Budget 2001/2002: the environmental perspective

The Central Government's Budget 2001/2002 has been hailed by the captains of industry as well as analysts of the stockmarket as growth oriented and forward looking. The Finance Minister has not only silenced several of the Government's critics but has actually earned compliments from distinguished leaders of the opposition. The Budget has deftly managed to bring about a decline in the fiscal deficit calculated for the year without an increase in taxes. On the contrary, by removing all but the 2% surcharge on income tax imposed in the wake of the Gujarat earthquake and through some other measures, the Finance Minister has added to the take-home income of most Indian citizens who pay taxes. The Budget has emphasized specific principles and outlined several initiatives that would accelerate the pace of reform if implemented faithfully. However, ?environment? was an important word missing from the Finance Minister's Budget speech. It is ironic that every Finance Minister goes out of his way to hold pre-Budget consultations with various groups of representatives from industry, labour, the economics profession, and others; but never is there any attempt to hold an across-the-table dialogue with a group dealing with environmental issues. This could be due to weaknesses on either side or perhaps both sides. Conceivably, governments and legislators still do not appreciate the role of the environment and natural resources in economic activities, particularly as it impacts on the lives of the poor. Or, it could be that so-called environmentalists have dug themselves into a hole by appearing to the public and other representatives in Parliament as a group opposed to all economic activities and as what a discredited Vice President of the US, Spiro Agnew, referred to as the ?nattering nabobs of negativism? in, of course, a different context. Whatever the reasons, it is unfortunate that economic policy in India has not yet reached a point wherein environmental concerns would be mainstreamed into decisions and measures as included in the Budget. This is not to say that the Budget has not addressed subjects related to the environment. For instance, the stress on payment of user charges, if applied faithfully across sectors and for services provided by the environment and natural resources, can lead to conservation of resources. The timetable for reforms in the power sector, which has subsequently been provided, added substance in the meeting of Chief Ministers and power ministers from the states held on 3 March, can lead to rationalization of power tariffs, and, therefore, more efficient use of energy. This will result in reducing pollution and a more efficient use of natural resources, correcting, for instance, the excessive use of groundwater with low prices for electricity supplied in rural areas. The Budget also contains a provision for using resources from the Watershed Development Fund set up in NABARD, for promoting people's participation and enabling water users' associations to implement, operate, and maintain irrigation schemes. If implemented properly, this scheme could be a major step in taking the management of a key natural resource to local communities and empowering the rural community to assume responsibility for decentralized water supply. It is hoped that a similar approach will be followed in rural electrification. The Budget aims to extend rural electrification to the 80,000 villages that have no access to power, in the next six years. This should be achieved by implementation of decentralized renewable energy projects by local communities. Extension of the grid has serious limitations in several cases?economic unviability and environmental effects?that can be eliminated by the use of renewable energy. These issues need to be debated in Parliament and should result in a mandate for the Government on the manner in which the measures included in the Budget must be implemented. In fact, this Budget, more than most that have preceded it, requires an informed debate in Parliament of the longer-term implications and mode of implementation of the principles and directions on which it is based. It is hoped that the elected representatives of the people will not excessively indulge in posturing on a populist basis, but focus on longer-term benefits that the Budget can provide, particularly for those below the poverty line. It is also hoped that in the parliamentary debate on the Budget, environmental issues will receive attention, and that actions to protect the environment will be built into the fiscal measures voted by Parliament. We need to be reminded that in most sectors of the economy, environmental damage translates into significant economic loss. This has been carefully documented and estimated in TERI's major project GREEN-India 2047. Sound economic policy cannot be made in isolation of a sound environmental policy.