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Finance Minister P. Chidambaram's
claims to be a reformer may have received a glancing blow with the
10 percent surcharge on the super-rich in Thursday's budget
proposals, but the fall of the axe on 42,800 people who earn Rs.10
million a year is small price to pay for his reluctance to take
more drastic steps against the wealthy.
What this unwillingness to soak the rich, a favourite pastime of
socialists, shows is that the government may have finally won the
battle against the Leftists in the Congress, who, as a
Left-leaning newspaper of Chennai felt, were more "clued in" to
the demands of the aam admi than the supposedly Rightist prime
minister. It can perhaps be said, therefore, that the government
and the party are finally moving, even if slowly, towards a
capitalist economy.
The fear about the rich being taxed was expressed during the
run-up to the budget, mainly because it was felt that the
government's capabilities to finance the profligate welfare
programmes of the Congress were limited. This was more so at a
time of low growth and low investment.
But, if the tax structure has not been tampered with in a major
way except for those individuals who, according to the finance
minister, believe along with business magnate Azim Premji that the
rich have a duty to contribute to the national exchequer, the
reason perhaps is that the Leftists in the party and government
have realized that the reforms cannot be rolled back.
Moreover, the minister has indicated that this imposition is a
one-time affair. Premji, too, has welcomed the move, describing it
as politically correct. At the same time, while no tears need be
shed on the levying of duties on SUVs - or "socially useless
vehicles", as Jairam Ramesh once called them - or on "smart"
phones, the trend shows that the old belief that the aam admi will
vote for a government which extracts money from the rich may not
have completely died out.
On the other hand, the value of growth, which used to be earlier
mocked because their benefits were assumed to be only for the
"greedy" corporate sector, is now being gradually appreciated. It
is not without reason, therefore, that Chidambaram spoke of the
need for getting back to eight percent growth rate and argued
about the "imperative" nature of foreign investment.
The neo-liberal brigade used to speak hesitantly about these
initiatives earlier. Now, the climate is more conducive to reforms
because the high fiscal deficit, high inflation, low growth and
low savings have left no alternative but for greater globalization
and deregulation.
That the language of reforms is being spoken, albeit cautiously,
when it is believed that the present budget may be the last one
before the next general election, which may even be brought
forward to the end of this year, denotes the realization in the
government that the so-called LPG - liberalization, privatization,
globalization - route to economic development has wide acceptance,
and not only among the "neo middle class" identified by Narendra
Modi, the children of the post-1991 reforms period who have become
much more affluent than their parents.
It is possible that this change of mood, ironically, has been the
result of the slowdown, which made many people, especially in the
poorer sections, aware that the only way there can be greater
employment opportunities is by revving up the economy with the
injection of capital by domestic and foreign investors. As a
result, disinvestment is no longer derided as the sale of family
silver except by the hardcore Left.
This is not to say that populism is on its way out. Instead,
Chidambaram pointed out that the "flagship programmes have been
fully and adequately funded". Foremost among them is the rural
employment scheme which was believed by the former National
Advisory Council member, Harsh Mander, to be responsible for the
Congress's 2009 victory. Although the food security bill is yet to
be approved of by parliament, the budget has set aside Rs.100
billion for providing foodgrains at subsidised rates to nearly 70
percent of the population of 1.2 billion.
This largesse has been undertaken presumably because Congress
president Sonia Gandhi believes that it will be the winning card
in 2014 as the employment scheme was in 2009. These spendthrift
policies suggest that the government does not intend to do away
with subsidies.
There are other conflicting signals. For instance, against the
industry's expectation of a rollback of retrospective taxation,
the government has announced its intention to introduce a modified
General Anti-Avoidance Rule (GAAR) from 2016.
Although it has been called a "please all" budget (except for the
"super rich"), the Sensex's unenthusiastic response showed how the
urge is in favour of more reforms than what is on offer. The
credit rating agencies, however, have been more cheerful.
(Amulya Ganguli
is a political analyst. He can be reached at amulyaganguli@gmail.com)
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2013
Union Budget
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