Political Logic underlying Pranab's Budget - Mainstream

With the Left weakened electorally and the United Progressive Alliance Government of Prime Minister Manmohan Singh free to chart its own policy course, the corporate sector had been expecting the new regime’s first Budget to be what business commentators euphemistically call “investor friendly”. But while there were rich pickings for key companies in specific sectors, Finance Minister Pranab Mukherjee’s Budget speech on Monday made it clear there would be no early deviation from the steady course of Centrism that was the hall-mark of the UPA-I’s economic management.

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Thanks to the irrational exuberance of the corporate sector, which misread the 2008-09 Economic Survey’s advocacy of sweeping reforms as a sign of impending liberalisation in sectors like banking, insurance and retail as well as of wholesale privati-sation, the stock markets nosedived as soon as it became clear none of this was going to happen quickly. The UPA may still move on those fronts as time goes by and the growth rate recovers. For the present, however, it is clear the Congress leadership does not want the winning formula of Keynesian fiscal policy and social-democratic welfarism that it established in the Prime Minister’s first term to be diluted so soon after it paid handsome dividends at the hustings. Taking as his starting point Dr Singh’s statement that the victory of the Congress-led UPA in the recent elections reflected a mandate for inclusive growth and equitable development, Pranab Mukherjee emphasised the importance of welfare schemes like the National Rural Employment Guarantee, and the National Urban Renewal Mission. He mentioned privatisation under the Orwellian heading People’s ownership PSUs and echoed the aim, first mentioned in President Pratibha Patil’s address to Parliament last month, of bringing the government’s stake in public sector firms down to 51 per cent. But the absence of political consensus meant the figure that has been budgeted on the revenue side is not very ambitious. And the Minister rushed to clarify that the public character of state-owned insurance and banking would not be altered.

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