End of visionary budgets

The days of visionary Budgets are over. The unstated priority of Finance Minister Chidambaram's Budget is to ensure that his minority government, uncertain of its political viability, survives a full term of five years. And so it is a technician's Budget that implements suggestions of sundry expert tax committees, but steers clear of radical visions that may annoy its coalition partners.Unlike many of its predecessors, this budget makes no mention of second generation reforms, labour reforms, or public sector disinvestment. This is no accident. The Budget's focus is on ensuring the government's survival by providing tens of thousands of crores for an unending list of schemes to keep the Left Front (and several other constituencies) happy. NCAER chief Suman Bery calls it a "no scheme left behind" Budget. Two big red herrings have diverted public attention from the disappearance of second generation reforms from the Budget speech: the cash withdrawal tax and fringe benefit tax. Both have created a big stir. But neither constitutes the remotest threat to the government's longevity. To use a media analogy, Budget controversy has shifted from page one to page three. I expect all future Budgets of this government to follow the same path. Budgets will focus on spending and technical fiscal issues, while steering clear of radical dreams. Budget controversies will tittilate rather than cause political cleavages. This does not mean that reforms are totally off the agenda. Rather, it means that reforms will be pursued in low key outside a high-profile vehicle like the budget. The reforms will be slow, muddled and unhurried, in keeping with the imperative of political survival. Indeed, future budgets will not even discuss reforms directly relevant to the Finance Ministry. This is evident from the news of government sale of shares in PSUs such as BHEL and Oil India in the coming year. In past years, this would have been a budget highlight. Now it is off-budget. Is this deliberate shift to a low budget profile good or bad? There is something to be said for reducing the overpowering hype about budgets. Foreigners cannot understand the phenomenon: there is no budget hype of this sort anywhere else in the world. Nor did it exist in India till the 1990s. In the early decades after independence, budgets were mainly about raising more taxes to finance additional Plan investment. Budget day was the dreaded day when prices went up after tax hikes. Nobody ever called those dream budgets or visionary budgets. They were tax-and-spend budgets. But then in the 1990s India turned away from inward-looking socialism to globalising liberalization. The change did not come easily to a political class that had sworn for decades by the holy name of socialism (while using it for kickbacks and patronage networks). Nor was it easy to change attitudes in a population fed on four decades of AIR/Doordarshan propaganda about the virtues of socialism and evils of corporations and markets. The change in mind-set required was so huge and multi-faceted that the reforms had to be explained as visions of a brave new world that would yield a totally different path to prosperity. So, Finance Ministers no longer restricted themselves to issues of taxing and spending. Rather, they ranged far and wide over the entire economy, calling for changes that related not just to the Finance Ministry but all Ministries. The budget process could not stand apart from the overall reform process: it had to be promoted in terms of an overall vision. This visionary process was started by Manmohan Singh, carried forward by Chidambaram in 1996-98, and (after initial hiccups) taken still further by Yeshwant Sinha. Reforms started as a Congress idea bitterly attacked by the left and BJP, who predicted dire disaster. But instead of disaster there followed the fastest-ever economic growth and fall in poverty. Soon the public no longer needed much convincing about reform. And China's spectacular success changed even the reluctant CPM. In due course the Left and BJP both came to power, and both found the compulsions of economic liberalization too strong to reverse. Thus did a consensus on reform emerge. It came not through debate or ideological conversion but by the democratic process of putting every part of the political spectrum in power, and obliging it to deal in pragmatic terms with the compulsions of a globalising world. That political process is now more or less complete. There remain heated debates about the width and depth of reform, but these are now debates within a reform paradigm. In this new political climate, there is no need any more for budgets to become vehicles of brave new visions. Especially when coalition politics makes visions more foolhardy than brave.