BackIndia: the sum of the parts is greater than the whole
India: the sum of the parts is greater than the whole
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The Congress-led United Progressive Alliance (UPA) deferred the presentation of the Union budget for 2012-13 to incorporate, in its calculation, the favourable political fallout of the just-concluded round of elections to the state assemblies, particularly in Uttar Pradesh. In the light of the outcome—contrary to the rosy computations put out by Congress groupies— there is no gainsaying that the UPA miscalculated; worse, its consummate defeat has given wind to the idea of a new political alliance.
If it is of some solace, it happens to the best.
Whether they band together to evolve a new political collective is beside the point. What they are increasingly articulating is a desire for the policy process to be far more participative and the end of the business-as-usual budget. It should always have been thus, but the Congress, especially in the tenure of the UPA, has approached policy change with a mindset carried over from the 1970s—one that brooks no dissent.
After the elections, not only is this mindset going to be politically injurious to the UPA, but it is obvious that without the assent of states, a politically weakened Union government will be in no position to pursue its pet policy changes such as the national counter-terrorism centre, a single goods and services tax (GST) and the direct taxes code (DTC).
This no longer holds. In fact, most of these states are growing as fast, if not faster, than the national average. According to the latest numbers available with the Central Statistics Office, in 2010-11, the growth rates were 11.6% for Chhattisgarh, 9.2% for Andhra Pradesh, 14.2% for Bihar, 5.9% for Orissa, 11.7% for Tamil Nadu and 8.1% for Uttar Pradesh; in the cases of Madhya Pradesh and West Bengal, where data for 2009-10 is available, the growth rate was 8.5% and 8.4%, respectively.
The growth rate for the national economy was 8% in 2009-10 and 8.6% in 2010-11—indicating that growth rates in most states were faster. Since these are economically deficit states, it is natural to assume that they will continue to retain the present bounce as they play catch-up in putting in place their infrastructure.
This comes about at a time when the two national parties, the Congress and the Bharatiya Janata Party, are considerably weakened and are at a standstill; the euphoria of the 2009 Lok Sabha elections, when both were dominant players, is like a distant dream. Consequently, it has created a vacuum in Indian politics.
The leadership of these “eastern" states has probably sensed this. Some of them, such as Mamata Banerjee and J. Jayalalithaa, are unlikely to ignore the opportunity. Unless something dramatic happens, this is likely to be the state of things to come, reflecting the reality: the sum of the parts is greater than the whole.
In more ways than one, therefore, this will probably be the last instance of the budget format that we have come to know, expect and react to year after year. In any case, if all goes according to plan (and nothing in India really does), then by 1 April 2013, the marquee tax reforms of GST and DTC should be in place. For sure, it will render part B—which incorporates all the changes in tax rates and norms—of the speech redundant.
In other words, going forward, the budget will largely be a policy statement that incorporates the budget arithmetic; and, given the volatility in the global macroeconomic environment, it may require to include a quarterly update to Parliament, in case the economy needs counter-cyclical policy palliatives.
Clearly, the new India is ready for the new rules. Is the UPA ready though?
Anil Padmanabhan is a deputy managing editor of Mint and writes every week on the intersection of politics and economics.
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