Budget has two faces

How a Congress-friendly budget also addresses the markets

Initial reactions to the Union budget, 2013-14, were based on an analysis of numbers as Finance Minister P. Chidambaram chose to represent them in his budget speech. The budget was seen as a tax and spend document — expenditure on the Congress's pet projects was increased, to be financed by higher taxes on the super rich. The budget was mostly in line with the Congress's politics of the last ten years. It was pro-rural poor and anti-rich.

The disappointment that followed was mainly due to expectations from Chidambaram, who was seen as more market-friendly than the rest of his party but had failed to present a budget that pushed investment and helped growth, or to defy the party line. Arguably, the budget was not more market friendly than that which could have been presented by any other Congress minister.

There seem to be two issues here. First, shouldn't it have been expected that the last budget before the elections would be one that represented Congress ideology? In the last ten years, the Congress has not portrayed itself as pro-business or even pro-market. It is only when the economy started slipping into a bottomless hole that the party brought in its most competent and most market-friendly cabinet minister to take charge. Chidambaram's job was to convey to the markets that it was not a complete return to the days of the licence-permit raj. But to expect that the Congress was ready to give up its agenda of welfare programmes, or the pro-poor, anti-rich image it has been trying to build, was perhaps unrealistic.

As a consequence, the budget essentially had to be a tight-rope walk between the instincts of the Congress and the needs of a government rapidly losing the confidence of industry, foreign investors and credit-rating agencies.

... contd.

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