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In Budget 2019 PM Modi treads the middle path on populism

The talk was that BJP election managers wanted a waiver of about Rs 1.5 lakh crore. The PM appears to have resisted this option.

, ET Bureau|
Feb 02, 2019, 07.18 AM IST
NEW DELHI: The political signalling in the government’s interim budget cloaks the jostling that went on over the kind of relief to be extended to the farming community, which eventually ended with Prime Minister Narendra Modi taking a call against doling out a farm loan waiver.

Clearly, a Rs 75,000-crore package is way below what BJP’s election managers would have wanted. The talk was for a massive waiver in the vicinity of Rs 1.5 lakh crore.

The PM, however, appears to have resisted that option, indicating that he is open to stretching but not crossing fiscal confines even for immediate electoral benefit. And the reason is equally political — build an election pitch for economic and political stability.

The Centre has assiduously stayed away from farm loan waiver. Even after the UP elections in which the BJP promised a one-time farm loan waiver, the state government was asked to bear the expenditure from its own budget.

At the same time, the government has stayed the course on its other political objective of targeting the vote of the low-tomiddle-income young population. By doing away with income tax for those earning up to Rs 5 lakh, the Centre is hoping to positively impact a majority of the young working population, a key vote segment in this category that’s highly aspirational but is also restless.

Some in this cohort may be finding it difficult to find gainful and stable employment.

The same idea prompted the government to recently announce 10% reservation in government jobs and education for economically weaker sections. In effect, this measure targeted unemployed upper caste youth. The interim budget has provisioned for increasing seats in educational institutions by 25% to facilitate this quota implementation.

Further the budget has increased the outlay for SC/ST schemes and programmes by 28-35%. Clearly, both caste and class arithmetic are at play here with government trying to stitch a ‘feel good social stability’ narrative through immediate measures.

That, in fact, is a key political focus of the budget — implement measures whose impact can be immediately felt. The Rs 6,000-in-your-account message to the farmer was the next best move after rejecting the idea of a waiver. That the money will come in three tranches is a way to ensure impact at the opportune time. The tax proposals also seem to aim to do the same.

But what’s clear is that the PM and his strategists clearly decided against getting into a battle of populism with the Congress, especially after Rahul Gandhi sought to set the tone by proposing a universal basic income. The Congress also promised farm loan waivers in the recently concluded polls in Madhya Pradesh, Rajasthan and Chhattisgarh, which is why the pressure was high on the PM ahead of the interim budget.

In contrast to the Congress, the BJP appears to have remained closer to the centre of the economic spectrum, thus wagering that consistent, incremental steps may work better in making the vote-for-stability campaign pitch than radical measures.

This is quite a transformation from the logic which resulted in the shockand-awe political effect of demonetisation ahead of the UP state elections, but then again the BJP is now fighting as an incumbent, building a ‘stability versus uncertainty’ argument. On that score, the interim budget is more a political manoeuvre than just an election stunt.
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