"Your reach must be beyond your grasp. I set high targets," said Finance Minister P. Chidambaram, after presenting the Interim Budget that laid out ambitious targets of keeping the fiscal deficit for 2014/15 at 4.1 per cent of gross domestic product and revenue deficit at 3 per cent on the assumption of a nominal GDP growth of 13.4 per cent, tax revenue increase of 19 per cent and disinvestment receipts of Rs 37,000 crore. "This is a budget of hope," he said while fielding questions on massive expenditure cuts and lofty targets.
While Chidambaram might have averted a ratings downgrade by keeping the fiscal deficit below the "red line" at 4.6 per cent for the current fiscal year, in the process he has also made some fundamental structural changes that could potentially have far-reaching consequences.
INTERIM BUDGET 2014-15:Key highlights
Take, for instance, the cut in Ministry of Labour and Employment's outlay from Rs 1,723 crore in 2013/2014 to Rs 656 crore for the next year - labour, employment and skill development are some of the most critical issues for an economy like India which is grappling to tap into its demographic dividend. The budget for the Ministry of Rural Development has been slashed brutally from Rs 61,810 crore to Rs 7,614 crore.
Allocations for the Ministry of Tribal Affairs have been slashed by nearly half, Ministry of Women and Child Development is down from Rs 18,200 crore to Rs 889 crore, Ministry of Health and Family welfare is down from Rs 25,990 crore to Rs 7,726 crore. The rural development sector seems to have been the worst hit, with its outlay cut from Rs 50,646 crore in the current fiscal year to Rs 2,902 crore for the next year.
FULL COVERAGE:The Great Indian Budget
Such drastic spending cuts in crucial ministries have been justified as 'savings' by the finance minister. "We over-provide in many departments and ministries in the hope that the economy will grow at a certain rate...for these are savings… you might call it cut in expenditure."
The forced fiscal austerity, including reduction in grants to states, while keeping the spends on subsidies relatively unchanged at more than Rs 2 lakh crore shows up as a poor accounting exercise.
Though the minister has met his fiscal deficit and current account deficit targets, but the math seems forced and unsustainable. Postponing subsidy payments to oil marketing companies to next year, hastily going about disinvestment without strategic thinking, cutting crucial planned expenditure, and buffering up with profits and dividends of state-run companies is as short-sighted an approach as that of his predecessors.
Biocon chief Kiran Mazumdar-Shaw termed the budget as mere 'tokenism': "Today, we have $15 trillion worth of projects stuck in the country because of lack of approvals but the finance minister has only taken token measures," she said.