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This is a pre-election budget with a difference. It is not
the one right before the country goes to once-in-five-year
polls in 2014, but sure feels like one. In fact, given the
mess the UPA finds itself in—a crisis of confidence, little
money to throw at problems, and riotous coalition
partners—it probably needs a couple of poll-friendly budgets
to run a serious chance of being re-elected. Or so goes
conventional wisdom. Is there after all a magic formula that
finance ministers can take out of their brown budget
briefcases to woo the electorate?
A look at pre-election budgets over the past
decade-and-a-half doesn’t throw up a clear answer. A typical
pre-election budget would reduce taxes and increase social
sector spending—as the UPA’s first finance minister P.
Chidambaram did in Budget 2008, or NDA finance minister
Jaswant Singh did in Budget 2003. Alas, only one of the two
governments was voted back. Did Chidambaram’s Rs
60,000-crore farm loan waiver swing it for the UPA at
hinterland poll booths?
Even here—not surprisingly—opinion is divided. “If the
government keeps election results, past or future, in mind
when preparing a budget, one can only assume that it’ll try
and uplift the poor through enhanced social schemes,”
acknowledges K.T. Chacko, director, Indian Institute of
Foreign Trade. In the last two pre-election budgets, record
spending plans were laid out, with the UPA-I assuring
another Rs 60,000 crore for Bharat Nirman and company in
2008. The NDA, too, had signed off Rs 60,000 crore-plus for
its pet projects—new roads, modern airports, seaports and so
on—as a way to create skilled jobs and enhance savings.
Former economic affairs secretary and PIL activist Dr E.A.S.
Sarma and others say budgets don’t predict outcomes at polls
that follow immediately thereafter—because the bigger
picture does not elude voters, who may accept sops (like a
cash handout), but then vote for candidates they secretly
back. Even so, it’s apparent that food security is the UPA’s
plank for the coming election. “It’s true the government
can’t take many chances there—food security is, after all,
the only pro-poor measure on UPA-II’s anvil,” says Subrat
Das, director of the Centre for Budget, Governance and
Accountability.
“A problem with ‘populist’ budgets is forgetting to make
changes in governance. The big picture does not elude
voters.”Dr E.A.S. Sarma, Former economic affairs secretary
If there’s a silver lining for the UPA-II, it’s that
expectations have been abysmal in the past too. In 2008,
businessmen (and by extension salaried professionals) were
hit by the downturn and got excise sops worth Rs 1 lakh-crore—a
stimulus package to go with pay commission arrears, which
were a booster shot to the auto industry. There was also
higher allocation for the rural employment scheme. In short,
it was a please-all year in which steps to control spending
were talked about, with little done.
The UPA may have won that one, but recent history clearly
shows us that so-called ‘populist’ moves don’t necessarily
result in votes. The Narasimha Rao-led Congress government
ran out of luck at the polling booth in 1996, despite
then-FM Manmohan Singh’s reformist budget, which threw in a
food subsidy to match a fertiliser subsidy, higher I-T
exemptions and industrial tax holidays that we are still
struggling to undo.
The UPA’s recent electoral losses in the elections in five
states will also determine how “populist” the budget ends up
being. George Cheriyan, executive director, CUTS, a consumer
rights organisation, feels expectations from the budget this
year were definitely higher before the results of the latest
assembly elections became known. “Now, the focus will be
more on schemes et cetera, keeping in mind the UPA has
(only) two more years to go,” he says.
The trouble with ‘big-ticket’ budgets, which tend to pick
between pro-poor measures and deregulation and
liberalisation of industry, is that many crucial policy
decisions fall behind. Administrative reforms or phasing out
of subsidies and exemptions fall into the background in
headline-grabbing budgets.
Even among so-called “reformist” pre-election budgets, there
are huge differences in the way the voter reacts to them.
For instance, former FM Yashwant Sinha’s budget in 1998,
which promised to start dismantling the ‘Inspector Raj’—and
gave many sops to industry—came right before the NDA
government successfully faced voters for a second term. Yet,
when former finance minister Jaswant Singh, in Budget 2003,
tried to clear up the cluttered excise rates, approved of
entirely rejigging the tax administration, and gave yet
another Rs 60,000 crore to infrastructure, a seemingly
perplexing poll defeat followed.
Confusing? It’s quite simple, actually. Prof Anil Gupta of
IIM-Ahmedabad says if vote-seeking sops worked, the Congress
would have been in power in UP and Punjab. “Fact is, people
want long-term and lasting change as much as they want
immediate action on crucial issues like employment and food
security,” he says. The first sign, then, of a
voter-friendly budget is if the government opens its purse
strings for the social sector. Whether the Indian voter
bites at this is another matter, thankfully.
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