Finance minister P. Chidambaram. Photo: AP
Finance minister P. Chidambaram. Photo: AP

Interim budget: Chidambaram’s populist tune

Govt's proposals for a subsidy for education loans and one-rank-one-pension for defence forces target the youth and families of defence personnel in the run-up to Lok Sabha election

New Delhi: Finance minister P. Chidambaram said he shunned populist measures in his interim budget unveiled on Monday, but his proposals for a subsidy for education loans and one-rank-one-pension for defence forces target two key kinds of voters—the youth and families of defence personnel—in the run-up to Lok Sabha elections.

Chidambaram denied he had given the nation a populist interim budget, saying: “I don’t yield to temptations. I do what is right and good under the circumstances and I have the support of the Prime Minister and UPA chairperson."

But within hours of Chidambaram announcing a transfer of 500 crore for the one-rank-one-pension scheme, Congress vice-president Rahul Gandhi called a special press meet at his mother and Congress chief Sonia Gandhi’s official residence, 10 Janpath, to congratulate the government, Prime Minister Manmohan Singh and Sonia Gandhi.

“It is a historic and necessary step. The armed forces personnel should feel that the country is backing them," said Gandhi, who recently promised ex-servicemen that the Congress-led United Progressive Alliance government would take immediate measures to meet their demand. According to several opinion polls, the UPA is headed for a defeat at the general election due by May.

Not just the Congress, political parties cutting across party lines welcomed the proposal. Main opposition BJP’s chief Rajnath Singh said: “The announcement of one-rank-one-pension to the ex-servicemen is a welcome decision. The government dragged its feet for years on the issue but when it realized later that the BJP was committed to give the ex-servicemen the benefits of one-rank-one-pension, it finally gave its consent."

Around 2.3 million defence pensioners are expected to benefit from the move, a Congress leader said, requesting anonymity. The allocation for defence was also increased by 10%.

“It is one of the ways of winning the ex-servicemen in their (Congress’) fold. It is a populist electoral move, Rahul Gandhi had promised it and he is trying to keep it," said N. Bhaskara Rao, a New Delhi-based political analyst.

With the Congress focusing on women and youth as target groups in the upcoming election, Chidambaram announced measures to woo both, extending the interest subsidy on study loans and allocating money for initiatives taken by state governments and non-profits for women’s safety and security.

The last budget too had sought to woo these two groups, with proposals for a gender budget allocation of 97,134 crore, India’s first public sector bank that is exclusively for women, and job training for the youth. In the interim budget, read out in the Lok Sabha on Monday amid protests over plans to create a new Telangana state, Chidambaram said the government will pay the interest amount on all education loans that were taken up to 31 March 2009 but remained unpaid by 31 December. The move will benefit 9 lakh student borrowers and cost the government 2,600 crore in 2013-14.

Chidambaram, who has declared the already-extended grant of 1,000 crore as non-lapsable, allocated an additional 1,000 crore to the Nirbhaya Fund for the safety and empowerment of women. In last year’s budget, Chidambaram had announced the creation of the Nirbhaya Fund with a corpus of 1,000 crore as a tribute to the December 2012 Delhi gangrape victim, an incident that triggered massive protests by women and youngsters. Nirbhaya (fearless) was the pseudonym given to the victim.

These were not the only sops. After Rahul Gandhi made a public request at a party meet on 17 January, the government raised the cap on subsidized cooking gas cylinders from nine to 12. According to the party’s assessment, a key reason for its growing unpopularity is a decline in support from women, a traditional support-base that has been alienated by the government’s failure to check price rise.

In addition, a venture capital fund (VCF) was announced to provide concessional finance to members of Scheduled Castes with an initial capital of 200 crore which can be supplemented every year.

“In short, this is addressing a long-felt need of these groups with elections in mind," said Pradeep Bhargava, director of Allahabad-based G.B. Pant Social Science Institute. “Something like a VCF would benefit larger enterprises, so the focus should have been on smaller enterprises like artisans, etc., instead."

A proposal aimed at farmers across the country, the interim budget exempted loading, unloading, packing, storage and warehousing of rice from service tax.

Congress leaders said the excise cut on small cars, motor cycles, scooters and commercial vehicles as well as SUVs would please the middle class and the youth. While the excise duty on SUVs has been reduced from 30% to 24%, that on small cars, two wheelers and commercial vehicles was cut from 12 to 8%.

BJP’s Arun Jaitley, was quick to label Chidambaram’s address an “election speech". “The speech of finance minister P. Chidambaram was absolutely an election speech but I would say it was an unconvincing election speech."

Tarun Shukla, Ragini Verma and Prashant K. Nanda contributed to this story.