Budget 2012: Pranab lays road map for UPA’s survival (First Post)

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This year’s budget was expected to be a blockbuster one. The government still has one budget to go to get into the populist mode before the General Elections in 2014.

The UPA government shows no sign of collapsing in a hurry. And, forgive the cynicism, it is so far down on popularity that it could have afforded an aggressive budget without the fear of sinking lower in public estimation.

It was the perfect opportunity for Finance Minister Pranab Mukherjee to kick-start the virtually stalled reforms process and pump life into a sputtering economy. Any bold move would have earned him praise from the chattering classes and the corporate sector. This was the last chance for him to send a message that the government is still alive to the needs of industry and manufacturing sector.

Instead, he presented an insipid, middle-of-the-road budget. “It is a budget for stability,’’ he said. He was talking of economic stability, of course, but it was really about political stability.

Any tough measure in the Budget could have attracted sharp reactions from allies such as the Trinamool Congress and the DMK. Reuters

Yes, we would have liked a little bit of instability.

He could have gone tougher on subsidies and hiked the tax exemption limit a bit more. He could have targeted inflation better. Mukherjee mentioned subsidies in his speech and said these have to be controlled – brought down to 1.75 percent of GDP in next three years. That’s well into the next regime at the centre. It did not carry conviction.

Were politics and the state of the UPA weighing heavy on his mind?

Possibly. Any tough measure could have attracted sharp reactions from allies such as the Trinamool Congress and the DMK. The government is already in a crisis after the forward-looking railway budget presented by Dinesh Trivedi. Trinamool chief Mamata Banerjee has fiercely objected to the fare hike proposed by her own minister and has asked the Prime Minister to sack him.

The primary concern of the Congress at this juncture is to stop the UPA from disintegrating. The opposition, or its opinion, is a minor worry – they will find fault with the budget in any case. Any tough measure on sensitive issues would have caused consternation among its allies and scared off potential allies like the Samajwadi Party, the Bahujan Samaj Party and even the Left.

The Congress-led UPA is looking at them for numbers in the House in case the Trinamool Congress decides to withdraw support.

Thus, Mukherjee’s budget is for the survival of the UPA.

The government, hemmed in from all sides at the moment, would have been more adventurous had the results of the last round of Assembly elections been in its favour. Now, it has to be on the defensive till 2014. The budget next year could be even tamer.

The industy may be a bit miffed, but the government cannot leave the common man dissatisfied. That seems to be Mukherjee’s position.

But he seems to have targeted his constituencies well. The farmers have no reason to be unhappy and the middle class gets some benefit from the revision of the income-tax exemption limit. The service tax hike is going to pinch the latter a bit but it is not gong to be too painful. These are the sections that are not quite enthused by big-ticket reforms.

This could well be the economic road map of the government till 2014. Mukherjee has given a direction to the UPA through this budget. It may not be to the liking of many sections though. But, they will have to bear with it.