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'Budget does not show direction for the future'

Dr Isher Judge Ahluwalia

The Budget was rather lacklustre. It had nothing to cheer up the economy. The Budget is emphasising the need for diversification of agriculture in India. It also talks about linkages with the food processing sector.

But there is a major gap. The political economy of food stands in the way of getting farmers to move away from foodgrains towards other crops.

As far as the hike in LPG price is concerned, you must understand that the challenge is to produce products at low costs. If you cannot do that, then lower prices can only be sustained by subsidies.

No Budget can provide subsidies indefinitely. The long-term solution is to bring in more producers of LPG, generate competition and have them lower prices.

The promise to take the first actual step on downsizing the government by June 2002, cut in fertiliser subsidy, dismantling of the regulated petroleum price regime are some of the reforms in this Budget for a start. There are some more.

The Budget cannot be friendly to all, but it must show the direction for the future so that we can all feel better tomorrow atleast. It doesn't quite do that.

We cannot blame the global slowdown so much for our ills. Yet, it does affect us, but most of the problems are of our own making. We need a harsher Budget to get our power sector reforms moving. Agreeing to reform must not be the basis of the states coming to the centre for money. It must be cash and carry. Do your reforms first and then take cash from the centre.

I keep my fingers crossed that it is possible for the government to abolish 12,200 jobs in ministries and jumbo sized departments. Don't forget the Voluntary Retirement Scheme.

Frankly, I am surprised by the Budget. I expected it to be much better. I think it is time for a fundamental change. Agriculture should be taxed after a constitutional amendment.

Changes like Section 88 and interest rates are a disincentive to save. I don't think that will lead to some increase in consumption expenditure and augur well for the economy. Savings will just take other forms eg. bank deposit.

Dr Isher Judge Ahluwalia is director and CEO, Indian Council for Research on International Eeconomic Relations.

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