A politically neutral budget

A politically neutral budget

By THE SUNDAY GUARDIAN | 5 February, 2017

In days, elections open, including in Uttar Pradesh, a state core to the fortunes of the BJP. In addition, the mix of states going to the polls includes Punjab, where the Shiromani Akali Dal-BJP alliance is facing the heat of anti-incumbency in a context where the Aam Aadmi Party is seeking to expand beyond Delhi, while the Congress Party seeks a breakthrough such as would place that party on a track towards revival. In Goa, the BJP needs to emerge as the single largest party, if not win a majority outright. In Punjab, it is essential for the credibility of the BJP that the SAD-BJP alliance put up a respectable showing. In other words, by at worst coming a close second, if not once again leading the three-party pack. In Uttar Pradesh, the BJP needs to emerge as the single largest party at worst, and ideally win a comfortable majority in the state Assembly. Even coming second in seats to either the Congress-Samajwadi Party combination or the Bahujan Samaj Party would deal a considerable blow to the prestige of the ruling party at the Centre, while coming third would be a disaster. Should such a result occur, the Narendra Modi government would experience severe headwinds from an Opposition scenting victory in not just the 2019 Lok Sabha polls but even in some of the 2018 state Assembly elections. Despite the immense political stakes, especially in UP, the Narendra Modi government resisted the lure of political expediency and presented a budget that is politically neutral. Finance Minister Arun Jaitley, once again, ensured that the 2017-18 Union Budget reflected economic rather than political needs and criteria by for example resisting calls to slash direct tax rates. This has been done only to the lowest decile of taxpayers, and that too in a limited way. In yet another example of the fact that the Modi government looks on High Net Worth individuals as being outside its natural constituency, a 10% surcharge has been imposed on income above Rs 5 million annually. India being a country where slums co-exist peacefully with mansions, this additional impost on the wealthy is unlikely to create any political waves.

Prime Minister Modi and Finance Minister Arun Jaitley have shown that politics will not be allowed to influence their decisions concerning the economy. This trait has been demonstrated in several other decisions as well. For example, by not passing on the benefits of the much lower price of crude oil as compared to what it was when the NDA took charge of the country on 26 May 2014. Such a benefit would have been immensely popular, especially with the middle class, a key constituency which plumped for the BJP in the last Lok Sabha elections. However, the PM and the FM calculated that the exchequer needed the windfall gain more than retail consumers did, showing a focus on fiscal needs rather than political popularity. Similarly, FM Jaitley has refused to reduce direct tax levels except to a marginal extent, even though steep tax cuts would have been immensely popular with voters, although of course not to the international financial agencies closely monitoring the policies of the Modi government. Such entities applaud the government for remaining on the path of overall fiscal rectitude. In its drive to ensure resource mobilisation, the government has refused to heed the counsel of some outside experts that steep cuts in corporate tax were needed to revive private investment. Such taxes have indeed been cut, but only for companies below Rs 500 million, a relatively low figure in the emerging business landscape. In a further blow to politics as usual, the FM has decreed that any contribution above Rs 2,000 to a political party will need the donor’s details to be recorded. Hopefully, in future, all contributions from anonymous donors will be barred and it will be mandatory to give information to the public about all donors, besides political parties coming under the ambit of the RTI. Overall, the Union Budget has been described as cautiously conservative, in line with earlier budgets of the Modi government. Overall, the budget presented on 1 February by FM Jaitley shows the discipline and avoidance of populism that has marked so many of the decisions of the government. At a time when politics is playing such an important role in the national discourse, the PM and the FM need to be congratulated for proving wrong their political rivals, who had predicted a slew of populist measures designed to attract votes in the coming state Assembly elections. 

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