Mr Chidambaram, Show Thy Grit

The Union Budget shows the mettle of the finance minister. The mechanism of budget-making is such that the finance minister has enough room for maneouvreability. It is a document which, in effect, does not reflect the collective responsibility of the cabinet. The minister has to secure the broad consent of the prime minister on the thrust areas of the Budget. The cabinet ministers are kept in the dark till the last minute. At 4 p.m on the day of the presentation of the Budget a cabinet meeting is convened where the ministers are informed about the proposals. From the meeting, the finance minister rushes straight to the House.

 

In fact, in 1979, Charan Singh, the then finance minister, insisted on reading part A of his speech so that his cabinet colleagues could appreciate the philosophy behind his proposals. But part A was so long that it took him nearly one hour to finish. Eventually, the ministers came to know of the Budget proposals along with the rest of the world.

Strong-willed finance ministers have always used the Budget as a tool to the set the national agenda of their choice. For instance, Liaquat Alis 1947 Budget was the last straw that convinced the Congress leaders that they could no longer work in tandem with the Muslim League. That is when they agreed to go ahead with the countrys partition. In 1979, Charan Singhs Budget contributed to the split in the ruling Janata Party.

Mr Chidambaram is the finance minister of a 13-party coalition government. Though he manages to advance the agenda dear to him in cabinet meetings, his presence in the government is not felt as much as that of Manmohan Singhs in the previous government. Mr Chidambarams well-wishers seem to have stopped sympathising with him. In fact, they pity him. The Budget, therefore, will give him a chance to change this growing perception about him.

But Mr Chidambaram cannot advance his agenda unless he neutralises and isolates the Reds within the United Front. The Left is pursuing a dog in the manger policy. It wants to enjoy power without responsibility. It had been creating hurdles in the way governance. It is preventing the government from increasing petroleum prices without offering alternative suggestions on how to meet the huge oil pool deficit. Similarly, on the one hand the Left is pushing for higher procurement prices of agricultural produce, whereas on the other, it is opposing any hike in prices for consumers.

However, Mr Chidambaram can exploit the compulsions being faced by the Left. Though it has been making constant noises about something or the other, it will not dare to break away from the United Front. In a way, it is in the same boat the Congress is in.

The latest series of election results show that there is neither any consistent support for the United Front, nor can the Congress hope to improve its position if elections are held in the near future. Hence, both need to stick to each other for some more time. Mr Chidambarams party, however, is not dependent on political support from the Left. In fact, the political support base of each of the UF constituents is so distributed that neither is dependent on the support of the other. In West Bengal and Kerala, where the Left does count, it doesnt want accommodate others. But in other places it wants to climb on to the shoulders of their partners.

There is another area where Mr Chidambaram can exploit the differences within the Left, particularly the CPM. If one goes by the West Bengal experience, the state chief minister, Jyoti Basu, should be quite sympathetic to Mr Chida-mbarams agenda. The finance minister could take Mr Basu into confidence on major Budget proposals. He could, in fact, incorporate some of Mr Basus ideas too.

All in all, Mr Chidambarams Budget should aim at sustaining the growth momentum and imparting new impetus. Even in the pre-reform period, productive forces had gained strength to give way to a sustained growth rate of 5.8 per cent. Reforms have pushed the trend rate to about 6.5 per cent. For three five-year plans now, the growth rate target has been consistently exceeded. The recent signs of slow-down are due to factors that are not impossible to correct. Their origin is in budgetary deficits. The increase in prices of petroleum products, some cut in subsidies and sale of public assets could change the scenario within six months.

If the Left does not allow an increase in petroleum prices, let Mr Chidambaram resort to the second-best solution increase duties on petroleum products. Unfortunately, Mr Chidambaram has no direct control over the disinvestment process. He should form an idli-dosa clique in the cabinet to time disinvestment in the next boom phase of the capital market.

He could boost savings by declaring some popular instruments of savings deductible for income tax purposes. Manmohan Singh let the PMO make the expenditure Budget. But Mr Chidambaram must get back effective control over the expenditure department, and try to minimise the damage which the humble farmer may try to inflict upon the Budget.