Most commentators on TV and in press
are praising Chidambaram for the good economics he has practiced in his budget.
There are no populist schemes, no enhanced spending plans and no grandiose
announcements. There are big investment revival strategies prompting corporate
India to give him a thumbs up. While I agree that the budget is indeed shorn of
the usual pre-election-year rhetoric, and I compliment Chidambaram for it, I
think most people have not deciphered the political intent behind the budget. I
am convinced this is a budget driven largely by the compulsions of looming
elections.
Before I go on to what I mean by that,
let me say a word about the usual critics. The BJP has been totally silenced.
The only lame duck argument the party could provide (read Yashwant Sinha in
Indian Express today) is that Chidambaram first cut spendings in FY13, and then
raised allocations for the next year to merely make it all look optically nice.
His contention is that this is a form of “trickery”. I call it smartness. This
is what private companies do. They never look at last year’s budgets to set next year’s numbers. They
look at “actuals” of last year for that. Chidambaram has brought the best of
private sector governance standards to the government. The BJP can crib!
Chidambaram even silenced the loudest critic of the UPA – the number 1 TV news
anchor! The poor soul was forced to agree meekly with his panelists that
Chidambaram had indeed delivered! The Left could not decide whether they should
agree with the taxing of the “super rich” (something they would be naturally prone
to do) or disagree (considering it was inspired by the US President)! The JD(U)
made some really good overtures, stoking speculation that a political
re-alignment is in the offing! So all in all, the usual suspects were firmly
silenced!
Now let me prove that this is an
election-eve budget.
1)
In the first 5 minutes,
Chidambaram made the most important statement of his entire speech. I reproduce
verbatim “As Joseph Stiglitz, Nobel prize
winning economist said “There is a compelling moral case for equity; but it is
also necessary if there is to be sustained growth. A country’s most most
important resource is its people”. We have examples of states growing at a fast
rate, but leaving behind women, the SCs, STs, minorities and some ackward
classes. The UPA does not accept that model. The UPA Government believes in
inclusive development, with emphasis on improving human development indicators.
I hope this budget will be yet another testimony to that commitment”. Who
do you think Chidambaram hit with that statement? BJP’s poster boy Narendra
Modi of course!
2)
The Congress’s core
electoral constituency is the rural
poor, the farmers, the SCs, STs and in some states, the OBCs. Just look at
the spending increases Chidambaram has promised for these constituencies:
a.
Rural development:
budget of Rs 80,000 odd crores, an increase of 46% over last year’s actual. This
is huge. Of this, NREGA and the PMGSY are big schemes, both of which have seen
enormously enhanced budgets. Clearly, the rural constituency won’t be starved
of funds!
b.
Ministry of drinking
water and sanitation (targeting the above identified electoral
constituencies) has a 17% higher allocation
c.
Ministry of education
also has a 17% higher allocation. A large chunk of this is in the form of
scholarships for SCs/STs/OBCs/Minorities/Girls and that has grown by 16%. The
Mid-day meal scheme has also grown a lot.
d.
The Ministry of Health
budgets have increased significantly to Rs 37000 crores. Of this, the National
Health Mission has seen a 24% increase to Rs 21000 crores.
e.
Ministry of Minority
affairs has seen a 60% over last year’s actuals.
f.
Agricultural credit
target has been increased to Rs 7 lac crores from Rs 5.75 lac actuals of last
year, an increase of 22%. This is the credit target. The Ministry of Agriculture
has been allotted 22% higher at Rs 27000 crores.
g.
There is a small provision
of Rs 10000 crores for the food security bill related expenses. I guess,
the larger part of this burden will come in next year’s budget.
3)
The symbolism of making the
rich pay more in a tough year – the surcharge on the “super rich”, the higher
surcharge on corporates, the higher excise duty on SUVs and big cars, the
higher customs duties on costly cars and even mobile phones – are all meant to
make the core election constituency feel privileged.
4)
The symbolism of being
concerned about women is obvious. The special “Nirbhaya” fund for women’s
safety, the all-women’s bank are all part of this; clearly aimed at growing the
election constituency to include women.
The above should show that Chidambaram’s
spending focus is squarely on his party’s core consituencies. Where has he cut?
He has given a very small increase to defence, though to take care of any
attacks from the BJP on grounds of national security, he has said he will
provide as much as required, if
required. This is a good way of keeping it “off-balance sheet”!
Of course, there are many good ideas in
the budget as well. The strong emphasis on reviving investments, the cut-backs
on fuel subsidies (though not adequate in my view), the plans to increase
savings (inflation indexed bonds), the focus on infrastructure (tax free bonds
up to Rs 55000 crores etc), the incentives for local manufacturing (industrial
corridors, investment allowance etc)….are all very good proposals. No wonder
the near unanimous opinion that the budget makes for good economics. What most
people have not realized is how savvily Chidambaram has also presented a great
political budget!
The real truth is that this is a
clear pre-election budget. It is focused on ensuring that the Congress wins the
next elections. Spends are targeted at key election constituencies; painful tax
provision are aimed at making these constituencies feel special. This is
Chidambaram at his best. Good on economics, great on politics!
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