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The Business of Budgets : India’s Federal Budget, Modi’s Political Future 

By Saumitra Chaudhuri

Since the historic federal budget of 1991 presented by then Finance Minister Dr. Manmohan Singh that launched India on a path of reform and market orientation, Budget Day in India has been high season for economic policy. On the last day of February each year, India’s Finance Minister announces the government’s major economic policies that often spark separate legislative activities and send political ripples throughout South Asia and beyond.

Prime Minister Narendra Modi’s first federal budget was presented in 2014 just a month after he came into office; his first-fully formed policy budget arrived this February, and was met with much anticipation. The Economic Survey tabled in Parliament the day before the budget foreshadowed a wide-ranging reform offensive on a phalanx of subjects, including India’s leaky subsidy system of welfare spending. Even those who watch political economic matters with keen interest – including market professionals – did not expect the script in the budget, though they would have been happily surprised had it indeed been there.

In October and November, Prime Minister Modi followed up on his massive victory last May with a string of successes in a number of provincial legislatures, considerably strengthening his position federally. Then came an unexpected turn of events: Starting in December and continuing into January, a series of spiteful, sectarian and absurd pronouncements by some of his own supporters catalyzed a coalescence of the splintered and reduced opposition parties. The media, previously numbed by the sequential massive electoral successes of Modi, found their critical voice once again. But by then it was too late — the BJP sorely lost the elections in the provincial legislature of Delhi in early February, a disaster precipitated by the unfortunate political tone in the preceding months.

Modi now needs to push through with his legislative agenda in order to solidify his political standing and usher in the new era of cooperative federalism he has promised his people. Certainly, he has a lot on his plate – from amendments to coal and minerals legislation, to reforms in insurance regulations and land acquisition law. He has other agenda no doubt, but for now they are not on the table. Modi has a comfortable majority in the lower chamber (House of the People), but is badly outnumbered in the smaller upper chamber (House of the States). For any law making to succeed he needs the support of most or at least some of the opposition, and certainly not stout opposition. For coal, minerals and insurance legislation, however, it is believed that Congress has all but assured support.

But that was before the spiteful language and ensuing furore in Parliament, which ushered out the short winter session of Parliament last December. Even though the verbal jousting has bordered on the bitter, co-operation cannot be completely ruled out. But not on the land acquisition bill, unless Modi manages to get some regional parties aligned with Congress to break ranks and support him. Perhaps that is why the Prime Minister attended the recent wedding festivities of the daughter and great-nephew of two powerful regional leaders who dominate two of India’s most populous provinces, home to 300 million citizens.

There has been plenty of speculation that the asymmetry between Modi’s control over the lower chamber and his lack of influence in the upper chamber can and will be resolved through a joint sitting of both houses – a procedure that India’s Constitution provides for. However, the language of the provision clearly envisions that such a sitting be called to consider a bill passed in one house, but not by the other. It is possible that the land bill may finally have to be sorted out this way, but it can hardly be a prescription for legislation in general. The irony is that most of India’s politicians would agree with the changes sought through the land bill, including many in the previous government. Indeed, the BJP while in opposition supported the passage of the bill in its present form. Such are the wages of convenience.

The challenge before Prime Minister Modi on the home front is the completion of the legislative agenda that he has so far laid out, and in the time frame of this session and the next one in July. The apparent soft-pedalling in the Budget on subsidies and the like appears to be part of a plan to get the legislative business through without stirring up fresh hornets’ nests. The tougher battles will need to be fought, just not today.

Saumitra Chaudhuri is a Senior Fellow with the Asia Pacific Foundation of Canada, and a Former Member of the Economic Advisory Council to the Prime Minister of India


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