Small change

The Union budget 1999-2000 does not give enough impetus to the environment sector

Published: Wednesday 31 March 1999

-- if there is a link between the Union budget 1999-2000 and environment, it is difficult to establish. If the government had more money, then it could have spent it on environment-related activities, such as improving fuel quality. But the fact is that both the Union and the state governments are bankrupt. The Union government continues to be so even after the recent budget. Even the deficit figures are fudged.

Using the old gross domestic product ( gdp) series and without excluding the transfer of share of net small savings collections, (these should not be excluded as they also represent borrowing), the fiscal deficit to gdp ratio in 1998-99 was 6.5 per cent (revised estimates). The fiscal deficit in 1998-99 was Rs 103,737 crore. Plug this in and you have a gdp of Rs 1,595,954 crore for 1998-99. How much will the gdp grow in 1999-2000? Finance ministry officials have talked about a 13 per cent nominal gdp growth -- 6.5 to 7 per cent real gdp growth and the rest inflation.

But I believe the budget does not have anything to stimulate a 6.5 to 7 per cent real gdp growth -- at least directly. However, let us ignore that point for the moment. A 13 per cent nominal growth gives a gdp figure of Rs 1,803,428 crore for 1999-2000. The budget gives a fiscal deficit figure of Rs 79,955 crore. If you include small savings, the fiscal deficit is Rs 104,955 crore. Divide one by the other and you have a fiscal deficit to gdp ratio of 5.8 per cent. The budget says: "Based on the old series of gdp and excluding the payment of the share of small savings." The fiscal deficit to gdp ratio is 4.4 per cent. So one must not be misled by that figure. It is actually 5.8 per cent on a comparable basis.

The finance minister has also decided to abolish the additional customs duty of five per cent on the import of ships for scrapping in India. As the rules in the country are not as stringent as in the West, this decision will put a lot of pressure on the environment. It will now become easy for these countries to send their ships to India for scrapping. In that case, cutting the duty is not a major issue. But the government must try to tighten norms so that western countries, whose laws do not allow them to scrap their own ships find it difficult to send these ships to India.

The government should have tried to discourage two-wheeler purchases and provide more incentives for buying cars as four-stroke engines cause less pollution. Instead, finance minister Yashwant Sinha cut the price of two-wheelers and increased the tax on cars. This move will surely see an increase in pollution. This is not a favourable decision as far as environment is concerned.

With the additional duty on high-speed diesel, the projected revenue from additional taxes is going to be around Rs 10,000 crore. The duty on diesel may remove some of the differential prices between diesel and petrol in principle. This may affect the environment by reducing the pecuniary incentive in favour of polluting cars.

But there are also some positive aspects in the budget. Financial assistance to the states will be linked to recovery of water charges and land consolidation. Administration of the targeted pds (public distribution system), the Annapurna scheme and education and employment schemes will be decentralised to Panchayats . If properly implemented, decentralisation and devolution can completely transform public governance. This will also have implications on protecting the environment.

According to the budget there will be a National Foundation for Innovators, National Bio-reserves Board and a National Statistical Commission. Apart from 74 per cent automatic approval for fdi' s in pharmaceuticals, the Drug Price Control Order ( dpco ) will be reviewed. But one need not get misled by all these new schemes. The Central Plan outlay is actually far less. Take for example rural development, which includes the Indira Awas Yojana and the national Social Assistance Programme. The budget estimate in 1998-99 was Rs 8,182 crore and in 1999-2000 it is Rs 7,843 crore. And there is a big difference between budgetary outlays and Central Plan outlays. Most ministries and departments have lower Central Plan outlays.

Yashwant Sinha's budget may not be a damp squib like the one last year. But it is damp one nonetheless.

(The author is an economist).

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