The fundamental responsibility of any Government on the financial side, and hence of its Finance Minister, is to address the basic questions concerning the economy. In the Indian context, these would be questions relating to growth, inflation (i.e., price stability) and human development. Given the structure of our economy, one would have expected the Finance Minister to devote the bulk of his time addressing fiscal and monetary issues.

Last year he did not do that, and the country has paid a heavy price for the neglect. The year 1998-99 will end, according to the Finance Minister, with a fiscal deficit of 6.5 per cent of GDP, the highest since 1993-94. Remember that the Budget last year promised a fiscal deficit of 5.6 per cent and what we now have is the mirror image, at 6.5 per cent. It will also end with the M3 growth ofclose to 20 per cent and an average annual inflation of 6.9 per cent. The rupee has slipped to 42.71 to the dollar. Nothing can be more damning than these figures. They are testimony to the irresponsibility of the Government in 1998-1999.

One would have expected that valuable lessons would have been learnt by the Government and they would change course in 1999-2000. Alas, it is not to be.

In 1999-2000 also, the Government seems determined to continue with its ``tax and spend'' policy. The additional taxation this year is Rs 6,234 crore of indirect taxes and Rs 3,100 crore of direct taxes. Adding the additional revenue of Rs 121 crore to be raised on behalf of the Department of Posts, the total additional mobilisation will be Rs 9,455 crore. Only a few days ago, the Railway Budget proposed additional mobilisation of Rs 900 crore. This level of additional taxes or resource mobilisation will be inflationary.

Besides, the manner in which these resources are sought to be raised are also retrograde. Theprincipal instruments employed by the Finance Minister are continuation of SAD of 4 per cent imposed last year; an upward revision of customs duties by 5 per cent (in the name of rationalisation of duty rates); an across the board 10 per cent surcharge on customs duties with a few exceptions; a 5 per cent customs duty levied on sectors which hitherto enjoyed zero duty; and a 10 per cent across the board surcharge on income tax and corporate tax.

We proclaimed that we are moving forward towards stable tax rates. We also proclaimed that we will move towards Asian levels of taxation by the year 2000-2001. By one stroke, the Finance Minister has reversed the direction of reforms in the area of indirect and direct taxes, and has created a sense of uncertainty, particularly among investors.

I am appalled by the number of new schemes announced by the Finance Minister. Some are clearly old wine in new bottles. The Budget's intention seems to be to jettison the names of Jawaharlal Nehru and Indira Gandhi and toreplace them with Sanskrit/swadeshi names. Many of the new schemes involve more subsidies, it is a matter of sadness that the Finance Minister should have announced more subsidy-based schemes.

For example, he has announced subsidy-based schemes for water users, for cold storages, for lifting fertilisers in the lean months and for giving VRS to public sector employees. The Jawahar Rozgar Yojna, the only anti-poverty scheme which in my opinion has yield durable results, is being revamped and renamed. The Indira Awas Yojna is being subsumed in a new scheme with a different name. All these point to both thoughtlessness and pettiness.

I am also shocked by the lack of opaqueness in the Budget documents. The total expenditure for 1998-99 has been placed at Rs 2,81,912 crore. As against this, the Budget estimate of total expenditure for 1999-2000 is only Rs 2,83,882 crore, an increase of Rs 1,970 crore. When I first saw these figures, I could scarcely believe my eyes. Then, the footnote hit me. In the footnoteis hidden an expenditure of Rs 25,000 crore which is not reflected in the expenditure figures on account of ``a new system'' being introduced.

Even this enhanced expenditure of only Rs 26,970 crore (Rs 1,970 crore + Rs 25,000 crore) is a gross under estimate. In the current year, total expenditure increased by Rs 49,844 crore and to expect that in the next year total expenditure will increase only by Rs 26,970 crore is an act of deception.

The projected fiscal deficit of 4.0 per cent on the basis of new GDP series and 4.4 per cent on the basis of the old series is also deceptive. If the Rs 25,000 crore is taken into account, even on the basis of the new GDP series, the fiscal deficit will be 1.6 per cent higher. Thus, the true estimate of fiscal deficit in the Budget is 5.6 per cent. When 1999-2000 comes to an end, what it will be, I do not know.

At the end of the presentation of the Budget every section must feel good, buoyant and optimistic. I ask myself the question, who has this Budgetenthused?

Certainly not the investors. New uncertainties have been introduced and nothing has been proposed which will create a more friendly and favourable climate for investment. I do not expect either foreign direct investment or foreign institutional investment to increase in 1999-2000. In 1998-1999, according to the Economic Survey, FDI declined by 38 per cent over the previous year and FII outflow was nearly US $ 700 million.

Nor will the Indian entrepreneur be enthused. He will be unhappy with the 10 per cent surcharge on income tax as well as corporate tax. He would have to pay more by way of customs duties which will increase his capital costs. Further, the 13 per cent excise duty on capital goods has been raised to 15 per cent. There is no promise at all that interest rates will be reduced. In such an environment, it is doubtful whether the Indian investors will shed their inhibitions and invest in new projects.

Nor will the consumer be enthused. The tax and spend policy coupled with highfiscal deficit and high monetary growth will only fuel inflation.

(P Chidambaram is former Union finance minister)