BUSINESS

There Is No Case For Postponing The Union Budget

The demand for a postponement is ludicrous.

05/01/2017 4:21 PM IST | Updated 05/01/2017 4:35 PM IST
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Union Finance Minister Arun Jaitley with Minister of State Jayant Sinha leaving Finance Ministry North Block to present the General Budget at Parliament House, on February 29, 2016 in New Delhi, India.

The opposition parties have demanded a postponement of the Union budget for 2017-18, scheduled for 1 February, since it comes just a few days before elections to the Uttar Pradesh, Uttarakhand, Punjab, Manipur and Goa assemblies are scheduled to be held. The election dates range from 11 February to 8 March.

The demand for a postponement is ludicrous. Once this becomes a precedent, no government--at centre or state--will be able to present budgets on time, assuming there is some election or the other round the corner somewhere in India.

If it is argued that the Centre gets an unfair advantage by being able to present a budget before major state elections, surely, by the same yardstick, state budgets can be delayed by national parties claiming the it gives state parties an advantage in their state.

Anand Sharma of the Congress has pointed to the example set in 2012, when Pranab Mukherjee presented his budget after the elections were completed in March.

However, that is a bad example to cite. Reason: in 2012, the budget was supposed to be a hard one, given the huge fiscal slippages and roaring inflationary trends. Mukherjee was thus happy to postpone his budget, since he did not want to impact the party's prospects in Uttar Pradesh by announcing tough measures, especially a hike in petroleum prices, then long overdue.

The demand for a postponement is ludicrous.

But one can conversely point out that the 2007 budget was presented by P Chidambaram on 28 February even though Uttar Pradesh elections were due just a month after that. He presented the budget just as election campaigns were getting into full gear. The 2012 case should thus be seen as exception and not a logical precedent for determining what should happen in 2017.

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Indian Finance Minister P. Chidambaram (C) and Ministers of state for Finance Pawan Kumar Bensal (R) and Palanin Manikkam (L) arrive at the National Parliament to present the government's federal budget for the fiscal year starting 01 April, in New Delhi, 28 February 2007.

The truth is budgets don't make the kind of difference to voter choices that political parties like to presume. Narasimha Rao's decision to change budget priorities from reform to appeasing the population did not win him 1996. P Chidambaram's Dream Budget of 1997 did not stop the BJP from coming to power in 1998. Nor did Vajpayee's 2003 budget do much to save the NDA from ignominy in 2004. One can say the UPA's farm loan waiver in 2008 may have helped it do much better in 2009, but the evidence for this conclusion is patchy. One can equally argue that agricultural minimum support prices (MSPs) had been raised significantly in 2008, which was a stronger sop for farmers than loan waivers. That, and the previous five years of fast growth, could have done the trick more than the farm loan waivers announced in the budget. But in UPA-2, neither the Land Acquisition Act, nor the Food Security Act, both intended as populist vote boosters, worked for the government.

The short point is this: voters do not evaluate government performance from what happens in the last year. So whether one presents a regular budget or a populist one, the impact on voter choices is marginal.

But there is a larger principle at stake here. If every time there is an election anywhere, the normal business of the government must be suspended or postponed, how can any government work efficiently? In India, there are state elections almost every year, and, when the odd state government falls for some reason or the other around budget-time, elections can even be precipitated at the wrong time.

Voters do not evaluate government performance from what happens in the last year.

This time, the rationale for moving the budget presentation process up to 1 February was to ensure its passage by 31 March, so that all tax proposals are passed before the start of the next financial year. By trying to force the NDA government to postpone the budget, the opposition will be deliberately scuttling this aspect of the move.

It is all right for state budgets to be postponed when state elections are underway, or Union budgets when a national election is underway. But there is no reason to postpone a national budget just because state elections are underway. At best, the Election Commission can specify--as it already has--that state-specific proposal can be eschewed.

Plus consider this: what stops a government from announcing its freebie programme as part of its election manifesto or a few weeks before expected election dates? Just two weeks ago, the UP government announced a plan to include 17 other backward castes in the SC quota. Other states have announced quotas for Marathas (in Maharashtra), Jats (in Haryana) and Muslims just before elections. If these are not election-eve sops, what are they?

Trying to use state elections as a ruse to stop a central budget is nothing but political football. The Election Commission should kick the ball out of the park.

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