India's Union budget has left most people perplexed. Delivered by the new Finance Minister of the second United Progressive Alliance government, it seems to have been constrained by the political necessities of the government than its desires. A lot of people had thought that the budget after the last general election would be a celebration of the Congress Party-led UPA's hard-won freedom from the fetters imposed by the communist Left parties.
They had provided necessary support to the previous UPA government for the latter to survive in power. As a result, the government could not bring into play a lot of their neo-liberal instincts. This time many had thought the finance minister would unleash those policies that remained the toast of national and international capital for close to three decades.
National budgets in India have an added importance in the country since the days when the Indian economy was controlled by a series of licenses and permits. These were the instruments with which the bureaucracy and the political class favored this or that group of the capitalists, and create a gravy train of patronage.
In 1991, economic reforms were initiated that liberalized some of these restrictive policies when the current Prime Minister, Manmohan Singh was a finance minister; measures especially in areas where the public sector had a monopoly. But the aura of the budget did not diminish as public finance continued to play a major role in the Indian economic development story. On the contrary, the budget became a measure of what fresh liberalization the government would adapt to satisfy this lobby or that.
Unlike the USA, the Indian budget-making exercise is entirely driven by the executive. The legislature plays a role only in voting on specific grants and often that vote is almost desultory and cursory. So the economic direction of the country is almost totally the business of the government of the day.
This budget seemed to lack that direction though all the major newspapers of the country called it the budget of aam aadmi (the common man). But a closer look at the budget show that though there are some measures for direct transference of funds to the rural poor under schemes like National Rural Employment Guarantee Act, there is very little to cheer for the proverbial 'common man.' There are no new mechanisms by which jobs could get created directly at a time when millions of jobs have vanished in just a few months' timeframe. Or there is no potion in the budget for spiraling consumer prices even though the whole sale price of commodities continue to drop and indeed touch negative territory.
This in effect means that while farmers and peasants are getting less for more, they have to pay more for less when they become buyers in the retail market. Not only that, the government has not even invested in the future. At a time when agriculture, a sector that might cater to just 25 per cent of the gross domestic product of the country but provided for 60 per cent of the population was barely recovering from the throes of a major crisis, the government has not provided any stimuli to it in the form of either fiscal or monetary measures.
On the other hand, the budget has not shown any great reformist zeal either in terms of fostering capital. Barring some fiscal concessions to specific industries, the budget has stayed mum in terms of the way it seeks to direct Indian economy in the last few months of the year 2009-10. This at a time of a global-scale crisis is surprising.
Of course, it can be speculated that the limited time left for this current year could have provided the finance minister a strategic window for not doing anything clever at a time of widespread instability. The government could have thought the extra-budget stimuli it provided early this year in the wake of the breaking out of the financial elements of the global economic crisis should be allowed to work its way through before a new batch of measures could be brought to play. But it still leaves a void.
That gap indicates the underlying problem of the Indian liberalizers is ideological. In the demise of neo-liberal policies and policymakers, they fail to locate at a ideological locus from where they can direct Indian capital. This fact is most evident in the text of the document that usually precedes a budget in the Indian system, the Economic Survey. The survey this year has tried to put the cause of the current crisis in the oft-used excuse of the global neo liberalizers -- that it lay in the failure of regulation of the financial markets.
It failed to acknowledge that the crisis was born in the fundamental failure of capital to efficiently redistribute income needed to deepen markets. It also failed to say that the glorious Indian growth story would continue only till there is pent up demand in the society that would need to be met. The party this way cannot continue for very long.