SWAMINOMICS – Budget goodies can\’t sway the Indian voter

Opposition parties have made an absurd demand to postpone the Union Budget until after the elections in UP and four other states. The Election Commission should have dismissed this plea instantly. Indian voters are far too cynical and experienced to be bought by a few pre-election goodies in the budget. The Election Commission\’s code of conduct prohibits last-minute goodies to sway voters, but this must not abort vital institutional events like the Budget.

The Election Commission must know it is somewhat ridiculous to set an arbitrary deadline for incumbent governments to announce goodies, since this assumes that the public has no memory beyond a few weeks. Actually, the public knows after decades of elections that most politicians are rogues that promise the moon and deliver very little. That\’s why anti-incumbency runs deep in the Indian voting psyche.

In some countries like the US, incumbents get elected repeatedly, sometimes for decades. In India studies in the 1990s showed that two-thirds of incumbent legislators lost their seats even if their party won. Without exception, every finance minister in the Centre and states feels obliged to offer some pre-election goodies in his last budget. Although history shows that this fetches meagre dividends, it is politically necessary to make the effort.It is typically futile.

The exceptions have been chief ministers who have been repeatedly re-elected, thanks to demonstrably good and fairly clean economic development -Odisha, Bihar, Madhya Pradesh, Sikkim, Tripura, Chhattisgarh. In none of these states has victory depended in the slightest on last-minute goodies in the final budget. It has typically been the outcome of five years of purposive development.

Some pre-election gambits have been credited with swaying votes but without convincing evidence. Besides, these are rarely budgetary goodies. Some chief ministers have announced big cash bonuses for food procurement over and above the normal rate. Some UP chief ministers have announced astronomical rates for sugarcane to be paid by mills. Loan waivers and cancellation of electricity dues have often been announced, but rarely at budget time.

Narendra Modi\’s speech on December 31 was a brazen pre-election announcement of goodies. At a time of falling interest rates, he guaranteed senior citizens 8% interest on fixed deposits of 10 years. He announced a cash transfer of Rs 6,000 for every pregnant woman opting for institutionalised delivery; interest subventions of 3 to 4% for lower middle-income housing; and a slashing of the tax on small business turnover from 8% to 6% if conducted digitally. Working capital loans to small industries were raised from 20% to 25% of turnover, and government guarantees for small business loans were doubled to Rs 2 crore. Thirty million farmers with kisan cards will automatically get Rupay credit cards. Interest will be waived for 60 days on farm loans for the rabi crop.

All these goodies could have been announced in the Budget. But Modi chose to announce them on December 31. So much for Election Commission attempts to ensure fairness through deadlines, or the notion that budgets are the sole or main occasions for announcing pre-election goodies. Some of these sops may have fiscal consequences, but the banks will foot much of the bill.

Many analysts expect the Budget to announce steps towards a Universal Basic Income for all. This has been discussed for two years, and has backers both from the right and left. Whatever its pros and cons, such a deep reform must not be ruled out on the ground that state elections are in the offing.

Does any analyst really think that Modi\’s new goodies or a Universal Basic Income will decide the coming state elections? Nyet. Other issues are far more critical. Modi believes people will vote for his tough attitude towards Pakistan, and the surgical strikes. Demonetisation is the big issue of the day, with Modi believing he will win votes for being the first politician to seriously attack black money , and opposition parties hoping that the bungled implementation of demonetisation will improve their chances.

Other key issues include the forging of anti-BJP alliances, a strategy that worked well in the 2015 Bihar election. Caste and religious alliances are constantly proposed and broken. The Akali Dal and Samajwadi Party both believe they can win votes for economic development. The Aam Aadmi Party believes that its anti-corruption platform is a winner.

These are the critical issues. Forget about the Budget.It does matter for the economy . But it is almost irrelevant for the state elections.

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