Attempts to paint the budget either in revolutionary or neo-liberal hue are unjustified.

Amidst criticism and counter criticisms, a thorough review of the recently presented budget throws up a few positive points but many more negative aspects. There is no socialist orientation to the budget. The hue and cry that it has completely derailed the market economy

is also unfounded. However, there are indications of deliberate attempts at over-politicisation, over-centralisation and control of some politically contentious programmes.

Redefinition or reassignment of specific and complementary roles of the state, private and cooperative sectors as per the common minimum programme is one of the positive features of the budget. Although there are apprehensions regarding formation of cooperatives under state support, encouraging people to establish cooperatives by themselves in both rural and urban areas will be a huge step towards promoting economic activities on a self-help basis and, above all, to nullify the negative impact of neo-liberal policies. At a time when we are talking about inclusive growth and equitable development, to argue in favour of neo-liberalism blindly will be a blunder.

Cutting the state’s role across the board will be a big mistake when the country is struggling to address distributional and structural conflicts in economic and social spheres. Another positive aspect of the budget is its high priority on augmentation of social security, some relief and village-centred development programmes initiated by CPN-UML government in 1994/95.

Likewise, when hardly 10% of development budget goes to villages, the increments in grants is timely and justifiable, more so in the changed context where a two-tier approach to sub-national governments, one at the state level and another at the local level, is to be pursued. But one wonders why the informal workers, the most vulnerable group, have been left out. In totality, a comprehensive approach to cover almost 1 million landless households is wanting.

The negative aspects of the budget are many. The first and foremost is that no attempt has been made at structural and institutional reforms. How policies and programmes dictated by the status quo approach will contribute to a new socio-economic transformation is not understood. For social transformation, changes in socio-economic relationships are essential. The external liberalisation policies have been preserved even as Nepal has become one of the most liberalised countries in terms of tariff rates and open policies. There has, however, been an attempt to impress that there have been some changes in internal liberal policies. Some support to public enterprises and commitment to purchase two airliners for Nepal Airlines are the only departures in the budget in this direction. There must be a system that demands accountability of decision makers.

At the same time, we should not forget that the finance minister of a party which was threatening to confiscate properties of many has now abolished additional 1.5% income tax imposed on corporate sector. On the whole, liberal policies have not been tempered with — as was the apprehension.

Interestingly, some neo-liberal policies in dire need of correction have been left untouched. This is true in case of macroeconomic policies which need synchronisation to make them compatible with economic inclusiveness. Therefore, attempts to paint the budget either in revolutionary hue or its other extreme counterpart is unjustified. The proposed programmes lack coherence or a proper framework. Another big risk the budget has taken is that it has almost totally ignored the supply side of economy to ensure the targeted 7% growth. There is neither any programme to augment agricultureal production nor the policies to increase industrial production.

Expanded distribution programmes without backing of added production or supply enhancement risk creating a mismatch between supply and demand, leading to unsustainable growth and development. This may have adverse impact on resource mobilisation as well. Notwithstanding the ambitious size of expenditures amidst high revenue targets, it is likely that the budget will be unable to meet the commitments of developmental programmes.

In time, the finance minister will face the dilemma of whether to cut development programmes or rely on deficit financing. If the latter, inflationary pressures will increase; there is no anti-inflationary policy. The way certain programmes have hidden agenda of politicisation will encourage misuse of resources.

One may wonder how such a budget could even leave a dent on the problem of underdevelopment, poverty as well as sustained inclusive growth and development. It seems the budget despite some good intentions has failed to address deep-rooted structural conflicts

and accompanying problems that the finance minister’s party fought 12 years to address.

Dr Khanal is an economist