/- per kg. Now, what was the need to reduce this by just Rs. 2/-? This might prompt other state governments to get the rates lower. In today's time, I do not think Rs.5 or Rs.3/- really doesn't matter a lot to the BPL families too. Food security act should concentrate more on providing nutritous items at a subsidised price.
  

The Ugly

• Rs. 500 crore for Tamil Refugees?!?! Seriously?!?
  
• Rs.1000 crore for Aila Cyclone rehabilitation. While I have no issue with this money being alloted for this cause, pray what wrong did the people of Bihar do? Kosi river did massive and unprecedented damage to almost the entire state of Bihar, and they have been asking for funds from a long time. Yet, for reasons known to all of us, Bengal gets this provision!
  
• These steps also sets an ugly precedent, because this brings into focus the stupid influence regional parties are beginning to have on national policies. Many such disasters have happened in this country, will the FM give the same level of treatment to all the states?
  

Summary

All in all, this budget was totally on expected terms. Neither was it path breaking, nor was it mind blowing! I thought that the middle class will get some cheer, considering the economic situation but it is the poor, the farmers and the corporates that seem to have benefitted from this budget. Also, given the huge amount of spending the government is doing now, the tone of the next two budgets might remain similar.