With 10 state assembly elections
this year and the general election in the next, the Congress-led
United Progressive Alliance (UPA) faces possibly its sternest
challenge since it returned to power in 2009.
It goes without saying that the forthcoming electoral tests have
been compounded by the perceptibly declining political standing of
the ruling alliance caused by multiple scams and economic
stagnation. In addition, defeats in a series of elections ranging
from municipal contests to state assemblies have underlined its
Aware of its falling status, Prime Minister Manmohan Singh did
talk of reviving the animal spirits in the economy while the
Congress formally elevated heir-apparent Rahul Gandhi to the No. 2
position to be the vice president in order to enthuse the party
workers. But, their effects have been minimal.
Much depends, therefore, on the budget if only because it will
show the direction in which the country is moving. Such an
indication is all the more necessary because a major reason for
the economic slowdown has been the policy paralysis caused by
confusion about the model of development - whether to be populist
or reformist. In this respect, the budget will be a make-or-break
affair if it succeeds in dispelling the miasma of indecision,
which has been the bane of this government.
But, will it do so? If the government fails yet again to make up
its mind about the economic agenda or opts for an unviable mixture
of the two conflicting models to neutralise the doubting Thomases
within the Congress, it may well return to square one. The fallout
will be that the uncertainty of purpose which prevented the party
from making a favourable impression on the electorates in regions
as diverse as Bihar, Uttar Pradesh, Punjab and Goa will continue
to hobble along.
The chances of such an eventuality cannot be dismissed. The reason
is that one of the legislation expected to come up before
parliament is the extravagant welfare measure favoured by Congress
president Sonia Gandhi - the food security bill. It aims at
providing subsidised food to 75 percent of the rural population
and 50 percent of urban dwellers at the gargantuan annual cost of
Rs.1.2 lakh crore.
Since few countries have tried feeding about 67 percent of the
total population at virtually throwaway prices, its effect cannot
be anticipated. In electoral terms, the Congress obviously expects
to reap a huge benefit if the scheme can at all be implemented
given its enormous logistical problems of procuring, storing,
transporting and distributing such massive amounts of foodgrains.
It is anybody's guess whether the creaky bureaucracy will be up to
the task. Apart from that, what is even more worrisome is the
disastrous impact of the populist measure on fiscal discipline.
Considering that the government has been referring to the need for
cutting subsidies and taking small steps like increasing fuel
prices and reducing the supply of cooking gas at subsidised rates,
the economists in its ranks cannot be too pleased with the food
bill. But they have had to hold their tongues in order to
accommodate Sonia Gandhi's views.
She wants the bill to play the role which the rural employment
scheme supposedly did in boosting the Congress' prospects in 2009
although the programme did not seem to have helped the party in
subsequent elections. Arguably, therefore, the masses are probably
less impressed by generous handouts from a paternalistic, mai-baap
sarkar than by an atmosphere of economic buoyancy promising
increasing employment opportunities.
To achieve the latter, the budget will have to turn away from
populism to focus on reforms, which have been virtually stalled
even after the departure of the Left. If the government is
courageous enough to do so, the economy can still break out of its
present standstill mode and generate the promised animal spirits.
It may take time for the visible effects of such a turnaround to
become noticeable, but what does happen when the economy is
perceived to be recovering is to create a feeling of hope.
It isn't only the middle class, already far more consumerist than
it ever was, which experiences this heady optimism; the feeling
percolates down to the lower strata since the job prospects are
higher in a thriving economy.
In a way, therefore, the budget presents the last chance to the
government to persist with what it started in 1991 but could not
pursue as vigorously as it should have. The constraints included
the Left in the 2004-08 period, resistance from within the
Congress by votaries of what Manmohan Singh called an "outdated
ideology" and the cussedness of the Bharatiya Janata Party (BJP),
which opposes when out of power what it advocates while holding
office. But any further hesitation on the government's part may
prove to be politically fatal.
Amulya Ganguli is a political analyst. He can be
reached at email@example.com