Column : Don’t knock the politics in the Budget

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: Coming up with a budget is an arduous task in the best of times. This year it was particularly hard. In addition to the usual reforms vs aam aadmi balancing act there was the constraint of an already stretched fiscal situation. To make things tougher, there were the enhanced expectations from impatient reformists given that this was the first year of a term with a clear mandate. The ‘if not now, when?’ chorus was almost deafening. All this made for the budget this year a great exercise in political economy.

It may help to present, in very broad strokes, the major forces whose interplay decides economic policy-making in today’s India. First, and perhaps the most vocal, are the reformists. The crisis had given them a temporary setback but they seem to have recovered faster than the economy. The immediate gains here go to the rich, the educated and the urban segment but, over time, gains are generally believed to percolate down. Here, squarely, is India Inc. with all its investors and the upper-middle class: a strong media voice.

Then there are the organised incumbents of the labour force. Though over 90% of India’s labour force works in the unorganised sector, organised sector unions, linked closely to the party system, still wield influence. These are the people with an axe to grind against reform, though its indirect fallout may help them in the medium run. Much of the lower-middle class, rightly or wrongly, perceives its interests aligned with this formation.

Finally comes the bottom third of the population—in dire need of government support for mere survival. In size they swamp the immediate beneficiaries of reforms and hugely so if we consider the willingness to vote factor. It can be swayed easily if the government does not present a ‘poor-friendly’ image.