High noon at budget corral
Times of India, February 19, 2015
ministers have gone to some lengths to repeatedly explain that
the annual budget should not be viewed as the only barometer of
the government?s economic intent. In fact, governments take
policy decisions throughout the year, so it is both unfair and
unrealistic to treat the budget as virtually the sole indicator
of policy direction.
is how it has always been and this year will be no different.
Indeed, budgets have usually been the platform for governments
to signal major policy shifts, such as the seminal one in July
1991 when Manmohan Singh announced the dismantling of industrial
licencing. Next week, millions across India and around the world
will be watching the live telecast of Arun Jaitley presenting
his second budget.
This year?s edition
has two plot twists that will add to budget watchers? frenzied
speculation. The first relates to last year?s hurried
post-election effort, which did not, as cricket commentators
might say, ?take the aerial route?. Will this year hold out more
hope for advocates of the big bang approach to reforms?
The second twist has
to do with results of this month?s Delhi election. Will that
resounding political victory for an alternate economic
philosophy, albeit only at a state level, cramp this
government?s economic instincts?
Though there are
often good reasons for a flurry of big-ticket reforms at the
start of a government?s term, in hindsight there may have been
equally good reasons for last year?s methodical approach. For
starters, despite the hype about the biggest mandate in three
decades, last July the government faced the same arithmetical
challenge in passing legislation in Rajya Sabha that is now
evident even to the most superficial of observers.
clearly was that the PM had taken a strategic decision to change
the narrative, about governance in general and his own image in
particular. Thus the thrust on foreign policy from the start,
and the back to basics emphasis on Swachh Bharat in August. But
an equally important signal was the obeisance he paid to
Parliament, bending to touch its steps on his first visit. The
non-verbal message, that he was a democrat, was resounding. That
was followed up with sustained outreach to all state governments
and most parties in Parliament to change the dynamics of the
relationship, both between Centre and state and between
government and opposition.
While arguably the
past nine months have seen positive developments in Centre-state
relations, there has been no overarching entente in Parliament
between government and most of the opposition. Nevertheless,
because of the new narrative, signalling and overtures, when by
December the government resorted to issuing ordinances, they
seemed justified to many. A key objective had been achieved:
building an image that the Modi government is not instinctively
authoritarian, and will reach out across the aisle to build
consensus, but as a last resort it would not hesitate to use all
constitutional options to break an extended impasse.
It is at this
juncture that the Delhi election result has added a significant
new plot twist. Though it is far too early to assess its
nationwide impact, if any, it has nevertheless been a shot in
the arm for those swept away by the Modi wave. This applies
particularly to those whose politics is resolutely left of
centre, but also holds true across the political spectrum. The
vacuum created by Congress?s collapse was never going to remain
unfilled for long. But the Delhi result holds the potential of
setting off a gold rush for that space.
The question now
arises whether the government will play by the game plan it has
been putting in place for nine months, or feel compelled to make
alterations. It can?t completely ignore these developments and
must inevitably accord priority to some issues on which AAP is
getting traction. Any impression of procrastination on issues
like black money, or the safety of minorities, would leave its
flanks exposed and risk ceding further political ground. It is
no coincidence that the PM has now come out strongly against
Every cloud has a
silver lining. This mini shock to the system may be just what
the doctor ordered, particularly if it yields more leeway to
govern, free of distracting self goals by those ostensibly on
the same side. With BJP losing only 1% of its Delhi vote share
and subsequently winning local polls in Assam and Rajasthan,
nothing now stops the government from confidently asserting the
development agenda of the 2014 campaign.
This may already be
happening. The finance minister has said that the Delhi result
would ?not affect the pace of reforms?. And a long overdue
debate on subsidies has now got underway. The PM?s legendary
communication skills will surely be an asset in selling the
reforms necessary to grow the economy and create jobs.
Yet if the votes
needed to pass legislation in Rajya Sabha could not be secured
earlier, the Delhi result makes it even less likely now.
Convening a joint session of both houses becomes virtually
inescapable to pass new laws, including the ordinances. Due to
procedural requirements, that will take months.
Meantime, there is
no logic to play safe anymore. If legislative confrontation is
inevitable ? but, importantly, winnable ? the budget is ideal to
unveil a broad, ambitious reform agenda.
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