Loose Canon | The fall-out from the Budget
The reverberations from the finance minister’s revolutionary Budget will be felt in our hearts and wallets for years. But how exactly did the idea of such a brilliant Budget occur to him? Manas Chakravarty tells us...india Updated: Mar 09, 2008 02:03 IST
In Karnataka, Deve Gowda’s son says the credit for the loan write-off should go to his dad. In Maharashtra, the Shiv Sena says their rallies forced the finance minister’s hand. Similar claims have come in from Barrack Obama and Hillary Clinton. Sources say that Jayalalitha is supposedly behind the excise exemption on packaged tender coconut water...
The reverberations from the finance minister’s revolutionary Budget will be felt in our hearts and wallets for years. But how exactly did the idea of such a brilliant Budget occur to him? Economists have been scratching their heads ever since he presented it and they admit they’re completely clueless.
Perhaps a bit of history could help. Legend has it that, in the dim mists of antiquity, a bunch of political strategists once got together and wondered how they could win a federal election. They burnt the midnight oil, stroked their chins and tugged at their beards, but none of them had even a glimmer of an idea. It was then that one bright spark, in utter frustration, gave vent to his feelings. “What we really need is a bloody unique damn good economic ….er…..thingy,” he said. And that was how, from the initial letters of “bloody unique damn good economic thingy”, the BUDGET was born. There’s little doubt that Mr Chidambaram’s latest budget has lived up to those superlatively high standards.
But was this really Chidambaram’s budget? Here’s what Sharad Pawar had to say: “The Budget has shown that my main concern is for the farming sector.” Soon after the budget announcement, Telugu Desam leader Chandrababu Naidu said the UPA government “stole the TDP’s idea”. In Karnataka, Deve Gowda’s son says the credit for the loan write-off should go to his dad. In Maharashtra, the Shiv Sena says their rallies forced the finance minister’s hand. Similar claims have come in from Barrack Obama and Hillary Clinton. Sources say that Jayalalitha is supposedly behind the excise exemption on packaged tender coconut water, while we must thank Mamata Banerjee for the excise exemption on puffed rice. However, everybody agrees that the entire credit for clause 3(d) of the Explanatory Memorandum to the budget, which says “Insert a new rule 7A to prescribe a procedure to enable the provider of output services to take credit on inputs and capital goods on the basis of an invoice/challan/bill issued by its other office” should go to Chidambaram alone, as it could only have come from the finance minister’s superb legal brain.
People have already started asking for more. Mayawati, for instance, lost no time in bringing out full page advertisements in the newspapers pointing out that small craftsmen, weavers and artisans and “lakhs of unemployed, small and marginal entrepreneurs” should all get a loan waiver. This has led to huge queues outside government offices in Uttar Pradesh, with millions of people trying to register themselves as “unemployed entrepreneurs”.
Be that as it may, the younger and more adventurous farmers have declared they deserve more. “Why should only people in cities get stock options?” asked a small farmer heatedly. Incidentally, small businessmen in small towns ask why they have been left out. Small investors have decided to request the finance minister to reimburse their losses from the stock market crash. Small professionals and small arms manufacturers say that loans should be waived for them too. “We too are small,” they pleaded plaintively.
But the real genius of the Budget lies in the manner of financing all these hand-outs. Worried economists have been wondering how the government will find the cash for the farm loan waiver and the Sixth Pay commission bonanza. They severely underestimate the wizards at our finance ministry. How does the government compensate the oil companies for not raising petrol prices? By issuing lots of promises to pay in future: these are called oil bonds. How does it recompense fertiliser companies for not raising prices? By giving them fertiliser bonds. When the food, fertiliser and oil subsidies are all paid for by issuing bonds, why on earth should the government pay cash? All it has to do is distribute agricultural bonds to banks to recompense them for the loan waiver and to hand over Pay Commission bonds to its employees in lieu of cash. Experts believe, however, the rumour that salaries of government employees will henceforth be paid in bonds is a bit premature.
Manas Chakravarty is Consulting Editor, Mint