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A budget for Bharat can reset the narrative -Anil Padmanabhan
-Livemint.com

Pro-poor and yet not populist can be the single defining strand of this year’s Union budget

The run-up to this year’s Union budget, especially the past one week, has taken place in the backdrop of an unprecedented, vicious political confrontation between the ruling Bharatiya Janata Party (BJP) and the opposition. Together with the hit-wicket tendencies of the BJP-led National Democratic Alliance (NDA), it probably exaggerated the magnitude of every challenge and in the process overshadowed even the good that there is in the economy.

Undoubtedly then, this year’s budget, finance minister Arun Jaitley’s third, presents the NDA a chance to reset the narrative: back to good economics makes for good politics. Ironically, the NDA was off to a good start when it replaced the ideology of freebies with empowerment (teaching people to fish, instead of doling out fish); that is, you can be pro-poor and yet not be populist. It will, if it transpires, be the single defining strand of this year’s Union budget.

In the past one year, every political entity in this country has contributed wholesomely (with able support, in some cases, from a very partisan media) to polarizing India along caste and religious lines. The narrative of delivering on economic aspirations through a fundamental structural reform, spun by Narendra Modi during the 16th general election, has been completely overshadowed and now India risks being stranded as a middle-income economy. That aspiration has not gone anywhere, it has just been smothered by all the divisive political rhetoric.

On Friday when the Economic Survey 2015-16 was released, Mint ran the results of the online poll conducted by instaVaani on expectations from Budget 2016. Both reflected identical expectations: the Union budget should deliver on growth. Indeed it was a rare convergence of public opinion and a public policy document.

According to Arvind Subramanian, principal author of the Economic Survey, chief economic advisor and a key member of finance minister Arun Jaitley’s budget team, growth is the best insurance India can put together as it braces for a rocky global environment over the next few years. Not just the overall world economy, but countries like China and oil producing countries like Russia, Saudi Arabia, Venezuela and so on are particularly vulnerable. In the case of the Chinese, the slowdown is far from bottoming out, while crashing oil prices have pushed the oil economies to the edge.

To the general public (or at least those who participated in the instaVaani poll), growth is the means of delivering their aspirations. The slowdown (or rather the less-than-enthusiastic revival of the economy) has led to layoffs or squeezed wages even for low-skilled jobs; and this after everyone began to take the nearly decade-long unprecedented growth run from the turn of the millennium for granted. To India’s youth, most of whom have not seen the negative fallout of living in a command control economy, the disappointment is that much more.

The problem can be fixed. The decline of retail corruption, thanks to the high-profile campaign by Modi and Delhi chief minister Arvind Kejriwal, has eroded sectors (like real estate) which were driven by black money. Also, decades of neglect of governing institutions convinced us that only graft, the fuel of the parallel economy, could deliver. The decline of the black economy has created a void, unfortunately at a time when there is a global crisis. But there is no option but to stay the course—presumably there will be gain after initial pain.

To a large extent, the lull in economic activity is also because vast sections of the economy are out of step with the leading sectors—creating bottlenecks. This is only to be expected given that India is still transitioning (even 25 years after the landmark moment in 1991) from a regime of command and control. The moment clearly demands a budget for Bharat—to catch up with India.

For instance, as the Economic Survey showed us, the idea of direct benefit transfers has run into the rural wall. The lack of last-mile financial inclusion connectivity implies that the idea of JAM (Jan Dhan, Aadhaar and Mobile) to deliver subsidy payments directly to the beneficiary is going to take a long time to accomplish—unless rural India gets a radical makeover for the supporting infrastructure.

Similarly, the Survey, using a term from the Mahabharata—Chakravyuha—points out that the country still has a long way to go on the ease of doing business. It points out that India has transitioned from “socialism with limited entry” to a regime of “marketism without exit”. The bankruptcy code, pending before Parliament and a likely victim of the confrontation between the treasury and opposition benches, is one means of resolving this dilemma for businesses that go sour (not necessarily because of crony capitalism).

Agriculture, too, is a victim of a public policy mindset that is stuck in time. At its core, it believes in the dumb peasant argument, wherein every public policy has to think of every commercial aspect of farming. But as the Survey itself admits, now a third of Indian farming is accounted for by horticulture—which enjoys none of these benefits and is vulnerable to the vagaries of the market; in other words, the Indian farmer is neither risk-averse nor unable to work the trade-off between risk and reward (what they need is institutional mechanisms like the recent market instrument-based crop insurance scheme to mitigate risks).

In the final analysis, it is clear then that the budget has presented itself as a great opportunity for the NDA to reset the national narrative. Will it seize the moment?

Anil Padmanabhan is deputy managing editor of Mint and writes every week on the intersection of politics and economics.