
Ok, so the Union Budget is
here. Many people believe, rightly so, that the budget is of
little consequence. As a matter of fact, the budget drew little attention from the media this year, comparatively speaking. We have more important things to discuss such as the Arun Nayar/Liz Hurley wedding etc.
The budget is of little consequence because there is nothing sacrosanct about it. Think about this, India has one of the lowest central bank independence, even among countries in the Asia-Pacific region. What this essentially means is that our treasury is the FM's personal spoil and he can basically do what he pleases with it.
Stupid academic types feel gloated having discovered major economic arguments from advanced economies which have neither relevance nor validity in the Indian context. Our central bank is straddling several factors at a time, including reserve ratio, interest rate, temporary liquidity adjustment. These moves can be best charactereized as voodoonomics.
So, let's look at the
main features of this budget. Most of the largesse have been allocated for disbursement among party cadets at the Mandal level. There are some token measures for powerful SC/ST special interest groups. The budget is full of soundbites such as rural employment guarantee, more inclusive growth etc. etc. In other words exactly what has been happening since independent, more of the same in fact.
The key disconnect between the chest thumpings and reality can be seen in the
dismal allocation for Muslims. Of course we have a huge cess of 1%, to subsidize the education of rich OBC kids.
Ostensibly the goal of the budget is to fight inflation. Some folks believe that reducing the budget deficit might contain inflation. Indeed the budget deficit has decreased over the years. Revenues have gone up and politicians couldn't raid the treasure chest fast enough. With our slow bureaucracy, even spending money takes a little while. But it will catch up. Meanwhile, there are some really really dangerous ideas being floated, such as using the FOREX reserves to fund infrastructure expansion.
Some of the reactions to this budget were telling. The PM asked,
What more do you want? He would be surprised at the answer though. People mostly want him to get the fuck away from the manger. The Hindujas
liked the budget. Given the Bofors related noise, it is perhaps safe to declare allegiances at the outset. Good strategy. The FM conducted an
opinion poll. He might as well have held a gun to the heads of the people.
This budget was the worst ever combination of playing to the gallery and playing it safe, like building a panic room in Switzerland. To say that the FM chickened out would be insulting to the chickens.