The Budget is dead, long live the Budget

Free Press 26-3-2001

Corruption cost this country Rs 250,000 cr. in the last10 years

The budget is dead, long live the budget; It was not killed by Tehelka, as many people think. It was killed by the stock market, which has been crashing ever since the budget, and for very good reason. It is a wrong budget, at a wrong time and it is going to play havoc with the nation’s economy.

But Yashwant Sinha is a lucky man. The stock market crash has come at the right time for him. He can now blame the crash as well as Tehelka for the disastrous results of his budget. When he stands up in the Parliament next year – if he is still in the government, and the government is still there – he will say that he must not be held responsible for what happened after the budget. It is like saying that the operation was successful, but the patient died.

I have been saying for some time that the economy is in a state of collapse and there is nothing the government can do unless it revises its disastrous free-market policies. You go round the bazaars and you see the fall-out everyday. There are very few customers in the shops, many of which do not open at all. In one shop I know, daily taking have come down from a lakh a day to six thousand. The man has three assistant’s who now twiddle their thumbs and pass time drinking tea. 

The s-called “new economy” industries have also crashed. The companies are closing by the dozen, not only in India but all over the world. Software companies are also down, because foreign buyers have cut down on their business. Infosys shares are down to Rs. 4000, against 10,000 a few months ago. And companies in Silicon Valley are downing shutters and sacking their staff workers, including Indian Software programmers whom they used to woo until the other day.

Where is Pramod Mahajan now? You don’t hear much from him nowadays. Nor the great worthies who believed that India was getting very close to paradise riding on the software crest wave. The fact remains, as I have often said, that India had nothing much to contribute to IT revolution except IIT graduates. They could perform as long as they had jobs. And whether they had jobs depended very much on the economic health foreign companies who employed them.

We should see things in perspective. The IT industry is expected to have a turnover of less than 10 billion dollars this year, including six billion dollars of exports. The bulk of exports are contract jobs depending entirely on orders from overseas firms. Ten billion sounds big but it is less than 2 per cent of India’s GDP. Ten billion dollars is worth around Rs.50,000 crore, which is  the turnover of Reliance group. Can an industry worth no more than two per cent of GDP make much of a mark on the economy ?

The total number of IT workers is probably no more than 500,000 or, say, dying industry. There are foolish people who argue that we don't really need an agriculture industry. We can be a superpower in IT make so much money that we can import all our food from abroad, and forget about producing anything here. It is this kind of people who are advising the government at the moment.

But what has this to do with Tehelka and the defence scam? Corruption cannot be compartmentalised when it becomes a way of life, as it has obviously become. It breeds middlemen everywhere, whether he is the brother of a clerk in the municipality or the son of an MP.

When you are out to make money, and have the right connections, you use them. If everybody is monetising his or her assets, and if your only asset is your access to the powers that be, and if you are not assailed by any principles or moral considerations, you go ahead and make money, as politicians, bureaucrats and businessmen did in the defence scam.

Before it came to power, the BJP always gave the impression that it stood by certain principles and it would not com promise them. This is what the Congress had also done in Nehru's days. But after coming to power, the Vajpayee' government suddenly went back on the party's policies, just as the Congress had done under Narasimha Rao. Neither the Congress nor the BJP has explained why they went back on "their own principles and why the policies they were adopting were superior to the earlier ones.

They did not explain because there was nothing inherently superior about their new policies. And that is precisely why the policies failed. Five years of Narasimha Rao's reforms did not benefit either the farmers nor those below the poverty line. Foreign investment certainly went up, but so did prices.

There was no increase in GDP growth rates and no increase in jobs. It is true that the upper class made a lot of money, but it always does no matter what policies you follow.

Once you take the attitude that principles and ideals are for birds, and promiscuity pays, you are sailing in dangerous waters. There is nothing to guide you and you are on your own. You then come under the pressure of vested interests, particularly those with deep pockets and Swiss bank accounts. These people are everywhere, whether you are buying 01 selling, for it doesn't matter what you buy or sell, as long as they get their cut.

So you have a new type of government, a government running on commission. The commission agents rule the roost, and often they are your own men, with links that go right to the top. This happened in the case of Bofors and it is now happening in the case of defence deals and privatisation of public sector units.

Those who believe that no money has changed hands under the table in the case of Balco, the aluminium company now in dispute, will probably never understand the ramifications of the middlemen's community in the country, In the case of Balco, the government was under tremendous pressure from foreign investors, to privatise. The pressure was mounting as the budget approached. The Balco sale got big headlines in foreign newspapers and it was also mentioned by the finance minister when he visited Germany after the budget as a great achievement.

At the same time, it was anxious to see that Baico was not sold too cheaply. The Sterlite offer came in very handy. Sterlite was also getting a big aluminiun plant for next to nothing. It would have to invest something like Rs.2000 crore to set up a plant of Balco's size. The deal was struck, but not without some itching palms getting greased. Corruption is costing this poor country at least 2 per cent a year in GDP growth. Since our GDP is now around 500 billion US dollars, it is costing us ten billion dollars a year, 01 Rs.50,000 crore. In the last ten years it has probably cost us over Rs.250.000 crore, which is almost the size of the central budget. It is actually costing us ten times as much as all other losses put together. It is a pity that instead of curbing it, as it had promised, the NDA government is actually promoting it!