Budget, in the shadow of polls

This week, two important developments will take place, which will leave an impact on the national economy till at least the end of February next year. The Union Railway Budget is slated to be placed before Parliament today (Wednesday) and the Union Budget on Friday. But this year, it will be of special interest to see how the Ministers concerned deal with the problems besetting their spheres, in view of the fact that economics alone won't dictate their prescriptions. Admittedly, it will be argued that, in India at least, this is always the case, but this year, the political impact on the two events of the State elections just held will be especially severe, given the play of numbers in the Lok Sabha.

UPA GOVERNMENT

Briefly, the UPA Government cannot fend for itself in the Lok Sabha; it has to rely on allies to muster a working majority in the House. Again, it will be said that there is nothing special regarding this because, through the years, minority Governments have sailed through House votes because of assured support from friends, the basis of which is influenced by a plethora of factors. The problem this time is that the UPA Government is depending for its continuance on the support of political parties, whose support cannot be taken for granted. Since the State elections just concluded, it is too early to gauge, with any degree of certainty, how precisely the support-matrix will work out for the Congress Party. The problem is that before the water turns clear, there are the Railway and Union Budgets to contend with, exercises which ordinarily would have provided the Government of the day with an opportunity to set the tone for economic activity in the year ahead. This time around, caution will have to be the main plank, because the Congress Party will have to employ every political tactic in its armoury to get the UPA's allies and some others to support it on the floor of the House on every issue which is put to the vote.

BUDGET REFORMS

So what should the nation expect from the two documents? In fact, the Economic Survey this time (to be tabled in Parliament on Thursday) should be of special interest, because there the nation will find what the Government feels should be done in terms of policy during 2012-13, reforms, et al. It can be said with some certainty — assuming that the Congress Party wants to continue in the seat of power — that necessary reform initiatives, which are bound to be controversial, will be kept out of the Union Budget. Simultaneously, the Congress Party could choose to focus on populist measures (such as lowering the income-tax burden and pandering even further to the farm sector), in an effort to make it difficult for its errant allies and some other critics. Political games will, therefore, mark the two Budgets, the Union Budget much more than the Railway Budget (a steep pre-Budget freight increase having already been effected by the Trinamul Minister). This means that, in economic content, the Union Budget is likely to be average, with no overriding reform-direction. And yet, one shouldn't be surprised if the Budget is greeted by a rise in the Sensex. After all, in India, political economy is on the ascendant, in the process sapping the vitals of the Indian economic machine, which the nation can ill afford in these times of intense international competition and burden of a mammoth population.

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