Budget session a litmus test for the NDA

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Updated: Feb 19, 2015 4:30 AM

How PM Modi deals with the opposition onslaught in the Budget session will decide, to a large extent, how far the NDA govt will be able to push reforms, growth, and jobs.

If the record of UPA-II was poor in handling Parliament, it is no better for the NDA government led by the Bharatiya Janata Party (BJP). It has failed to get any of the critical Bills, including the Insurance or the Land Bill amendments, passed since it took over in May last year and has taken the ordinance route to keep the reform expectations alive. So, the budget session of Parliament beginning Monday and concluding on May 8, will be a litmus test for the bruised BJP; the party’s humiliating defeat at the hands of the Aam Aadmi Party (AAP) in the Delhi Assembly elections has emboldened the opposition parties to go full steam against the government in Parliament.

While railways minister Suresh Prabhu will begin his innings by presenting the railway budget on February 26, chief economic adviser Arvind Subramanian’s outlook on the economy will be tabled in the shape of the Economic Survey on February 27, and finance minister Arun Jaitley will announce the first full-year budget of the Narendra Modi-led NDA government on February 28, which happens to be a Saturday.


The expectations from Prabhu are high—he has been tasked with bringing the railways back on track, and it will be interesting to see which route he takes for improving the railway finances as raising fares at this juncture appears difficult. The minister urging India Inc to spend its corporate social responsibility (CSR) funds in improving the passenger facilities shows how desperate the government is to look at areas other than fares for funding the railways’ needs.

For Subramanian, the challenge is to deal with the new GDP series that has confused growth expectations by showing better growth in the last year of the UPA government as against the general perception of poor growth in the last two years of the regime. According to the new series, GDP grew 6.9% in FY14 and 5.1% in FY13. The numbers aren’t strictly comparable with the earlier data that showed the economy expanded 4.7% in FY14 and 4.5% in FY13, but despite this, the Congress party will try to project the revival in the economy as having started during the UPA regime itself.

Whatever be the case with the data confusion, the Economic Survey numbers this year would be keenly watched, with the growth numbers hotly debated in Parliament. Here, the government will have to get its calculations right, especially given that the planning Commission no more exists and there is still no clarity on the role the newly-constituted NITI Aayog is going to play in formulating policies to drive growth.

This leaves the finance minister to do the critical job of presenting a roadmap for growth in the Budget for the remaining years of the NDA government. As both Direct Taxes Code (DTC) and the Goods and Services Tax (GST) are still at least two-years away, he will probably avoid making any major change in the tax structure in the budget and limit himself to providing additional tax benefits for the manufacturing sector to push the Make-in-India initiative, and for the taxpayers to boost savings.

Apart from the usual promise of putting in place a non-adversarial tax system, putting the controversial General Anti Avoidance Rules (GAAR) on hold for a few more years, “till the DTC comes”, etc, can also be expected.

The real window of opportunity for big-bang reforms in the Budget is presented in the way Jaitley restructures the central allocations to the states. It is good to talk about cooperative federalism and allowing the states to have a greater say in deciding which schemes they want. But it would be difficult to allow states to have full freedom in utilising the central funds without credible checks and balances.

The biggest challenge for the government, though, in the Budget session will be to turn the ordinances that it has promulgated—including those on coal, mines and minerals and the land acquisition laws, and on raising FDI in insurance from 26% to 49%—into laws.

The Congress party has already announced a nationwide agitation against the Land Acquisition, Rehabilitation and Resettlement Act changes and it will try its level best to rope in other opposition parties for this platform.

How prime minister Modi deals with the opposition onslaught in the Budget session will decide, to a large extent, how far the NDA government will be able to push reforms, growth, and jobs, that it has promised to the people.

Going by the current count, the NDA has 59 members in the Rajya Sabha and 336 in the Lok Sabha. The ideal way to handle the situation would be to strike deals with other parties to get the bills cleared in the Rajya Sabha, where the NDA lacks a majority. This will require exemplary floor management on the part of the BJP, which has eluded the party in the previous sessions. So, the NDA government managers would do well to take the opposition head on and opt for the joint sitting of Parliament to get at least the insurance and the LARR amendments passed in the Budget session. On the others, they can keep on re-promulgating ordinances to show that the government means business. The cost of not doing this, or procrastinating, would be very heavy.


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