Source: Times of India
Of course this is not only the FM's budget, as no budget ever is. Neither is it the PM's budget, as no UPA budget ever is. It is a budget of a left of centre conglomeration that craves resources to maintain or enhance its political power. Within this larger scheme is a lot of complexity. There are regional and local forces, and there are sector-specific lobbies. There is also the national high command, which has its own interests, many times in conflict with the regional players and sector lobbies within the party.
Each of these forces demands something from the government, as each has to deliver votes very soon. A weak high command needs to reward the minions, yet the high command also needs to become stronger. The latter requires it to spend greater and greater amounts on centrally-backed schemes. It also requires some flexibility in giving grants and other benefits to regional and sectoral players. The weaker the Centre, the more it will have to resort to such measures. While all of this has to be achieved, inflation has to be kept in check — that single number can potentially negate everything.
This was the mandate facing the FM. Issues such as federalism, investing in the future and economic efficiency are consequently less important. The FM therefore acted in a manner that is clearly his, even though the orientation is clearly not.
The budget therefore makes the future direction of the Congress very clear. At what-ever cost — even if it means investment and future growth are curtailed — undertake centralised welfare. This lies at the core of its strategy as only that can strengthen its Centre, or so it believes.
The budget is an important event, for it lays transparent Rahul Gandhi's orientation — he is more like Indira Gandhi in concentrating more on sharing the pie, than his father Rajiv Gandhi who worked hard at expanding it. Perhaps (again like Indira Gandhi) he is not sure of his vote bank; this insecurity is consequently making him move further left. This is the first major event. The Congress has now formally yielded the right of centre space for others to take over.
To do what was required, the FM slashed expenditure allocations of the past even if it meant reduced capital expenditures — and used the extra resources to ramp up subsidies and schemes favoured by the high command. This is a new event — never before seen on such a scale, more than Rs 90,000 crore has been taken away from the allocations of the past. It makes all budgets much more suspect from now on — who knows what the FM will do next February?
But then there are some very strange numbers in the budget that defy any serious analysis. There are no major increases in taxes (increased excise on SUVs and income tax on high income individuals, etc notwithstanding) and economic growth is slowing, yet expectations of revenues have been increased by almost Rs 1,85,000 crore over last year. There is no reason to believe that the public sector will suddenly become more profitable yet expectations of dividends have increased by Rs 20,000 crore. It is not clear why other non-tax revenues will increase by Rs 25,000 crore. It is also not clear why overall subsidies in 2013-14 will be about Rs 26,000 crore lower than in 2012-13.
This therefore is the third major event. Most budgets, across different political conglomerations, tend to have somewhat realistic estimates — including Chidambaram's budgets of the past. But this one is carrying forward the legacy of last year's budget. It seems this tendency to show overly optimistic numbers has now become institutionalised.
There is therefore the fourth most important event of all. The budget is now unimportant. Politics requires month-on-month decision-making; it requires quick changes to expenditures and allocations. All political parties have become highly centralised, with the central leadership having dictatorial powers — taking decisions with limited internal party debate. What is therefore presented in front of the Parliament is not even a good enough statement of purpose by a government, but just a concoction put together by a few individuals.
This is not a welcome occurrence. The budget needs to be preceded by a very serious prioritisation exercise, even if it is an election year. Resources will always be limited; political entities within and outside the government will need to recognise that before their priorities are reflected in the budget document. But if the constraints of falling growth, reduced investment, increasing corruption and therefore evasion and avoidance, reduced control over subsidies, etc are not adequately recognised, the whole process becomes a futile exercise. The government has limited abilities. If impossible targets are placed in front of those implementing government policies, they will be forced to resort to over-optimism in such documents.
The writer is founder director of Indicus Analytics.