Who will pick up the tab?

Finance Minister P. Chidambaram has presented what should in all probability be his last budget before the general elections. In a clearly political pre-election exercise he proposed, as this newspaper feared, large expenditures on loan waivers and the various UPA flagship programmes. The huge loan waiver, though not a line item in the budget, is expected to cost Rs 60,000 crore, or 1.1 per cent of GDP. Small and marginal farmers who constitute the bulk of farmers get a complete waiver of their loans. The others pay 75 per cent of the loan. This is a very bad precedent. This is not the last election India will face, and if in an effort to win votes governments write off loans, it could only encourage non-compliance.

Overall plan expenditure shows an increase of Rs 38,286 crore in 2008-09, which is the second year of the Eleventh Plan. Flagship programmes of the UPA such as the National Rural Employment Guarantee Scheme, Bharat Nirman, Sarva Shiksha Abhiyan, mid-day meal scheme and National Rural Health Mission also get large increases in expenditure despite the fact that implementation of these programmes has been poor and they have not achieved their objectives effectively and efficiently. This budget seems to be a desperate attempt to expand the government's welfare schemes. The unfortunate element of the story is that such schemes acquire a life of their own. Even when there is a new government after elections, if it does not want these big welfare progammes, it will have little choice. Once a scheme is in place it is difficult to shut it down, regardless of how poorly it is being implemented. It is not enough to talk about better outcomes rather than outlays and keep increasing expenditure on schemes that do not work. In his budget speech the finance minister proposed a Central Plan Schemes Monitoring System (CPSMS) that will be implemented as a plan scheme of the Planning Commission. We wonder how this plan scheme will work any better than the Planning Commission's other schemes.

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