Sanjaya Baru | Awaiting hope and hype in Union Budget speech

The rich seek incentives to open their purses and invest, loaded with cash as many are, while the rest seek livelihood security

Union finance minister Nirmala Sitharaman is considered by many of her political colleagues as an incredibly lucky woman. Securing her first ministerial office in New Delhi as a minister of state for commerce and industry with independent charge at the age of 55 was in itself a much-envied achievement. Then, even before she turned 60, she was made India’s defence minister and, to top it all, weeks before her 60th birthday she was named Union finance minister. The second woman in both jobs after Indira Gandhi. Ever since Dr Manmohan Singh entered the history books as finance minister, the North Block job has become the second most important ministerial assignment.

With such good fortune comes jealousy. In Telugu, we call it “Drishti”, in Hindi it’s “nazar”, while the Greeks blamed the “evil eye”. Every culture recognises the power of jealousy. The jealousy of Ms Sitharaman’s political colleagues was always palpable.

Perhaps aware of this and fully conscious of the fact that in the Narendra Modi government all power resides only with the Prime Minister and all policy flows from above, Ms Sitharaman has maintained a low profile.

Flamboyance is not a word one associates with her. The media have often regarded her demeanor as “teacherly”. She would even read out her Budget speech as if she were lecturing a classroom, repeating sentences for emphasis. Remember this point, she seemed to be telling her fellow parliamentarians, you may be asked a question about it. In a few weeks from now, Ms Sitharaman will be reading out her fourth Budget speech. Hopefully, this time she will not be tired and exhausted by its verbiage and length. Few people are any longer impressed by the length of a Budget speech. At least this year television viewers across the country will look for a message of hope.

Weighed down by a slowing economy, rising unemployment as well as inflation, and battered by the persistent Covid-19 pandemic and its new variants, Ms Sitharaman’s audience seeks the return of hope on the economic horizon. Not political grandstanding but a roadmap to recovery. The audience for the finance minister’s televised Budget speech has always been heterogenous. On the one hand, is the investing class and, on the other, those in whom the economy has disinvested.

The economy’s so-called “K-shaped” recovery from the effects of the medium-term slowdown and the post-Covid downturn has sharpened the class divide within the country. This year, more than any other year in the recent past, the expectations of those two audiences would differ sharply. The rich seek incentives to open their purses and invest, loaded with cash as many are, while the rest seek livelihood security.

To make the task even more challenging for the finance minister, this year’s Budget speech has to be made in the shadow of impending state Assembly elections. Her party would expect that the speech would help it garner a few more votes in Uttar Pradesh and elsewhere in these polls. Squeezed between the expectations of the investing class, the middle class and the subaltern millions Ms Sitharaman may end up once again exhausting herself with a long speech that has something in it for everyone. But, do Budget speeches really make a political difference?

Officials in the finance ministry have already let it be known that this year’s annual Economic Survey will provide a record of the economy’s performance and the government’s policy response, desisting the temptation of showing off its’ authors knowledge of economics. If the Eco Survey ends up saying the government has indeed addressed the challenge of economic slowdown made worse by pandemic-induced uncertainty, it will then also have to answer the question as to why, despite the effort, the outcome has not yet been reassuring.

The Indian economy was on an eight per cent average annual growth trajectory through the first decade of this century and has slipped well below through the second decade. The Covid-19 pandemic and the subsequent developments have made matters worse, but are surely not the only reason, perhaps not even the principal reason. If consumer confidence and business expectations, as professionally recorded by the Reserve Bank of India, remain subdued, the uncertainty generated by the pandemic is only partially responsible. Something else seems to be missing in the mix, as a result of which most medium-term forecasts suggest that the average annual growth rate over the remainder of the Narendra Modi government’s second term will remain below six per cent.

The uncertainty caused by the persistent Covid-19 pandemic has been made worse by a combination of avoidable factors, beginning with the demonetisation in 2016, followed by the messy implementation of the Goods and Services Tax, confusion over what constitutes an appropriate trade, tariff and exchange rate policy, official highhandedness and arbitrariness, that unnerves investors, rising social tensions due to the communalisation of politics, loss of regional geopolitical influence and so on.

India has been here before. In the 1980s. Decisive policy intervention through the 1990s pulled the economy and the country out of that decade of crisis. Ms Sitharaman still has the option of securing her place in history if she prepares a speech that does not read like a laundry list of things done but sets out in clear terms the economic policy agenda for the next two years, against which the Modi government’s second term in office can be judged.

Rather than repeat ad naseum that all is well and that all that is needed to be done has been or is being done, a Budget speech relevant to the situation would be one that recognises the economic challenges facing the country — rising unemployment, inflation and poverty, inadequate new investment, the slowdown in export growth, increase in outbound capital and talent, a moribund education system unable to generate relevant skills, an over-burdened public health system and suchlike — and then seeks to directly address them.

Having made such an honest statement, the finance minister’s speech should set out the medium-term agenda for resuming India’s rise as the world’s “fastest growing, free market democracy” — a distinction that it briefly acquired during the first term of the Manmohan Singh government.

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