You are here: Home » Opinion » Columns
Business Standard

Mihir S Sharma: No more 1970s Budgets, please

UP's lesson for the Budget: end mai-baap sarkar, for voters and companies alike

Mihir S Sharma 

As everyone now knows, the United Progressive Alliance (UPA) is a little like Bollywood. It lives in the 1970s. The 21st century is something of a mystery to its leaders and its ministers. They don’t quite understand the internet. They try to micro-manage their schemes. They’re running public-sector enterprises into the ground. They don’t allow state governments to take policy initiatives. They think spending is a substitute for good implementation — and even for sound ethics. And so they spend too much, expecting the money will come from somewhere. They publicly scorn capitalism and money-making, and privately alter policy to ensure industrialists get what they want.

It would be simple, perhaps, to attribute this simply to a control-freak mindset of some kind, to assume that this is just in the Congress’ DNA. A party that continues to slavishly idolise the deeds of Indira Gandhi, you would say, is not a party prepared for the modern world.

True. But stopping there would be both unhelpful and simplistic. In order to work out whether the UPA, and the Congress, can change in time to drag India’s economy out of the six-per-cent-doldrums to which they’ve consigned it, it’s necessary first to work out what actually underlies this attitude. Only then will India’s citizens and voters know which buttons to push in order to push their leaders into change.

Fortunately, the round of elections that just concluded, particularly Uttar Pradesh’s, provides us with an ideal case study. I do not presume to know exactly why the Samajwadi Party (SP) won an unprecedented majority, and the Congress was humiliatingly wiped out, receiving far fewer seats than even its most derisive critics expected. Fortunately, we do not need to know why the Congress lost; we just need to know what the Congress thought it should do to win.

The answer is written all over its campaign. Its manifesto promised to create industrial jobs in UP. However, its leaders tended to wander the state praising schemes that they’d instituted, and promising more packages of one sort or another. Distressed weavers? Package. Bundelkhand parched? Package. People migrating? Scheme. No power? Scheme. The Congress’ Delhi leadership thinks of its political party as a giant non-governmental organisation that lobbies the government, like every other NGO we have, pushing its preferred schemes.

So how is the Congress getting it wrong? The answer, perhaps, lies in the reinvention of the SP. You would have to be extremely foolish – as some people have been – to think it has entirely changed, a softer, kinder SP, one which eschews populism. But its leaders’ ears are well known for being close-ish to the ground. If they feel that promises of free power aren’t enough, it means something. Instead, they have repeatedly promised to make it easier for individuals to get ahead. Instead of focused transfers, their talk was of computers, of completing the Mayawati government’s infrastructure projects, of crop insurance.

Instead of just focusing on who would want what, the SP tried to identify what it was that everyone needed. The former is the politics of the 1970s. The latter is the politics of today.

No more 1970s Budgets, pleaseThe Congress hasn’t caught up. It still thinks of finding vote-winning policies as requiring, first, the identification of groups it needs to win over. Policies that help them will win votes, it thinks. It seems to have a bone-deep disbelief of the idea that people might want, instead, a policy environment that helps them help themselves. It believes that people still expect a mai-baap sarkar.

And the problem this Budget season is that the UPA’s attitude to the economy isn’t different from its attitude to voters. Perhaps the Congress – just as it might genuinely wish to do good things for Uttar Pradesh – really wants higher growth, lower prices, and a more dynamic, private sector-led economy. But its idea of sensible economic policy-making is too much about finding and trying to help the companies, and sectors, that will help stimulate growth or reduce inflation — and not so much about allowing the private sector to grow and cut costs by itself. A mai-baap economy.

Here’s one simple change in atmospherics that’s telling: a few short years ago sensible people could declare the Union Budget near-irrelevant. This was no longer the 1980s, they said; the government had retreated from so many sectors, decontrolled so many others. India’s economy ran itself now. Government spending was constrained by legislated limits.

The antique ceremony around the Budget – the build-up, the secrecy and so on – had begun to ring false. Important decisions, through which fortunes were made and lost, were increasingly decided from individual ministries or by middle-level contracts, not through central revenue and expenditure. Nobody watched for and dissected every nuance of industrialists’ expressions at the Confederation of Indian Industry’s Budget-watching sessions any longer.

In 2012, is that still true? Today, India waits for one of the most important Budgets in decades. Nobody could deny its relevance, its centrality to so many issues. Under Finance Minister Pranab Mukherjee, the past few Budget exercises have been throwbacks to an earlier era: over-optimistic forecasts, ballooning expenditure, long lists of sector-specific exemptions, and, of course, lip service to Plan requirements. Naturally, the importance of the Budget has increased, again; equally obviously, that’s not a good thing.

The Congress’ election managers need to recognise that vote-winning politics means offering voters policies that help them fulfil their own desires, not ham-handed attempts by the government to find and “help” them. Analogously, the party’s economic managers must remember that vote-winning (and growth-winning) economics requires policies that helps individuals and corporations find profitable opportunities for themselves, not ham-handed state intervention supposedly in their interest — say, forcing down prices in the short term at the cost of fiscal stability.

Mr Mukherjee is much smarter than the Congress’ election managers. Giveaways, subsidies, tax credits and holidays are always a temptation. But surely he knows that 2012-13 is not a time to give in to temptation. Instead, give each sector what it really wants: an environment that helps every sector. Most importantly, a shrinking fiscal deficit and a more efficient, less heavy-handed government.

And, Mr Mukherjee, please make the Budget boring again. The 21st century is no time for excitement.


mihir.sharma@bsmail.in  

First Published: Sat, March 10 2012. 00:33 IST
RECOMMENDED FOR YOU