Whether someone likes it or not, Pakistanis and Indians inadvertently measure success through a comparison analysis between each other. Sadly, in most instances this rivalry tends to be unhealthy, but if somehow this negativity can be converted into positive energy, both sides stand to gain a lot. Given stark geographical and cultural similarities, mistakes can be avoided and successful measures undertaken on one side can easily be replicated in the other, thereby avoiding needless experimentation on many counts. It is in this context that one needs to analyze the recently announced Indian budget and to determine whether Mr. Dar, can also benefit from certain policy measures announced by the Indians by using them in his upcoming budget speech.
The Indian government’s 2015-16 budget, surprised quite a few pundits who were leaning towards it to be a reformist budget, where instead it has lacked any ‘big bang’ reforms and is simply aimed at balancing the need to boost business and to help the poor. Announcements such as, an $11.30 billion increase in spending on crumbling roads and other infrastructure, and to cut the corporate tax rate to as low as 25%, an act that would induce higher tax revenues through incentivizing corporate profitability, portray a governmental mindset that wants to convey the message to the Indians that if you work hard the rewards will be yours. The budget also saw to it that enhanced support is rolled out to old and new pension schemes, insurance and social security programs for tens of millions of desperately poor, along with tougher penalties for wealthy people who stash their cash overseas to avoid paying tax. Clearly to pursue this last point may be a difficult task in our case.
Since Mr. Modi had a strong influence in preparing this budget and given his track-record in Gujarat, many people had hoped for the budget to be a sharp and visible departure from ‘business as usual’. Some economists had been hoping that the BJP government will slash the more than $35 billion annual subsidy bill championed by the previous left leaning government, and will start a privatization process to dispose off the inefficient state-run banks and corporations. They have been proven wrong on both counts. On the contrary the government announced to increase its efforts and has provisioned for a direct-budgetary-support to help two-thirds of Indians still living on less than $2 per day. Privatization took a back seat, where the government took an entirely opposite stand by renewing its faith in India’s public sector enterprises (PSE). Wanting to capitalize on the traditional strength of its PSE – State Enterprises still form 25% of the Indian Corporate sector, where it has devised an innovative plan to spur growth and investment by making them not only partner, but also lead the private sector into making investments. For example, initiatives like: announcing US $137 billion investment in Indian Railways, which in-turn will also open up related projects for the private sector, and the plan to turnaround its national carrier, Air India Limited, are only to name a few amongst many others. Out here, so far PML-N’s current privatization vision remains flawed and needs to quickly change direction.
In short what the Indian budget has done is to set the stage for growth along with social equity. For any government, that actually thinks and cares, the most important aspect of a budget should be a real move toward comprehensive social security for the poor, or a “just and compassionate society” (Amartya Sen). And it is Mr. Sen who argues that whereas “poverty can be partially alleviated through relief; it can be eliminated only through creation of jobs and equitable growth in an economy.” What our economic managers also need to remember is that growth is not merely a statistic. It has to be in flesh and blood, if it is to mean anything other than a few extra numerals on budgetary outlays. If there are no jobs, and if there is no opportunity for talent, then the economy is only the crackle of a paper tiger. For Mr. Dar’s budget to be meaningful, he has to come up with a document that is crafted with honesty, realism, imagination and a powerful vision of Pakistan’s future.
Finally, ‘Economic Growth’, the simplest solution to excessive debts, cannot be conjured up by magic, and often proves stubbornly elusive when it is needed most. No one knows this better than the Turks, where back in the 2000s; it was only through concentrating on the basics of the economy by their Economic/Finance Minister Kemal Dervis that Ankara was able to pull back from the brink. Likewise, it will be a welcome sign if we were to also realize this necessity, sooner than later. What our economic managers need to remember is that while thumbs up from the IMF (International Monetary Fund) or the World Bank and the improvement in national credit ratings given by S&P (Standard and Poor) or Moody’s are all very welcome signs, it is inclusiveness (of the people) that matters most in the long-run. Here, their existing strategy of trying to solve deep rooted management problems with mere accounting solutions is just not going to work.
“Believing things which we know to be untrue, and then, when we are finally proved wrong, impudently twisting the facts so as to show that we were right.” ~ George Orwell.