P Chidambaram on Total Expenditure
The Union budget announced by finance minister P Chidambaram may not have the overt populism that many observers expected but it does have a keen eye on the 2014 parliamentary elections.
Key constituencies that could prove to be decisive for the Congress-led coalition in the forthcoming elections have been sharply in focus while drawing up the proposals inherent in the budget. That the run-up to those elections has begun is also quite evident in what could be seen as a political retort in the finance minister’s speech, particularly to the Narendra Modi model of development in Gujarat.
“We have examples of states growing at a fast rate, but leaving behind women, the scheduled castes, the scheduled tribes, the minorities, and some backward classes.
"The UPA does not accept that model,” Chidambaram said, setting off what could be Congress’ pitch for a hectic year of polls leading up to the 2014 general elections.
Terms like “sustainable” and “inclusive” growth were sprinkled generously.
“The overarching goal,” finance minister P Chidambaram said of his eighth budget, is to “create opportunities for our youth to acquire education and skills that will get them decent jobs or self-employment”.
Chidambaram took the cue from Sonia Gandhi, who had at the recent conclave of the Congress in Jaipur identified job creation as the biggest challenge.
Estimating that around 10 million new job seekers entered the market every year, she had said: “It is lack of employment that thwarts aspirations and fuels frustration, crime and violence.”
The Jaipur Conclave of the Congress had also emphasised the need for the party to address the middle class and the urban population.
The youth and the new middle class are largely overlapping categories, as most of those at the threshold of entering the urban life in search of new opportunities are likely to be young too.
Chidambaram’s budget attends to the middle classes, but not the affluent among them. He is mainly looking at the those who own mobile phones that cost less than Rs. 2,000.
While he increased the taxes on higher-end mobile phones and made eating out in a city restaurant costlier, he made buying a modest house in a city easier, gave a small relief in income tax to those who earn below Rs. 5 lakh annually, offered incentives to first-time investors entering the equity market and promised new investment instruments that would be inflation proof.
“We are talking about the ex-poor who have just managed to get out of poverty but are still very vulnerable,” said a key Congress strategist who estimates this number to be in the range of “above 300 million”.
As Chidambaram mentioned, “Any development needs democratic legitimacy and approval.” Until 2009, governments pushing growth were voted out at the Centre and the states. Chidambaram’s budget seeks to expand the successful new social contract that the Congress built during 2004-09.
"It essentially meant redistributing growth through welfare schemes for the poor and the rural. Congress for the first time made reforms politically saleable and won again in 2009 — a model that several chief ministers emulated.
However, during UPA2, the growing impatience — expressed as flash mobs in the street and outpouring on the social media — among the emerging young middle class has been a matter of lingering concern.
That could be the reason why Chidambaram’s budget refers to the “youth” nine times, and emphasises on skilling them on one hand and creating opportunities for them on the other.
While retaining the focus on the poor, he expanded the catchment area to the emerging new middle class too. What constrains him is the environment — low growth and high inflation — which has hit this class more badly than others.