INDIAN BUDGET 96: A QUICK ASSESSMENT OF THE INDIAN BUDGET FOR 1996-97.
The critics said that the United Front government-a coalition comprising of 14 parties and supported by two major parties from outside-would not be able to present a cohesive economic policy. And they were right-but only partly. The Annual budget presented in the Indian parliament on Monday evening by Finance Minister P Chidambaram reflected the pulls and pressures inherent in any coalition by the inclusions and the ommissions in it.
Mr.Chidambaram's budget does not have any flashes of surprise
To start with, it was clear that the government would do everything in its power to appear pro-poor especially towards the rural populace. There are several provisions to provide reliefs to farmers by way of subsidies, enhanced financial assistance and duty cuts on fertilisers-a clear reflection of the predilicitions of the prime minister himself a farmer.
There are many other recommendations which indicate that the Finance Minister was under political compulsion not to give away too much to the burgeoning middle classes, the corporate sector and foreign investors. Though there have been some sops to foreign investors-notably to institutional funds who can now invest upto 10 percent of a company from the earlier 5 percent-the much expected proposal of allowing private entry into the state-owned insurance business was not even mentioned by the Finance Minister. This clearly indicates that though the common minimum programme-a compromise policy between the disparate elements of the coalition-specifically mentioned the insurance sector reforms, the subsequent outcry among powerful left unions must have put enough pressure on Chidambaram to desist from turning the proposal into policy.
The finance minister would have also had to accomodate the demands of the Congress, which had initiated reforms in 1991 and which wants them continued as a price of its support to the United Front. The Congress, a powerful party which failed to muster enough of a majority in the last elections to form the government on its own does not want it to appear that its reforms did not succeed. The Finance Minister himself was a key minister of that government till political compulsions forced him to leave and he wouldnt want to undermine the Congress, but he cannot be seen to be totally in support either. However, the Congress has ensured that some reforms-mainly aimed at bringing in more foreign investment-would continue and the spectre of the Congress was most clearly visible in the general admission by this government that economic activity has boomed in the past five years.
What of Chidambarams own pro-reform inclinications? Those are most obviously visible in reduction of duties on severala items in keeping with general decreases in tarriffs, but it is clear that he has not had as free a hand as he may have wanted.
The opposition parties have predictably criticised the budget proposals, but it will not be surprising if in the next few days the finance minister gets some flak from his own comrades in arms and supporters. In his speech he repeatedly emphasised that he would come back next year and continue some of his initiatives-it remains to be seen if coalition politics will allow him to last that long.
The confederation of Indian Industry, the largest and most powerful industrialist lobbying rganisation in India has generally welcomed the Unin Budget 1996-97, stating that it was pro-growth and also had a lot of provisions for the poorer sections of society.