As finance minister P. Chidambaram gets ready to present the last full-fledged Budget of the United Progressive Alliance (UPA) government later this week, he has an unambiguous brief from his party leader Sonia Gandhi to present a budget that the “common man” can relate to and draw solace from. The party leadership believes that this is necessary for the party’s victory in the 2009 Lok Sabha elections.
Alienation of the common man has grown ever since Manmohan Singh ushered in economic reforms when he was the finance minister in P.V. Narasimha Rao’s cabinet in the early 1990s.
Since the advent of economic reforms, no Central government that lasted its full term has returned to power. This was the case with the P.V. Narasimha Rao-led Congress government in 1996 and the Atal Bihari Vajpayee-led government in 2004. Both faced unexpectedly large defeats in the polls.
The Congress party lost nearly 100 Lok Sabha seats in the 1996 Lok Sabha polls and won 140 seats against its 1991 tally of 232 seats. The Bharatiya Janata Party (BJP) indulged in the self-illusion of a shining India and its shining prospects and suffered massive reverses with its tally going down from 182 in the 1999 election to 138 seats in the 2004 Lok Sabha polls.
The root cause of the electorate’s anger was the growing disenchantment and alienation of the masses over these governments’ inaction in bridging the ever growing divide—both in real and psychological terms—between the rich and the “common man”.
Economic reforms are perceived to be a conspiracy waged by the ruling political parties in collusion with the rich and capitalist classes to derive mutual benefit, at the expense of the “common man”.
The growing trend of consumerism among the rich and the rising aspirational levels of the “common man” have further fuelled this dissatisfaction.
From a common man’s perspective, the record of the present UPA government in management of the economy is anything but impressive.
Galloping inflation, currently at 4.35% is making the common man’s life miserable, and the number may soon cross the RBI (Reserve Bank of India)-mandated threshold level of 5%. Worse still, inflation in food articles is much higher, stoking overall inflationary trends.
Substandard quality of imported wheat being supplied through the public distribution system (PDS), frequent hikes in prices of petrol and diesel, and shortage of LPG (liquefied petroleum gas) supplies are adding to the ire of the common man.
Aware of the growing unrest among the ubiquitous “common man”, the UPA government is considering many Budget proposals that can provide relief and humour him on the eve of crucial state elections later this year and the Lok Sabha elections slated for early next year.
These include waiver of crop loans to farmers, greater investments in agriculture and social sector programmes, raising the tax-free income limit, increase in income-tax exemption and moderation in tax rates.
Offering some tax concessions will put some more money in the pockets of the “common man”. That will at best give him a marginal relief as the rising inflation levels have rendered this inevitable in any case.
Has the “common man” appeared on the radar of the UPA government a little too late in the day? Can the UPA turn the tide with a dose of “populism”? These are key questions that would determine the coalition’s prospects in the next Lok Sabha polls.
In my opinion, what the UPA government needs to do is unveil a new economic philosophy and vision that is in tune with people’s expectations. It is simple: Those who have benefited from new economic policies have to cough up more.
To operationalize this philosophy, there can be no case for lowering of taxes, particularly for the corporates and rich individuals. That will not go down well with the aam aadmi (common man).
Following the ‘beneficiary pays’ philosophy, I propose that the peak rate of taxation may be increased for the rich to at least 35%.
You are likely to mop up huge resources as there are many millionaires and crorepatis among us today.
Withdraw all forms of exemptions granted to the taxpayees in these highest income brackets and withdraw waiver of long-term capital gains tax for all individuals, particularly for the rich and the super rich.
Only a new economic doctrine of this kind will satisfy a large section of the ordinary, unprivileged Indians, who have been left out of India’s growth story.
In a sense, economic agenda of the kind that people would like you to pursue may prove to be the antithesis of the policies pursued hitherto as part of economic reforms agenda.
Successive governments have failed to realize this and have paid a price for pursuing a patently pro-rich agenda.
If the finance minister persists with the same philosophy, then all I can say to him and his party is good luck!!
G.V.L. Narasimha Rao is a political analyst and managing director of Development & Research Services, a research consulting firm. Your comments are welcome at email@example.com