Moving from output-orientation to outcome-based orientation

Finance minister Pranab Mukherjee's Budget marks a turning point in the country's economic thinking. The Budget clearly proceeds with the view that a higher GDP growth rate is the principal instrument for poverty alleviation. And, in case of circumstances where the trickle down effect may take a painfully long time, the Budget makes interim arrangements to reach out to the poor and needy.

It is particularly welcome to note that the government has been able to state its priorities in a few crisp bullet points at the beginning. If I have read the finance minister's mind right, the government is moving away from an output-orientation to an outcome based orientation. It could be the beginning of lesser government in our daily lives, even as its increases the umbrella of protection to the really needy sections of the population.

The Budget desires two outcomes: job creation and infrastructure development (both social and physical). In the organised sector, the job creation will come from the thrust of physical infrastructure development, and its tertiary effects. What is noteworthy is that the Budget sees a cushion of comfort in the current accounts. Without having to resort to extraordinary non-debt creating capital receipts (such as disinvestment), the Budget has been able to keep the books fairly balanced. This is a great achievement, especially in the current scenario, where the earlier three stimulus packages are working their way into the system.

The reliance on domestic resources speaks of a government, which is in command of the situation and will neither play the populist card nor play to the pressures of the rating agencies. It should be very obvious to all serious India watchers that the government is creating a solid foundation for growth, on its own steam, which is a small price to pay for a marginal slippage in the overall fiscal deficit targets. Indeed, the government has reinforced its resolve to return to the fiscal responsibility targets as soon as conditions permit, but at the current juncture, the government is doing everything to get growth ticking again. The onus shifts to the private sector to think of making investments on a serious scale; resources will not be an issue.

On the other hand, what is particularly important from a medium- to long-term perspective is the Budget's stress on direct contact with the needy sections of the population. This is an extension of the government's ambitious programme of arming each citizen with a Unique Identification Number. The government will increase the effectiveness of all its poverty alleviation measures manifold if it can ensure proper identification and targeting of its goods and services. A beginning has been made with moving the fertiliser subsidy to a direct payment mode. Overall, the government can tweak at least one percentage point higher growth rate by only getting its beneficiaries right.