The quality of Government spending is also important

Fisal discipline does not only mean reducing the gap between revenues and expenses. It also means cutting unproductive spending and raising productive spending. A good example of productive expenditure is infrastructure. It is estimated that a Rupee invested in highways can create Rs 7 of economic value.

Much has been made out of the fact that the Finance Minister has allocated about Rs 173,000 crores for infrastructure in the recent budget. But is this such a big deal? We are probably 40,000 - 50,000 km of highways short today, according to recent indications given by the Highways Minister, Mr Kamal Nath. To build a km of four lane highway it costs around Rs 8-9 crores. And to build a six lane highway, the amount would be about Rs 14 crores. Let us take an average of Rs 10 crores per km. So buiding highways itself calls for about Rs 400,000-500,000 crores of spending.

Mr Pranab Mukherjee's budget has allotted Rs 19,894 crores for road infrastructure. No doubt it is an increase of 13% over last year. But the amount will be sufficient to build only about 2000 km of highway. While the private sector will also chip in, we all know that the government has to lead the way in road construction. And our target is 50,000 km , not 2000km!

Similarly, an amount of Rs 16,752 crores ( increase of Rs 950 crores over the previous year) has been allotted for expansion of the railway network. This amount too looks grossly inadequate when we consider that the railways remain the lifeline for millions of people in the country. The Railways also remain the most cost effective mode of transporting cargo over large distances on land.

All this goes to show that the budget has serious lacunae. Unfortunately, the media has not bothered to drill deeper and do a rigorous analysis of the infrastructure proposals.