New Delhi: Hours after it became quite clear that it had been soundly beaten in Punjab and Uttarakhand elections, the government announced it was removing a slew of items that were earmarked exclusively for small manfacturers.
The move to de-list (see story on Page 9) would normally have featured in on Wednesday’s Budget and the decision to fast-track it by a day seems to suggest a shift in the style, if not quite yet, of the substance of the government’s economic policy.
Under fire over his inability to contain rising prices of essential commodities, which added to the opposition’s arsenal in Punjab and Uttarakhand, finance minister P. Chidambaram appears to be keen on keeping his Budget proposals relatively free of possible political backlash.
This approach was first evident earlier this month when he announced the government would piggyback on share issues by some public sector power companies rather than resume a stalled disinvestment policy. While the Left parties, which support the government from outside, still cried foul, the move allowed the finance minister to deal with the issue outside of his annual accounting exercise.
The election results and a tough week on the Indian stock markets are underscoring the issues that the Budget must navigate at the last minute. For the past few months, Chidambaram has been under fire for his inability to contain increasing inflation. Even after widely expected defeats in Punjab and Uttarakhand—the party did retain Manipur—key electoral tests lie ahead. Uttar Pradesh is set to go to polls in April, followed by Goa and Gujarat.
As a result, both the finance minister and Prime Minister Manmohan Singh have yet again renewed their commitment to contain the high inflation rate. Meanwhile, in any trade-off between pushing growth and containing inflation, there is increasing political pressure to tackle inflation.
The industry has clearly sensed the finance minister’s compulsions.
“You’ll see little more of the populist hand of the Budget, which is not wrong,” said R. Seshasayee, president, Confederation of Indian Industry.
“The (election) results only substantiate our concerns,” said Communist Party of India (Marxist) leader Nilotpal Basu. “It is now proved that, in order to make itself politically sustainable, the Congress-led government will have to finally address inflation.”
Basu also expressed dismay that there was no mention of a possible curb on forward trading in foodgrains in the government’s annual Economic Survey. The Left parties have long been demanding a ban on forward trading.
The electoral defeats, which the Congress, especially in Punjab, blamed on price rise, can only further cramp Chidambaram’s style. The opposition within the Congress party is likely to get more intense as Sonia Gandhi loyalists, attempting to deflect blame on the Congress President who had actively campaigned in the state, point to the finance ministry for being unable to control prices.
Officially, the party continued to put up a brave front.
“High growth and electoral victories can go together,” said party spokesperson Abhishek Singhvi, when asked whether the party had paid the price for chasing growth over fighting mounting inflation. Singhvi admits that the party needs to analyse its defeats closely and go in, if necessary, for a course correction.
Not everything is stacked up against Chidambaram though.
Unlike his more earthy colleague, railway minister Lalu Prasad, who was heckled non-stop during his Railway Budget speech, Chidambaram will have the floor to himself during the Budget speech. The opposition has decided to allow the Budget presentation despite wanting to raise a lot of noise over the government’s alleged mishandling of Italian businessman Ottavio Quattrocchi, accused in the Bofors payoff case.
That temporary reprieve will grant the finance minister relative peace in Parliament to have his say, but it is unlikely to silence his critics within his party.
Ravi Krishnan contributed to this story.