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Budget 2015: Frequent elections are killing economic reforms

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Kamlesh Singh
Kamlesh SinghMar 02, 2015 | 10:49

Budget 2015: Frequent elections are killing economic reforms

Prime Minister Narendra Modi, while demolishing Congress's opposition to the Land Acquisition Bill, said that his government will not scrap MNREGA, especially because it was a monument of failure of the economic policies of the Congress party. Arun Jaitley, in his Budget 2015-2016, announced an additional Rs 5,000 crore for the populist scheme, now infamous for leakage and corruption. Modi had told the Lok Sabha to not doubt his political acumen. His government's first full-year Budget makes it clear that subsidies and populist policies of the past will continue, although with caution, because of, well, political acumen.

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Finance Minister Arun Jaitley (C) leaves his office to present Union Budget 2015-16. Photo by Vijay Mathur/REUTERS.

 There was a faint but palpable stamp of the Delhi election results on the budget. No big bang reforms. No much-awaited second round of reforms. You could feel the collective sigh of relief when the sound of boo after the 5 per cent reduction in corporate tax wasn't enough to silence Arun Jaitley. Corporate, as Jaitley had warned a couple of days ago, has become a dirty word in politics. Industrialisation is seen as an enemy of agriculture; growth as a friend of the rich. Hence, the continuation of populist lollipop delivery programmes. You can't blame Arun Jaitley or the BJP. The environment is not conducive to reforms. All we can hope for, and all we got, was a promise of incremental, gradual reforms. Call it a case of missed opportunities but nobody wants to administer the bitter pill, when the patient would rather suffer longer for its preference for the sugar-coated placebo.

The Bihar elections are just round the corner. Jaitley couldn't take risks, especially when his party's image has taken a beating, as it is seen as pro-industry and anti-poor. That's the perception; and perception, not truth, drives policies. Any tinkering with populist policies will strengthen the perception and weaken the BJP's chances. The next budgets will continue to be incremental like this one. Because there will be elections in states. The BJP will keep the pressure on the government to not experiment, forget talking big risks. The mood, against industry and corporates, which has freshly been reignited by the splendid success of the Aam Aadmi Party in Delhi, looks to dominate the political discourse. This may not be good economics, but politics, in the version of democracy we have chosen, trumps good economics.

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Is it time for India to hold the national and state elections together for the sake of consistency and stability in economic policies for at least five years? That question sounds as outrageous as big bang reforms.

Last updated: March 02, 2015 | 10:49
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