To Budget: Another opportunity Lost

By definition a Budget means “a summary of intended expenditures along with proposals for how to meet them” someone please let our Government know this
Budget means the same or similar things to most people; just the treatment rendered is somewhat different. Well to our government it has to mean something totally different.

It’s not a limit on spending, it’s not control, it is in fact how the treasure chest can be plundered.
Think about it

Why are so many government services inefficient and their private counterparts doing so very well, take mtnl for example, the telecom boom has had virtually no effect on productivity or quality, in fact the incumbent in such a huge market has done nothing while the competition has gobbled up so much of the market. Why??

Well the budget has a lot to do with this inefficiency. A private enterprise is rewarded for saving money while a government enterprise if efficient and saves some money then it’s penalized by getting allotted a lot less money the next time. It’s the sheer mentality of people who don’t understand economics and people who think they understand people trying to make economically viable solutions for “the people”
Let us just make sense of one fascinating aspect of this budget. The Rs. 60,000 Crore farm loan waiver. Here is where bad governance takes the shape of populism and ends up hurting everyone and helping the incumbent government in the near term. I often thought to myself “what’s wrong with populism”; I mean the government is supposed to think of the public good that’s why they have been elected. The answer is there is nothing wrong with populism its bad economics along with cunning and wrong use of position that I have a problem with, and this government seems to have done both with “the waiver.”

With growth rates of the country tending towards a decline on the back of a US recession, foreign investors and the industry in India needed some confidence in the capital market system of the country. The waiver which flouts the banking regulations and asks the banks to give a ‘no dues certificate’ even without reimbursing the waived amount the banks. This just sucks out liquidity from the system. To cut it short, the govt says it will clear 60,000 crore worth of bad debt from the banks books and that this is good for the banks, but here’s the catch
They will only provide 10,000 crore this year as for the remaining they claim to clear that in the coming 4 years (giving the burden of the majority of the weight of the waiver to a possible “incompetent” NDA government). In the mean time the banks have no money to show for the ‘no dues certificates’ they have issued. This pushes the country’s organized banking system to a big slow down a 50,000 crore slow down.

There are other problems with the waiver too

• It sets a bad precedent. What about farmers who have paid their debt by selling
their belongings or land or both?

• What about the farmers in the Vidarbha and Telengana region who all have land holdings greater than the lower limit 4 acres set by the FM?

The worst thing about this waiver is that it still offers no solution to the farming community. The solution to the problems of the farming community is that it’s not productive or profitable for most. The reasons are clear ever since 5th standard for me and most other paanchvi pass students. The vagaries of the monsoon determine almost completely how the year is going to be. Good rainfall = excellent harvest and the family is happy for one year and too much or too little rainfall implies debt burden increasing.

The solution has to be irrigation development. Israel which is war torn and has virtually no big source of non brackish water. It requires 1.2 billion cu metres of water annually of which a staggering 900 million is portable. Imagine if that were true in India, 75% water requirement is portable, every farmer will be able to come out of the death trap and lead a sustainable life.
Drip irrigation has helped Israel export water intensive citrus fruits as well. The catch with irrigating Vidarbha and Telengana is not the cost involved because it is much less than 60,000 crore. It is purely a matter of political will. Drip irrigation for the entire Vidarbha and Telengana region together will ensure water usage up to 95% and increase productivity by 75%. Its initial setup cost would be close to 15000 crores.


India is still not a consumer driven economy, it’s driven predominantly by government spending. This is the opportunity for the govt to spend on infrastructure and pick up stake in the growth it promises. There are a lot of opportunities of public private partnerships in the waiting. If only the Government can ‘budget’ for the losses if these opportunities are lost.
Kya humari government paanchi pass se tez hai??


(wrote this for the college IEEE magazine immediately after the budget. found it now, and thot it'll make a good read.)