Summing up

Every budget has a constituency, which is why politicians vie for the finance and railways portfolios. Two budgets were presented last week. There was clarity in one, because railways minister Laloo Prasad Yadav is not troubled by any confusion. He is his own constituency. Everything he has done since winning the general elections has been geared to one objective: winning the specific elections of Bihar, due soon (possibly as soon as in October). He wanted to be home minister not only in recognition of his self-esteem but also to use that office to reinforce the Muslim vote in Bihar. We would certainly have had some sharp announcements on Gujarat, POTA and Ayodhya by now if Laloo Yadav had got the job. As railways minister, he is preparing an enquiry into the incident at Godhra. Every signal he has sent, from earthen pots in trains to virtual-ticketless travel to photographs showing him cleaning his teeth with a neem twig, has the same message: he is working for the Backward castes, artisans, and Muslims, the framework of his electoral alliance. He has found 7,000 vacancies and created some 30,000 new jobs (Indian Railways is already the second largest employer in the world after the Chinese Army). These carrots are going straight to his voters in Bihar. Populism? Sure. If you are not populist how can you get the popular vote?

Chidambaram's constituency was compulsion. He had to hide a coalition survival plan into the budget by rewards to the victors. There is nothing particularly wrong in this, except that there were too many victors. At the top of the list was predictably Laloo Yadav, who got a "Bihar Package" worth Rs 3,350 crores. There is no clarification about whether this is fresh money or simply the funds left over from the Rs 4,000 crores offered to Bihar by the previous government but not utilised because in the bad old days money would be given only against defined schemes. This time the money will be handed over to Rabri Devi to be used as she wishes. In all likelihood a good part of it will be used to clear the backlog in government salaries so that there is relief when Assembly elections come around. But the Congress and the NCP also took away Rs 500 crores in drought relief to ease the pain before the Maharashtra state elections, so Laloo cannot be faulted alone. The BJP looked after itself and its partners when it had the chance, the most infamous case being the world tour of Andhra Pradesh MLAs that was funded by Delhi.

Tap here to add The Daily Star as a trusted source

The politics of the budget was evident in the punishment handed out to those who have dared to oppose the government. And so Uttar Pradesh got nothing. The message was that as long as UP does not vote for the Congress, it would not be paid any attention.

Orissa had the temerity to vote for Naveen Patnaik, so it went off the financial map of India. On the other hand, free electricity to farmers in Andhra Pradesh is getting every bit of sympathy from Delhi.

The problem with this budget, though, is not in its politics. Since every government is political, every budget will be, to some extent, political. The problem is that it was not anchored on any new idea, or perhaps any idea at all. It was an accountant's budget, a summing up rather than a vision; with a lot of red herrings strewn about to make it look prettier than it really is.

This is not Chidambaram's fault, really. No finance minister can afford a large idea unless he is permitted the flexibility needed to raise resources that can back up that central objective. Nearly 90 per cent of a budget feeds upon itself, year after year. The rough calculus is this. Defence and planning eat up half the budget (note, however, that twice as much is spent on plans than on defence). Subsidies and salaries account for some 20 per cent, and 27 per cent is paid out on interest. Add a few packages and there is not much left. The finance minister could not raise taxes on income or wealth for fear of alienating the urban middle classes, and he could not raise resources from disinvestments since that was a whipping boy of both the Left and the Congress in the elections. And so the service sector, which furnishes the biggest chunk of our GDP, is bound to get hit He cannot have a revenue-neutral budget, can he?

The last budget that Chidambaram produced, when I.K. Gujral was Prime Minister, is widely described as a"dream budget." Well, this one is full of dreams. It is full of good intentions, without offering any clue as to how to achieve them. The finance minister wants to cut the revenue deficit to 2.5 per cent by the end of this financial year and eliminate it by 2008. I too dream of owning the Buckingham Palace. How he can do so without a whisper on cutting government expenditure, or ending the profligacy of states is beyond rational understanding. But to be fair, maybe this is a subject he will take up when he presents his "real" budget in March. The government is fortunate that it inherits an 8.2 per cent growth in GDP. A bullish economy does not taper off unless hugely mismanaged, and both Prime Minister Manmohan Singh and Chidambaram know their responsibilities. (Note: Subramanian Swamy helpfully points out that in 1996 Chidambaram inherited a growth rate of 8 per cent and brought it down to 4.6 per cent after two budgets.)

The simple truth is that there is no money to pay for any of the stated objectives, minor or major. It was politically necessary to advertise a thrust towards agriculture, but look at the figures for spending on irrigation: Rs 829 crores. Compare this with the outlay on civil aviation, which is Rs 1,603 crores. At the very least this should have been the other way round, particularly since Air India and Indian Airlines should be either profitable or privatised. (Curiously, the finance minister has actually made life harder for the nationalised airlines with his tax on leased aircraft, but that is another story.) Similarly, there is much talk of a Suez Canal between the east and west coast etc, but the outlay on water bodies is just Rs 100 crores. I suppose there should be enough to pay for an initial project report, which can then be described as progress.

There are other problems. Investment in primary education, for instance, will emerge out of a two per cent cess. This is an excellent intention patched together in a hurry. Any careful study of the state of education would prove that government-administered primary education is the problem, not the solution. The infrastructure is rotten and the commitment worse. It would have been far better to incentivise the private sector into rural education, and ensure better quality on a wider base.

But, as noted earlier, problems of detail are not the real problem. It is evident that there was not enough time for the government to put together a theme and make its first budget into a launching pad for five years of power. The Prime Minister said recently that he wanted the Indian economy to follow the Chinese model. I presume he means that in only the vaguest sense, because the Chinese model cannot be created without a party dictatorship that ensures minimal wages and draconian discipline upon assembly-line labour while ensuring the highest returns to foreign capital. A report in the International Herald Tribune by Keith Bradsher from Guangzhou might serve as a further warning. It is headlined "Some regions thrive; others stagnate."

This budget will not create any problems in the coalition, since everyone understands the need for give and take. The criticism by the Left about some of the provisions, like the increase in foreign direct investment in insurance, is par for the course. The Left never expected to agree with everything a Congress finance minister did, and will restrict itself to verbal distance if it cannot force any changes. If there is a problem, it might be with the electorate, which has high expectations from any new government, particularly one born in surprise.

This, after all, is the first chance that the Congress has had after 1991 to give a new shape to the Indian economy. The moment was right for a big idea. Instead, we got neither a good budget nor a bad one. We merely got a boring one. A government cannot afford to look stale so quickly.

MJ Akbar is Chief Editor of the Asian Age.