Union Budget and state polls: Neither govt nor Opposition have strong reasons to fight over timing

Opposition parties are fighting tooth and nail to deter the Narendra Modi government from presenting the 2017 Union Budget on 1 February, 72 hours before voters enter polling booths in five key states including Uttar Pradesh.

These parties have sought the intervention of the Election Commission (EC) in the issue citing that a Budget so close to the elections will influence the voters since the government could dole out populist schemes.

Surely, the Opposition parties’ rationale behind their protest is valid. They aren’t wrong in making such a demand. No political party would want to risk giving an opportunity to a rival party in power to influence the voter by rolling out sops just days before the D-day. This can sway the neutral votes and give hope to the poor that more goodies will follow if they acknowledge the packages that have already been doled out.

Finance Minister Arun Jaitley. File photo. AP

Finance Minister Arun Jaitley. File photo. AP

Opposition parties have, hence cited (read here) that in 2012, when the same states were up for elections, the General Budget was moved to mid-March after voting was completed. But, as the above report mentions, this was a decision taken by the Congress-led UPA government. Beyond this there has been no precedent of the EC intervening to change the Budget date.

Opposition parties may be worried looking at the ‘mini-budget’ of Modi presented on the New Year's Eve. In his much hyped address, Modi announced a slew of populist proposals for rural India. The first in the package was the two housing schemes under the Prime Minister Awas Yojana (PMAY) — under which home loans up to Rs 9 lakh will get 4 percent interest exemption, and loans up to Rs 12 lakh will get 3 percent interest exemption. Also, in rural centres, Modi offered home loans up to Rs 2 lakh with an interest rate rebate of 3 percent. Then came proposals for farmers, including 60 days interest rate waiver for Rabi farming for loans taken from district cooperative banks and primary credit societies and announcement to convert 30 million kisan credit cards to RuPay cards.

Modi also announced raising government guarantees to Rs 2 crore from Rs 1 crore earlier to small firms and Rs 6,000 for pregnant women.

Union Finance Minister Arun Jaitley can very well start from where the prime minister stopped and dole out tax reductions and more populist schemes eyeing farmers and low-income groups. This is probably what worries the Opposition.

But the point is even if the EC heeds to the Opposition parties and delays the Budget, the BJP can still give promises of more perks to the poor in other ways. Hence, even if the Opposition manages to delay the Budget, it isn’t going to stop the government from luring voters with hints of future sops without falling into the EC’s trap.

On the other hand, if the government wants, it can postpone the Budget presentation. Most economists believe that tinkering with the Budget timing isn’t anything big for the economy. The reason given by the Modi government for advancing the Budget is that it will give ample time for the spending to start early and planning by each departments and will give more clarity to all stakeholders on the Budget proposals when the new fiscal year begins. This benefit may be lost but beyond that economists do not see much benefit for altering the timing of the Budget presentation. If appeasing the voters with Budget goodies isn’t an aim of the government, there is no harm in delaying the Budget post the elections.

“It hardly makes any difference,” said a leading economist with a rating agency who didn’t want to be named. “Of course, if the Budget is presented just before state polls, it will have an impact on the poll outcome. But, nothing will go seriously wrong even if the Budget is announced after the polls,” said the economist.

The point here is that advancing the Budget is a progressive step that would make the planning for the approaching fiscal year easier, but, beyond that it is not going to bring in any major benefits. Similarly, even if the Budget is held post the polls, there isn’t going to be any major damage to the economy.

Here, the final call lies with the EC. Neither the government nor the Opposition have strong reasons to fight over the timing of the Budget.

For full coverage of Union Budget 2017 click here.

Updated Date: Jan 13, 2017 20:17 PM

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