Dr Manmohan Singh has been unsparing in his criticism of the Jaswant Singh budget (2003 - 2004), both for the wrong things he has done and the right things he did not.
Dr Singh says that the budget is replete with tokenisms, and that the Finance Minister has refused to address the basic problems facing the economy, even in the priorities that Jaswant Singh has set for himself – eradication of poverty, boosting infrastructure, agriculture, fiscal consolidation.

Is Jaswant Singh’s first budget strong on rhetoric, and weak on specific measures?
This is a budget of tokenisms. It does not address the basic problems facing the economy. For the three last years, the economy has been growing at a rate less than five per cent per year, there has been no growth in agriculture, and no growth in employment. One does now know how the government wants to meet the target of eight per cent growth of the 10th Five Year Plan.

Eradication of poverty has been listed as one of the ‘paanch priorities’. Apart from extending Antyodaya to 50 lakh more BPL families, is there anything else in the budget speech to tackle the problem?
There is nothing else. Poverty in India is a rural phenomenon, and the budget does not have any measures to boost agriculture. There is nothing for irrigation. There are already central schemes for horticulture. There was no need for new measures of the same kind announced by the Finance Minister.

How effective will the leveraging of public funds be in the infrastructure sector? Is there hope of private investment in this sector?
There is a lot of wishful thinking. Most of it is a wish list, of wanting to raise Rs 60,000 crore. Talk about modern airports at Bangalore and Hyderabad has been going for years. And now, Delhi and Mumbai have been added. It will be good to leverage Rs 2,000 crore of public investment. But will it happen?

Is the fiscal deficit of 5.6 per cent a worrying factor?
Fiscal deficit in India is one of the highest in the world. Ever since the BJP has come to power in 1998, tax revenues have been falling. The government has always been overestimating tax revenues, and there has been a continuous shortfall. The fiscal deficit of the states is large. And there has been a growth in inflation. It is a worrisome factor.

The economic advisor to the Finance Ministry, Ashok Lahiri was arguing that a cut in the interest rates of the provident fund and small savings will not have a negative impact because the inflation is low. Do you agree?
Cut in rates for provident fund and small savings are measures borrowed from the practices of rich countries. There they have social security, health and unemployment insurance.Our people do not have anything else to fall back upon than their savings and the provident fund.
It is not true that inflation is low. Inflation is growing, and the rise in petrol and diesel prices and the situation in West Asia will increase inflation.

The disinvestment target has fallen far below the target. Does it mean that government is not able to get out of business though they claim that they want to do so?
Well, Disinvestment Minister Arun Shourie himself has said that Oil and Natural Gas Commission (ONGC), Gas Authority of India (GAIL), and Indian Oil Corporation (IOC) will remain in the public sector. If that is so, IOC should become a strong player. But after bidding for Indo-Burma Petrol (IBP), IOC is not allowed to bid for the other oil majors. IOC is not being allowed to grow vertically. What is the purpose of privatising the other oil majors, except to help fiends in the private sector?

Is the current account surplus, about which the government is boasting, a significant achievement?
A poor country like India cannot afford to have a current account surplus. It means that the country is not able to absorb imports, and the Indian savings are not being converted into investment. That is why, Indian savings are being invested in US government securities for an interest rate of one-and-a-half per cent.

Do you think the economy is showing a certain resilience, and the government is taking undue credit, especially with reference to foreign exchange reserves?
Yes. There is resilience in the economy, but the budget has not done anything to boost investment, and foster growth.At a basic level, are Jaswant Singh and the BJP confused about the role of the state in the economy? They seem to want the state to play a decisive role in the economy, and at another level they want to pull the state out of the economy.
There is confusion. India has to follow a mixed economy model, where both the public sector has an important role to play, especially in the infrastructure sector and in agriculture. Jaswant Singh wants private banks to go into rural sector. It is good if they do, but it is not likely to happen. There is need for public sector presence in agriculture.

Do economic reforms mean that the state should withdraw from the economy, and the public sector should be scrapped? What is your position?
We believe that economic reforms mean modernisation of the public sector, and not dismantling of public sector. The perpetually loss-making units have to be sold, but there is no need to sell profit-making public sector undertakings. The state will have to play a mediatory role to tackle societal tensions in a poor country like India.

Do you think Jaswant Singh’s budget is a political gambit, and the BJP is not committed to reforms?
It is a political gambit. Yashwant Sinha used to speak of the second generation of reforms. Jaswant Singh has given up even the pretence.

Has Jaswant Singh taken some of the unpopular measures suggested by the Kelkar committee like cutting interest rates of provident fund and small savings?
None at all. He has taken a 180 degree turn. The tax and customs exemptions have continued. What Yashwant Sinha tried to do by way of rationalising tax and customs structures have been given up.

What do you think of the Centre taking over the debt of the states?
It is always good to restructure the debt of the states, because that will free the states to pursue developmental programmes. But I do not think that the states are ready for the transition to the Value Added Tax (VAT). The Centre’s offer to make up for the state government’s losses in sales tax by 100 per cent in the first year, 75 per cent in the second year, and 50 per cent in the third year are vague.

Is it legitimate to compare India and Chinese economies?
There is nothing wrong in the comparison. It is good to try and achieve the growth rate of China. But we must remember that the Chinese savings rate is 42 per cent of the Gross Domestic Product, whereas savings in India is hovering at 24 per cent. And investment efficiency is very high in China.

It is being said that China, India and South Korea are the only economies which are growing in the world. What do you think?
Indian economy is growing, but it is not growing fast enough.