A Confounding Exercise

The Budget for 2001-2002 will go down as one of the most confusing budgetary exercises attempted in recent years. One can say this not so much because of the manner in which certain key ratios, such as fiscal deficit or revenue deficit, have been juggled, as because the claims thus built into the budget would otherwise be hard to sustain. Thus the fiscal and revenue deficits are shown to decline, but only on assumptions of growth in gross domestic product (GDP) that are not clarified. To illustrate, whereas the fiscal deficit in 2001-2002 is higher than in 2000-2001 by Rs 4,342 crore (3.9 per cent), still fiscal deficit as a proportion of GDP is supposed to come down from 5.4 per cent to 4.7 per cent. This can be so only by assuming that GDP growth in current prices in 2001-02 would be 14.64 per cent which is much higher than that in the preceding year, namely, of 10.25 per cent.

The budgetary exercise thus totally ignores that there has been a significant slow down in the overall economic growth momentum. The growth rate in agriculture in the 1990s was two-thirds lower than that in the 1980s. The decline in agricultural growth covered all crops, foodgrains and non-foodgrains. It is overlooked altogether that this slow down in agricultural growth could be attributed primarily to the decline in investment in agriculture in the 1990s. Between 1990-91 and 1999-2000, the decline in the rate of investment in agriculture as a proportion of GDP was as sharp as from 2.2 per cent to 1.1 per cent, i e, by 50 per cent. In industry also, the rate of growth has been less than impressive during the 1990s. The rate of growth of the industrial sector in the last three years was significantly lower than the modest rates achieved during the 1980s and 1990s of around 6.5 per cent.