Last week, just two days after the presentation of the Union budget, I had a chance encounter with Kavita Gupta, a young ethnographer. I was curious to hear what she as a researcher of consumer behaviour thought about the budget. She described it as an “aunty-uncle” budget, ramming home the point that the Congress-led United Progressive Alliance (UPA) had done little for what is often described as the country’s demographic dividend.
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While she did not expect any better, Gupta was still unhappy that the budget would lead to, thanks to the raft of new indirect tax levies, costlier mobile phones and branded clothes—two items part of the consumer behaviour of the youth.
It is widely known that 60% of India, with an estimated population of 1.2 billion, is less than 35 years of age. They are, especially since the voting age was reduced to 18 years of age by late prime minister Rajiv Gandhi, a potent electoral grouping. The Indian private sector, which realizes the market potential of Gen-Y, overwhelmingly targets this demographic grouping in so many ways. So then it begs the obvious question: What was the UPA thinking?
What galled Gupta and her ilk was the special dispensation that Pranab Mukherjee doled out to taxpaying citizens who are 80 years and older. A story in the personal finance section of Mint on 4 March reveals that while there are no exact numbers readily available, analysts estimate this number to be around 5,000.
Either UPA was being too clever by half—providing a special tax concession that costs the exchequer little to nothing—or, submitting to my conspiracy theory instincts, that there was some special beneficiary out there. Regardless, it was not a wise move to highlight it, even if one was to offer it, especially since it runs the risk of disappointing Gen-Y.
The example is a good metaphor of the larger disconnect between UPA and India. Tragic, because this was a government that had comprehensively won the 2009 general election and was expected to deliver on the growing aspirations of a youthful India. All the more, because it had within its ranks a charismatic Rahul Gandhi to tap this feel-good sentiment.
I have no clue as to how the youth affairs ministry determined its inputs to the finance ministry ahead of this year’s budget. Smart politicians, who know the pulse of the nation, rarely need a survey to tell them the mood and expectations of the populace. But may be the UPA, if it had doubts, could have commissioned a survey.
At a larger level, this year’s budget is at variance with what the people actually desired. Corporate India, as a Bloomberg-UTV survey showed, overwhelmingly looked for a solution on the issue of bad governance. Similarly, the public was looking for relief from inflation, or at least credible answers on inflation; and Gen-Y was looking for measures in the budget that would generate new jobs. In short, the UPA was expected to make that extra effort.
Instead, what we had was a business-as-usual budget with underlying assumptions that ignore economic realities, akin to being on a wing and a prayer. On the face of it, the budget commits to a fiscal correction premised on a growth in total expenditure of less than 4% over that of the revised estimates of 2010-11; an assumption (just as those that ignored the volatile trends in international oil prices) that anyone aware of the fiscal profligacy since the 1980s would find difficult to believe.
Not only does the logic surprise, but it also flies in the face of the commitment made by UPA in unconditionally accepting the recommendations of the 13th Finance Commission. As Indira Rajaraman, economist and member of the commission, pointed out in a panel discussion on the Union budget hosted by the Business Standard newspaper, the budget failed to make clear the parameters underlying it.
“The Finance Commission wanted the government to move beyond ratios to greater disclosure of how these ratios have been arrived at in the annual financial statement,” Rajaraman said, before adding, “We don’t know where these corrections come from.”
The Finance Commission’s homily was premised on readying the country as it prepares to join the global high table. As a key member of the grouping of the Group of Twenty countries, among other things, the commission believed that India needed to allow for greater transparency of its fiscal arithmetic. As one of the key destinations of global financial flows, it becomes equally imperative from the point of view of foreign investors.
If then almost every constituency has doubts about the efficacy of the Union budget for 2011-12, then the UPA is obviously in disconnect with India—not good news for the Congress cadres ahead of the party’s first electoral test after the political tide started turning against it.
Anil Padmanabhan is a deputy managing editor of Mint and writes every week on the intersection of politics and economics. Comments are welcome at firstname.lastname@example.org