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UNION BUDGET 2008 - A CURTAIN RAISER
GOING POPULIST WITH A VENGEANCE
By M H Ahsan
HYDERABAD: The Union Budget that will be presented by Finance Minister Palaniappan Chidambaram in late February may well be the last budget of the UPA government headed by Manmohan Singh. With this realisation, the government is expected to go populist with a vengeance and announce a slew of schemes that would be aimed at establishing the pro-aam admi credentials of the Congress-led coalition government.
Such schemes would include not merely an expansion of the coverage of the National Rural Employment Guarantee Act, but also the writing off of agricultural loans and a social security scheme for unorganised workers. Later in the year, the Pay Commission is expected to recommend a hike in the salaries and perquisites of Central Government employees, recommendations that would be accepted by the government. These initiatives would be aimed at wooing the electorate in general and government employees in particular. These would also intend mitigating to an extent the expected increase in the rate of inflation following a hike in the prices of petroleum products.
It is not as if these measures will be wholeheartedly endorsed by the Prime Minister himself, his Harvardeducated lawyer-turned-Finance Minister, by Dr Singh’s right-hand man in the government, Montek Singh Ahluwalia, Deputy Chairman of the Planning Commission or, for that matter, the head of the Prime Minister’s Economic Advisory Council Chakravarthi Rangarajan. Many of these proposed schemes would go against the very grain of the marketfriendly, ‘neo-liberal’ policies that the above named group espouse and believe in — sorry, swear by in private, if not in public!
Dr Singh has been emphasising time and again the need to ensure that subsidies on power, food, fertilisers and petroleum products reach only those who these are meant for, namely, the poor and the underprivileged. Few can take exception to such a fine statement of intent. The problem simply is that while ‘targetting’ of subsidies has been talked about for decades on end, little or nothing has been done about it. The government’s subsidy bill mounts year after year. The coming budget will be no different.
Yes, it is true that subsidies can and should be pared if these reach mainly the well-off. But this is easier said than done. It requires political will to take tough decisions, say, depriving vocal and politically-influential middleclass households of subsidised cooking gas or checking the adulteration of diesel with kerosene. Moreover, if subsidies are to be brought down, the Union government will have to act in close coordination with state governments, which is not exactly child’s play. So the government will take the easy way out as it invariably does and announce measures that would please the constituency of the Communists and the ‘left’ within the Congress.
The last-named faction in India’s ‘grand old party’ includes not just party president Sonia Gandhi herself but ministers like Human Resources Development Minister Arjun Singh and Panchayat and North-East Affairs Minister Mani Shankar Aiyar. A new addition to their ranks is Defence Minister A K Antony. These individuals are understood to be of the view that the UPA government must do something to distinguish its economic policies from those pursued by the BJP-led NDA government before it.
This ‘socialist’ group argues that the Congress stands to lose more support in the coming 15th general elections if it is seen to be following ‘market friendly’ economic policies while merely preaching the virtues of ‘inclusive’ growth and ‘reforms with a human face’. This faction would like a new garibi hatao campaign to be launched by the Congress, an electoral strategy of the kind that had helped Indira Gandhi in the early 1970s.
Under pressure from this influential lobby and the Left, Dr Singh, Chidambaram, Dr Ahluwalia and company have little or no choice but to go the populist way especially after the electoral defeat of the Congress in Gujarat. The government’s decision to expand the coverage of the NREGA from 330 districts to the entire country coincided with Rahul Gandhi being anointed party general secretary in late-September. The financial provision for the expanded NREG programme is expected in the budget.
Then, the government is likely to press for the enactment of the Unorganised Sector Workers’ Social Security Bill that was presented in the Rajya Sabha on September 10 during the forthcoming Parliament session. One of the most significant proposals in the bill is to provide each and every unorganised worker in the country with a ‘smart’ identity card that would have a ‘portable’ identification number enabling it to be used for a variety of purposes. Thus, a domestic help or a worker at a construction site with no permanent address would be able to use such a card for obtaining social security benefits.
Just as the NREGA has been touted as the largest social security scheme anywhere and the only act of its kind that legally mandates employment to a rural family for 100 days in a year, the bill to provide social security to unorganised workers is also said to be unique in the world and one that would greatly benefit the poor in cities as well as in villages. The proposed new law aims at providing various social security benefits to unorganised workers who comprise 94 per cent of the total workforce in the country.
Speaking to journalists at the end of 2007, Mr Chidambaram said there was nothing like an ‘election budget’ although he conceded that the one he will be presenting in February will be the last ‘full budget’ of the UPA government as the next one could be only a vote-on-account.
As is his wont, he said the thrust of the next budget would be to ensure high growth and “ensure that the growth process endorses and includes larger and larger sections of the people.”
In an important respect, the task of the Finance Minister has been made easier by the fact that the country’s gross domestic product has grown by over 9 per cent over the last two years even if this growth has not benefited large sections of the population. In addition, foreign capital inflows have been higher than anticipated and tax revenues have been particularly buoyant — collections of direct taxes (both personal and corporate) have jumped by over 40 per cent.
It is going to be an uphill task for the government to substantially streamline its delivery mechanisms in the next year and a half. The Finance Minister claims that over the last three and a half years, the UPA government has delivered on rural employment, education, health care, roads, electricity, transport and communications. But not everybody will agree with him.
Time is running out and many of the government’s populist programmes may be announced a bit late in the day, leading its critics to complain that these announcements are nothing but empty rhetoric. Besides, elections could take place six to eight months ahead of schedule towards the end of 2008. The proverbial aam admi is not easy to impress. She or he is becoming wiser by the day.
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