It must be noted that even the revised figures for 2000-01 provide for Rs. 2,500 crore from disinvestments. Thus far, the government has managed to garner only Rs.788 crore from privatization, Rs. 552 crore of which comes from the BALCO deal, currently under attack for undervaluing a profitable public sector unit (PSU). This implies that over March hasty privatization to the tune of Rs. 1712 crore would have to be gone through to validate the budgetary estimates. Big bargains await those who are cash-rich. And those bargains would get better still when the rush to find another Rs. 12,000 crore from privatization in 2001-02 gets underway.
 
Small savers, including retirees, on the other hand are to be squeezed. This not only helps reduce the interest burden on the government's budget. It would also force many small savers to turn to mutual funds and stocks in search of higher returns, though the risks involved are large, especially given recent stock markets trends. The increase in liquidity in the markets would of course cheer financial players who have also been given a bonanza in the form of exemption from tax of capital gains from sale of securities and units so long as such capital gains are reinvested in primary issues by public companies.
 
All of this jugglery, including the obviously irrational and shortsighted drive to hastily divest highly lucrative public assets at extremely low prices, does not help generate revenues to raise real expenditures and provide the system with a much needed stimulus from the fisc. It is this which constitutes the real fiscal crisis as opposed to the fiscal deficit per se. But within the neoliberal ideology of reform there is no solution to the problem, only a tendency to aggravate it further.
 
Given this fundamental ‘structural' constraint internal to the liberalization thrust, ways have to be found to divert attention from the real fiscal problem and provide alternative arguments as to how growth is to be triggered. Attention is diverted by making the fiscal deficit the fundamental problem, which it is assumed cannot be resolved from the revenue side but has to be done from the expenditure end. And, to show that he takes the problem seriously, the Finance Minister spends much time declaring that one of the ways he plans to reduce expenditure is by downsizing government. With attrition in the government establishment placed at 3 per cent of the current labour force, he decides to reduce employment in government establishments by 2 per cent a year by keeping new recruitment to 1 per cent of the current labour force. If this is done over the next five years, as he claims it would, government would be downsized by 10 per cent of current employment, which is the goal he sets himself.
 
Anybody with an understanding of the poor state of public services, including services such as sanitation, health and school education in non-metropolitan India would agree that India needs far more people employed in areas such as public health and education. The share of employment accounted for by government in India is much smaller than in developed and developing countries that offer better public services to its citizens. More and not less government employment is the need of the day. And the incomes generated by such employment will contribute not merely to better human development indicators, but to demand as well, providing a part of the stimulus spoken of above. This is not to deny that there may be overmanning in departments at Delhi and the state capitals, warranting some redeployment of the existing labour force. But the need to redeploy an existing labour force does not become the basis for arguing that total government employment is low. That would amount to condemning much of India's population to social services that are even worse than their currently poor levels.
 
But that is not all. The downsizing that the Finance Minister speaks of would yield little by way of expenditure reduction. As Table 1 shows, there are currently close to 3.5 million employees in government employment. However, of these 2.2 million are employed in the Railways and the postal department, both of which undertake a huge task given the size of the country, and are known to have accomplished their task creditably given the complexities involved. Another, 50,000 are employed in the departments of atomic energy and space, which like defence need to be kept out of the downsizing initiatives of the finance ministry. That implies that Mr. Sinha's downsizing exercise can apply only to around 1.2 million employees earning Rs. 11,459 crore by way of pay and allowances. Even if he successfully implements his downsizing threat, the amount saved in a single year would work out to just 0.08 per cent of total revenue expenditure, making the 10 per cent saving to be garnered in 5 years just 0.4 per cent of total revenue expenditure. Making much of this exercise is clearly a conscious or unconscious effort at diverting attention. In other contexts it would have even been dismissed as the work of a confidence trickster.
Table 1 >>
 
This issue need not detain us here, however. The real question is : if expenditures are not being raised substantially, if capital expenditures relative to GDP are to stagnate, how is the government to deliver on its promise that the downslide being experienced by the economy over the last two years, and underlined by the official Economic Survey, is to be reversed and the promise of a new 9 per cent growth trajectory redeemed. Obviously, the advocates of the neoliberal reform strategy within the government believe that the route to growth is more reform, even though reform thus far has failed to deliver and has even put the economy in recessionary mode. As a result, the stimulus to growth in Mr. Sinha's budget comes from what in financial accounting parlance would be considered “off-budget' initiatives. Borrowing heavily from the report of the Economic Advisory Council to the Prime Minister, the Finance Minister has argued, among other things, for more rapid privatisation, a revamping of the food procurement and distribution system in the country and a change in labour laws.
 
To deal with the embarrassment of rising food subsidies in a period when issue prices of food released through the PDS have been raised sharply, the government has decided to virtually wind down the system of procurement. The FCI will now procure only the amount required to maintain a “security reserve” – an estimated 10 million tones. If implemented, this would mean no procurement for the coming few years, since the government holds more than 45 million tones of food in stock.
 
Meanwhile, food movement and food distribution throughout the country is to be freed and privatized and the task of servicing the public distribution system is to be left to the states who would be provided “financial assistance” to meet the subsidy for the population below the poverty line. This would mean that the PDS is to be in large part dismantled. Markets would reach food to the people, including those who live in food deficit states. Immediately, this would spell disaster for the farming community. And if bad monsoons persist and stocks dry up, it would mean that rising food prices would erode the real incomes of consumers. Some section would lose heavily at all times. The only gainers would be the large private conglomerates, which would now enter the area of handling, storing and transporting foodgrains, who are to be provided long-term tax holidays to undertake the requisite investments.
 
This attack on food price stability and security is combined with initiatives that threaten a sharp slowdown in employment. As mentioned earlier, government employment is to be reduced at the rate of 2 per cent a year. Firms employing up to 1000 workers are to be allowed to close and/or retrench and layoff workers freely, providing the levers for a sharp reduction in total organized employment. Finally, in some of the sectors such as leather goods, shoes and toys, where small scale units employ large numbers, dereservation of production for the small scale sector is bound to lead to closure and retrenchment.
 
With incomes and purchasing power eroded as a result of slow growth and falling employment and prices set to rise because of higher indirect taxation and the dismantling of the PDS, the stage is set for growing inequality. Unfortunately it comes with low growth as well. The macroeconomic strategy implicit in the budget is one which is stagflationary. And that is combined with sectoral measures that would only aggravate the problem. The implication is clear. If the mandarins in the Finance Ministry have learnt anything from the experience with ten years of reform, it is a sense of irrational brazenness. Hopefully, Indian democracy would not tolerate such brazenness for long.