Pinnacle of cynicism

Issue 12 - Mar 2008

V Anantha Nageswaran

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Mr Chidambaram has morphed into a politician sold on the merits of financial inclusion. Again, nothing wrong with the idea but it is the execution that is important.

In this recent innings, he has made sure that revenue gathering was cranked up in many ways—some good, some extortionist and some truly bizarre. Bibek Debroy aptly commented that not a single budget of the UPA government moved the reform agenda forward and that there was no legacy to speak of. That’s not entirely true. Mr Chidambaram’s contribution in this innings has been his revenue gathering zeal. Future finance ministers might—unfortunately—find it rather useful.

The seeds have been laid for some bad fiscal tidings in the coming years, especially if we get hodgepodge coalition governments that last one or two years. For if Dr Singh and Mr Chidambaram could abdicate fiscal responsibility so readily, lesser mortals would find it even easier to do so. The BJP reaction said it all. It called the package for farmers too little too late. The brazenness of it has shocked the party into totally forgetting responsibility in fiscal policy. Once it recovers from the shock, it too would seek to emulate and outdo.

An unstable coalition would always have an eye on elections. Hence, upcoming budgets in the near-term could be election year budgets in a row. In a recent note to clients, Goldman Sachs’ Tushar Poddar, referring to India’s fiscal policy, wrote that it was all downhill from here. He may well have gotten it dead right.

Intelligent men with good intentions either stay that way or they morph into shameless self-interest seekers, impacted by what others do. Or, they morph into cynics because whatever they tried did not work. In the case of Mr Chidambaram it is the latter.

This budget is the pinnacle of that cynicism. But future finance ministers could make this appear as an exercise in fiscal prudence.

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