Click to play videoNew Delhi: How will Budget 2007 impact the average citizen of India? What are the key issues that the Finance Minister has to address in Union Budget 2007 so that it works in your favour? Will Budget 2007 be able to propel India on a double-digit growth path?
These were the key questions that a group of eminent politicians, industrialists, economist and young citizens discussed at a special CNN-IBN show Citizens' Budget. The show was hosted by Paromita Chatterjee.
The eminent lineup on the panel comprised of noted economist Surjit Bhalla, Congress leader Jayanthi Natarajan, CPI-M leader Prasenjit Bose and industrialist Rahul Bajaj.
Whether or not they think Budget 2007 will be able to deliver and take India onto double-digit growth track? It is with this question that the discussion kicked off, and in an instant poll among the participants, 50 per cent people said they believed it will put India on the double-digit growth track.
The key issue on the show was inflation:
Prices are spiraling out of control. Inflation is hovering close to a two year high and prices of food grains, pulses and vegetables have risen the most. When asked if the Finance Minister has done enough to control inflation, 80 per cent of the participants, however, voted no.
"Yes the prices are spiraling out of control," admits Congress spokesperson Jayanthi Natarajan.
"Anybody would have to admit that it is a very worrying trend to look at the prices of very essential commodities affecting the lives of ordinary people today. The government has to take steps on a war-footing to control it. The government has not failed in doing so. But 9.2 per cent growth is something to be proud of. There has been growth at various levels. The government has also put in place various programmes to tackle inflation. In spite of all this, prices are at this level. Clearly, something has to be done to put the prices in check," she says.
According to Surjit Bhalla, "even though inflation has been high at about 6.7 per cent, if one is to look at it realistically, inflation has been rising at only about 4.5 per cent in the last six months."
"Secondly, inflation has been in commodities and food which affect the poor, but they are not under the control of the Finance Minister in a short-term sense. They are under the control of the economy in a long-run sense. Last year, 2006, also happened to be the time period when worldwide prices of wheat and rice went up. So, the government couldn't possibly say it will produce more this year," he points out.
CPI-M Prasenjit Bose refuses to agree. "The argument that high growth necessarily lead to high inflation is theoretically as well as empirically an untenable argument. China, for instance, has far higher growth rate and below two per cent inflation."
"It's not about arguing over the rate of inflation or the WPI, it's about what are the commodities which are experiencing price rise. The spiraling prices of food items hit the poor the hardest. Mismanagement of the food economy by the government, the decision to continue with futures trading in essential commodities and high fuel prices are to blame for that," Bose claims.
Asked if the rising input costs an untenable situation for corporate India, Rahul Bajaj says "corporate India is not at all an untenable situation."
"Nobody likes inflation whether you are a corporate or an individual or cooperative. The problem is with the rise in the prices of primary commodities, which is hurting the poor. Supply side is a problem, which the Finance Minister himself has admitted. While the long-term situation looks OK; in the six-month, 12-month, 18-month, two-year scenario, we have not handled our food supplies well," Bajaj alleges. "Why is there a shortage of wheat, why there is shortage of pulses for five years? Imports don't solve the problem, we have to grow more," he says.
Bhalla doesn't think futures trading is to blame for inflation. "The Agriculture Minister has already banned futures trading. The argument that futures trading, which is about 1-1000th of total commodities, is affecting the price rise is beyond nonsense," he says.
The panel of experts also offered some possible solutions to tackle inflation:-
Prasenjit Bose, CPI-M: The primary solution has to be medium and long-term. If the agriculture sector and PDS is not revived, nothing is going to happen even in the medium term. In a situation of shortage, if you have futures trading and there is speculation, it is bound to aggravate shortages and appreciate prices.
Lastly, do away with the ad valuerem duty structure on petrol and diesel. Chidambaram has cut customs duty on steel and cement but I don't really know how is it going to impact the rise in inflation and food prices. Cutting down duties on petrol and diesel will definitely help control the prices in the short run.
Jayanthi Natarajan:In spite of cutting the subsidies, strengthening of PDS is definitely the most obvious thing to do. The state governments need to pay attention to better management of PDS. They have to ensure that there is no hoarding, that goods are available.
Surajit Bhalla: Do away with the PDS in the hands of the government. Give PDS to private hands to make it more efficient. There is large amount of efficiency within the people of this country, but not within the government. There is a big gap between what the farmer receives and what the retail price index is.
Rahul Bajaj: I don't think the problem in this country can be solved by the public sector or the government. I don't think the problems of this country can be solved alone by the private sector. We need a public-private partnership. If they don't trust us, it's just too bad.
Let's not forget that there is an element of connection between inflation, growth and employment. If you are going to artificially control inflation without knowing the reason for that, you could hurt growth and if you hurt growth, the maximum impact is on the poor, on the fixed income earners. The rich are well-off anyway. It hardly makes any difference to them. Don't hurt growth, but devise ways to minimise inflation.
Is agriculture the biggest worry for the Indian economy?
In the audience poll, an overwhelming 90 per cent of the audience said yes. The agriculture sector is at present growing at just about 4 per cent, which is really sagging when compared to manufacturing and industry. What's the big problem?
According to Surajit Bhalla, no matter which country it is, no matter whether it is China or India of Europe in the 19th Century, agriculture typically grows at a much slower rate than industry. "In a long-term sense, agriculture cannot grow for more than a 3 or 3.5 per cent. But that doesn't mean we are doing well. At the same time, an 8 per cent growth for agriculture is an impossibility," he explains.
"The real problem with Indian agriculture is a distorted, messed-up policy that we have towards wheat, towards rice and towards fertilizer. All the fertilizer subsidies that the Finance Minister gives year after year, about Rs 35,000 crore or 1 per cent of the GDP, accrue to the firms making fertilizer, not to the farmers. So that does not increase productivity of the farmer. And those firms are mostly government firms producing very very bad fertiliser at very high prices. Stop the protection to the inefficient industry in the hands of the government," he demands.
Bose disagrees. "Agriculture is subsidised all over the world. There is not even one country in the world, which does not subsidies its agriculture, precisely because industry can fix prices for their products while agriculturists can't. Their prices are fixed by the government through minimum support price. Subsidies are required for agriculture," he says.
"Until and unless you make agriculture viable and take it out of the crisis, if the government doesn't spend enough on agriculture, you cannot get this sector out of crisis," Bose argues.
Natarajan agrees to that viewpoint. "There has to be greater public investment in agriculture. That's why the government is trying to increase rural credit so that the immediate burden of farmers who seek credit is reduced," she points out.
Bajaj also says that it's high time India makes the agriculture sector viable. "This means the total cost of production has to be lowered than the realisation that the farmer gets. If the farmer loses his money and takes a loan, waiver of the loan interest will be no solution. The tax-payers are paying for it and inflation if paying for it. That could be a short-term solution for farmer suicide, but that's not a long-term solution," he argues.
"We need to increase yield, increase productivity in agriculture. Over 60 per cent of Indians live on agriculture, which is less than 3 per cent in the US. Even if we can bring it down to 20 per cent, we need to employ 400 million people in industry and services. And how will the 20 per cent produce all the food stuff that we need and export? That will have to be achieved by improved productivity and improved efficiency," Bajaj envisions.
Audience poll on employment: Are there enough jobs in the economy?
When asked if the generation next feels there are enough jobs that the economy has created, at least 50 percent yes, while an equal strength said no.
“The question is not just of having a job available in the market. The job must also be the one that matches up to ones qualifications and capabilities. I might have enough talent, but if the right kind of job is not available for me, it’s better to be unemployed in that case,” said one management student who said though she has done her majors in finance and looks forward to “a job in the finance sector” there are not enough financial jobs in the market for a fresher.
Responding to the issue, one of the potential recruiters across the country Rahul Bajaj (of Bajaj Auto Finance) agreed that in his firm alone, he gets more job applications than the available jobs.
“The organised private sector provides employment to eight million people. Ours is a thousand million population atleast out which 500 million may be a working population. The organised sector is ruthlessly pressed in this country and is not allowed to grow because there is a rigid labour policy. As an outcome we are not able to employ too many people. So, the rest of them have either the option of agriculture—which is not viable and is in a suffering state—or they are let in the unorganised sector where the pays are less and the working conditions are bad.”
Bajaj stressed that in order to make the economy grow, we need to “create more jobs,” and for that “we need to produce more.”
“We need a bigger market, both domestically as well as globally. If we want to conquer the world, we need to be efficient. How do we be efficient? There is just on guru in this world that forces you to be efficient. It’s not the Harvard Business School. It is competition. Telecommunications, insurance, airlines you create competition, let private sector come in, let the size of the market increase and the services will improve,” said Bajaj.
“I was the chairman of Indian Airlines in 1986. I know what that service was. See the service today. Create competition in roads, railways, everywhere,” he added.
Jayanthi Natarajan who boasts of an ambitious plan whereas the rural sector is concerned said, “more needs to be done” in the present situation, where there are a lot of qualified young professionals who don’t have enough jobs matching up to their expectations and credentials. “I won’t talk about the management graduates—who are highly professional and who after a while do get suitable jobs. I am talking about another level of skilled labour. We need to focus on people who must trained with a certain set of skills, to help them get jobs,” she said.
Is there a mismatch between the job opportunities and student’s qualification?
The audience were asked if they feel they are not offered the kind of jobs they are actually qualified for. Somewhat 90 per cent of the audience agreed with the view.
Surjit Bhalla said inefficient labour laws were responsible for such inadequacy. “As Rahul Bajaj pointed out earlier, we have got one of the most archaic labour laws in the world. If we employ more that 10 people or fifty people, we have to seek permission from the government, to be able to fire or hire anybody. This is completely untenable.”
Bajaj said that such laws are obsolete in today’s age. “The labour laws need to be reformed so that entrepreneurs, business people can hire and fire as they please. This is how it is everywhere else in the world. There is nobody around who believes that once you enter a job, you must remain in it forever,” said Bajaj referring to the public sector jobs.
Prosenjit Bose however, took an opposite stand. “We are having a programme on the budget. We are supposed to discuss what kind of impact can budget have on the job. Suddenly, we are having a poll here on labour law reforms,” said Bose.
“I want to emphatically, reject this whole argument. Budget has got nothing to do with labour law reforms. Budget is the annual financial statement of government expenditure and revenues. Labour law reform is not on the agenda,” he added.
CPIM leader said a ‘hire and fire policy’ would be no solution to the problem of unemployment in the country. He said in fact the labour law reform was not on the agenda of budget at all.
“Mr Bhalla and Mr Bajaj if they refresh their memory they would know the French Prime Minister, one year back nearly lost his job because of the fact that he wanted to introduce hire and fire for young people aged 24-26. The entire French youth protested and successfully got the labour law reforms,” said Bose.
One of the audiences cited the high attrition rate on the private sector and said that he seems to agree with the view that labour law need to be modified.
“If the labour laws are changed we might grow into a better economy,” he said, adding, “the attrition rate today is 69 per cent. People don’t stick to a particular job for more than six months or a year. A radical change should definitely be on the cards.”
Audience Poll: Infrastructure
One of key things on Finance Minister’s agenda is infrastructure. Roads, power, water are key areas, which remain inadequate even in our present day economy.
Has the government done enough for boosting infrastructure?
The audience were asked if they think that the Government has been able to deliver, when it comes to basic infrastructure. A whooping 90 per cent denied that they are satisfied with the Government’s performance in this regard.
Congress spokesperson Jayanthi Natrajan blamed the financial constraints for the failure. “We would have been able to deliver. But there are constraints. I’m not even politicising it, but for any government there are budgetary constraints. The focus is there on infrastructure and particularly on rural infrastructure, housing, drinking water—the issues that affect rural sector this time,” she said.
“I think this Government has done a great deal trying to achieve goals set out not just by the Congress manifesto but also as under the Common Minimum Programme,” she added.
Rahul Bajaj said he sees a huge bottleneck when it comes to improving the basic infrastructure in the context of corporate sector, “Infrastructure is one of the major problems of India. This is one area where you have to learn from China. What they have done in the past 20-years, had we done even half of that we could have been way ahead of China in every respect.”
“Our infrastructure is a disaster as compared to what we need today. Jayanthi Natarajan talks of resources and delivery. Yes, there is a limitation to everything but let me bring into context public-private partnership. Government should bring into use private sectors’ capabilities and money,” he added.
Economist Surjit Bhalla however took a contrary stand on the issue. Giving full credit to the UPA Government Bhalla said, “UPA has been on a war-footing as far as the infrastructure is concerned and I think they are delivering.”
A clear difference of opinion emerged when it came to ranking UPA Government’s ‘value adds’ to the infrastructure.
If I was the FM…
“What would you do if you were the Finance Minister?” was the open question posed to the panellist and audience of the show. They gave their inputs had they been assigned the job of making the budget 2007.
Industrialist, Rahul Bajaj: “I would not do anything that hurts the industry or the market for the sake of ensuring growth. I don’t want reduced taxes, but I want general goods and services tax that FM had said last year he would bring in April 2010. The earlier the better I would say.”
Economist Surjit Bhalla: “I would talk of simpler things. Allow this country to b one. And allow people to move from one place to another without bribing a government official. FM himself says that from now on, there will be no more octroi. That’s a very simple thing to be done and I hope he does it.”
“The second, in order to bring down inflation and increase growth, you’ve got to change the orientation of the government from producing things to financing things. Get the government out of business and have the government spend more,” he added.
CPI-M leader Prasenjit Bose: “I would want the Government increase spending on agriculture, education, health, rural infrastructure and public distribution system. In order to spend in these areas, I would suggest remove the tax concessions and exemptions available to the coporates.”
“A new lot of crorepatis has is come up in this country, and on them I would ask for an increase in the wealth tax. Billionaires are on the rise in a massive scale while the wealth tax collection is only a paltry 265 crore. Tax the rich and spend for the poor,” he added.
Congress leader Jayanthi Natarajan: “I would push for greater spending by the government on public health. The budget should have greater allocation for women in all sectors and schemes.”
Final Verdict: Will this budget be a citizen’s budget?
The audience gave their final verdict on whether the forthcoming budget is likely to take into account the issues and concern of the common citizen.
About sixty percent of the audience said no while 40 percent of them said yes.
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