A budget isn't merely an account of the government's income-expenditure and planned layout of proposed revenues and spending for the next fiscal. In the peculiar conditions of Indian democracy where election is the perennial season, the political message in a budget has to be equally astute as the economic reasoning.
It will be premature at this stage to adjudge the impact of Arun Jaitley's fourth budget. Early signs are that it is a prudent presentation keeping in mind the domestic and global constraints that the Union finance minister was operating under. He seems to have presented a decent budget while maintaining fiscal prudence and managed to direct the spending in right areas without sounding too populist. It heads in the right direction.
While an economist — depending upon his ideological predilection — may rate the budget 5 or 7 upon 10, politically the finance minister has scored 10/10. There are enough pointers and juicy, low-hanging fruits in the budget that may be plucked by BJP's poll managers and taken to the electorate to drive home the message.
Let's start with political funding. In the entire debate around demonetisation, which the Prime Minister had fashioned as a 'war against black money', his critics had repeatedly pointed out that unless and until the government takes sound measures to clean up the political funding system, demonetisation would fail in its primary objective.
In a 2015 paper titled Corruption in India: Bridging Research Evidence and Policy Options, Sandip Sukhtankar, Associate Professor in the Department of Economics at the University of Virginia and Milan Vaishnav, senior fellow in the South Asia Program at the Carnegie Endowment for International Peace, point out how political parties in India circumvent the law to receive anonymous cash donations just below the Rs 20,000 threshold to escape scrutiny.
While the Election Commission handles ably the planning and execution of elections, it is unable to do anything about the murky rules regarding political funding that is governed by politicians and business perpetuating "a system of trading policy and regulatory favors for monetary payments and campaign ‘donations’”, they say.
Sukhtankar and Vaishnav write: "For instance, corporations and parties are only legally required to publicly disclose political contributions in excess of Rs 20,000. This rule allows contributors to package unlimited political contributions just below this threshold value completely free of disclosure. Indeed, in 2014 the Association for Democratic Reforms (ADR) reported that 75 percent of the income of India’s six major parties comes from undocumented sources (ADR 2014)."
Now consider the fact that in its report, ADR has found that political parties to have received Rs 7,833 crore funding from 'unknown' sources in the 11 years. While 83 percent of total income of Indian National Congress amounting to Rs 3,323.39 crore and 65 percent of total income of the BJP amounting to Rs 2,125.91 crore during this period came from 'unknown sources, Bahujan Samaj Party's 100 percent donations came from unknown sources, according to the report.
Given this background, the chorus against cleaning up political funding was strong and it undercut Narendra Modi's stated mission to cleanse the Indian system of a parallel economy.
This is why Jaitley's move to slash the anonymous donation limit from Rs 20,000 to Rs 2000, above which the parties will have to disclose the identity of the donor, makes huge political sense.
Accepting the recommendation from Election Commission, the finance minister said, henceforth "the maximum amount of cash donation that a political party can receive will be Rs 2000/- from one person. Political parties will be entitled to receive donations by cheque or digital mode from their donors.
"As an additional step, an amendment is being proposed to the Reserve Bank of India Act to enable the issuance of electoral bonds in accordance with a scheme that the Government of India would frame in this regard. Under this scheme, a donor could purchase bonds from authorised banks against cheque and digital payments only.
"They shall be redeemable only in the designated account of a registered political party. These bonds will be redeemable within the prescribed time limit from issuance of bond. Every political party would have to file its return within the time prescribed in accordance with the provision of the Income-tax Act," the finance minister said in his budget speech.
Some have pointed out that this merely poses a logistical impediment to political parties bent on exploiting the system and they may very well keep on subverting the law by using loopholes such as taking more donations below the Rs 2000 threshold. While that is arguable, there is not a shadow of doubt that this will be advertised as a major reformative step by the BJP during election campaign. The message is clear. The Prime Minister is serious about cleaning the system.
The introduction of the RBI bonds is an intelligent step that gives the donor the chance to remain anonymous while ensuring that the transactions takes place inside, not outside the banking system.
While bringing greater accountability in political funding was one part of Jaitley's message, the other part was the greater outlay for minorities and the rural sector. These are politically sensitive zones and the government's push leaves no space for doubt that the upcoming Assembly elections in five states have played a major part in the decision-making.
Jaitley announced "implementation of the Schemes for welfare of Scheduled Castes, Scheduled Tribes and Minorities", the allocation for which has been "stepped-up from Rs 38,833 crores in BE 2016-17 to Rs. 52,393 crores in 2017-18, representing an increase of about 35 percent. The allocation for Scheduled Tribes has been increased to Rs 31,920 crores and for Minority Affairs to Rs 4,195 crores. The Government will introduce outcome based monitoring of expenditure in these sectors by the NITI Aayog," said the finance minister.
Jaitley also announced that Pradhan Mantri Mudra Yojana will prioritize lending to dalits, tribals, backward classes, minorities and women — all target areas for astute political messaging.
Overall, the impression is clear. The government has laid the poll plank for the upcoming Assembly elections through budgetary provisions. Now expect the BJP to go to town.
Published Date: Feb 01, 2017 17:10 PM | Updated Date: Feb 01, 2017 17:10 PM