With 10 state assembly elections this year and the general election in the next, the Congress-led United Progressive Alliance (UPA) faces possibly its sternest challenge since it returned to power in 2009.
It goes without saying that the forthcoming electoral tests have been compounded by the perceptibly declining political standing of the ruling alliance caused by multiple scams and economic stagnation. In addition, defeats in a series of elections ranging from municipal contests to state assemblies have underlined its predicament.
Aware of its falling status, Prime Minister Manmohan Singh did talk of reviving the animal spirits in the economy while the Congress formally elevated heir-apparent Rahul Gandhi to the No. 2 position to be the vice president in order to enthuse the party workers. But, their effects have been minimal.
Much depends, therefore, on the budget if only because it will show the direction in which the country is moving. Such an indication is all the more necessary because a major reason for the economic slowdown has been the policy paralysis caused by confusion about the model of development - whether to be populist or reformist. In this respect, the budget will be a make-or-break affair if it succeeds in dispelling the miasma of indecision, which has been the bane of this government.
But, will it do so? If the government fails yet again to make up its mind about the economic agenda or opts for an unviable mixture of the two conflicting models to neutralise the doubting Thomases within the Congress, it may well return to square one. The fallout will be that the uncertainty of purpose which prevented the party from making a favourable impression on the electorates in regions as diverse as Bihar, Uttar Pradesh, Punjab and Goa will continue to hobble along.
The chances of such an eventuality cannot be dismissed. The reason is that one of the legislation expected to come up before parliament is the extravagant welfare measure favoured by Congress president Sonia Gandhi - the food security bill. It aims at providing subsidised food to 75 per cent of the rural population and 50 per cent of urban dwellers at the gargantuan annual cost of Rs.1.2 trillion (Dh 80 billion) .
Since few countries have tried feeding about 67 per cent of the total population at virtually throwaway prices, its effect cannot be anticipated. In electoral terms, the Congress obviously expects to reap a huge benefit if the scheme can at all be implemented given its enormous logistical problems of procuring, storing, transporting and distributing such massive amounts of foodgrains.
It is anybody’s guess whether the creaky bureaucracy will be up to the task. Apart from that, what is even more worrisome is the disastrous impact of the populist measure on fiscal discipline. Considering that the government has been referring to the need for cutting subsidies and taking small steps like increasing fuel prices and reducing the supply of cooking gas at subsidised rates, the economists in its ranks cannot be too pleased with the food bill. But they have had to hold their tongues in order to accommodate Sonia Gandhi’s views.
She wants the bill to play the role which the rural employment scheme supposedly did in boosting the Congress’ prospects in 2009 although the programme did not seem to have helped the party in subsequent elections. Arguably, therefore, the masses are probably less impressed by generous handouts from a paternalistic, mai-baap sarkar than by an atmosphere of economic buoyancy promising increasing employment opportunities.
To achieve the latter, the budget will have to turn away from populism to focus on reforms, which have been virtually stalled even after the departure of the Left. If the government is courageous enough to do so, the economy can still break out of its present standstill mode and generate the promised animal spirits. It may take time for the visible effects of such a turnaround to become noticeable, but what does happen when the economy is perceived to be recovering is to create a feeling of hope.
It isn’t only the middle class, already far more consumerist than it ever was, which experiences this heady optimism; the feeling percolates down to the lower strata since the job prospects are higher in a thriving economy.
In a way, therefore, the budget presents the last chance to the government to persist with what it started in 1991 but could not pursue as vigorously as it should have. The constraints included the Left in the 2004-08 period, resistance from within the Congress by votaries of what Manmohan Singh called an ‘outdated ideology’ and the cussedness of the Bharatiya Janata Party (BJP), which opposes when out of power what it advocates while holding office. But any further hesitation on the government’s part may prove to be politically fatal.
Amulya Ganguli is a political analyst.