On Monday evening, India’s finance minister P. Chidambaram chose an unconventional strategy to hard-sell the Union Budget. He took questions from citizens on Google Hangout. Chidambaram’s enthusiasm for new communication tools to discuss the budget is commendable. Yet, that can scarcely mask his reliance on stale ideas and conventional UPA (United Progressive Alliance) tactics in framing the Union budget itself.
Chidambaram’s budget at first glance appears to be a combination of several small steps without any overarching theme. But a closer look suggests that there is indeed a key theme: of status quo. By pandering to numerous special interest groups, by refusing to emphasize the importance of public goods over leaky populist schemes, and by eschewing the path of credible fiscal consolidation, the UPA government seems to signal that it won’t abandon its populist agenda. At best, it may temper its spendthrift ambitions to mollify ratings agencies and avert a credit rating downgrade.
Broadly, Chidambaram had two alternative strategies to choose from in order to right-size the government and avert an economic crisis. The first and more radical strategy would have been to abandon the populist legacy of the UPA and redirect public spending towards high priority public goods, which cannot be appropriated by sectional or special interests. The second and safer strategy would mean continuing with the failed approach of the UPA but in a more restrained avatar, and trust in luck to fill the fiscal hole.
Anyone following the budget knows which path Chidambaram chose to tread. Consider Chidambaram’s allocations for different ministries. The rural development ministry, which runs the highest number of leaky schemes such as the Total Sanitation Campaign, has been among the biggest beneficiaries of Chidambaram’s largesse. The allocation for the ministry has jumped by 46% over the revised estimate for the current fiscal year, and is much higher than the increase in the budget for either education or health.
Consider also the budget announcements directed at women: a women’s bank, with a measly corpus of Rs.1,000 crore, and a special Nirbhaya fund that has the same corpus, and which seems to be a last-minute addition to his budget speech. Chidambaram has little idea of how the fund is supposed to work. He has entrusted the responsibility on the women and child development ministry, a ministry that has distinguished itself by its ineptitude in tackling the nutritional crisis among Indian women and children. There is a remarkable parallel in such measures with last year’s budget. Last year, Pranab Mukherjee announced a multi-sectoral scheme to tackle malnutrition in 200 high-burden districts. The impetus for the scheme last year was the “Hungama” report by the Nandi Foundation, and the subsequent storm it generated in the media in the run-up to the budget. It appeared doubtful even then that the government would walk the talk and a year later, Chidambaram promises it will finally take off in 100 districts. This year, the run-up to the budget witnessed an outcry over the Delhi rape, and pat came the government response of tokenism, once again.
It is natural for a democratic government to respond to public concerns but the nature of the responses expose the insincerity of the UPA government. There are several initiatives that can make this country more gender-equal. For a start, the UPA could have followed the example of Kerala, which initiated a comprehensive ‘women friendly infrastructure’ project in 2010, involving small but significant investments such as building toilets in government offices as well as major ones such as reserving government-funded apartments for women workers who face a long commute.
Genuine reforms, either in the provision of public goods or in the provision of gender-equal services, require hard work and greater attention to detail. It calls for abandoning the path of populism, which the UPA is unprepared to do. And it will be unfair to blame only Chidambaram for treading the beaten track. Surely, Congress president and UPA chairperson Sonia Gandhi and Prime Minister Manmohan Singh must share the blame for the collective failure of the UPA in charting a new policy path, one that could inspire confidence among investors and voters alike.
The disturbing message of the Union budget is thus not about what lies ahead in the next fiscal year but about what might lie further ahead were the UPA to regain power in 2014: more populism, continued fiscal stress, and lower growth. What is equally disturbing, though, is that the principal opposition party, the BJP, appears to have little clarity over how it will revive the economy. One has to only read the economic resolution adopted in its national conclave to realize that its recommendations are extremely populist, and at times contradictory. It expresses concern over the ballooning fiscal deficit and yet demands a roll-back of hikes in all administered prices!
With political outfits such as these, is it any surprise that the Indian economy is in a mess, citizens are disgruntled, and industrialists are wary of making investments?