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Home > Business > Budget 2005-06 > Columnists > T C A Srinivasa-Raghavan

Budgets are for chhote bhaiyyas

February 26, 2005

A finance minister is seldom as secure politically as he likes to pretend. And in certain situations, he can become very insecure indeed. This could be one such time. One wonders why.

Few finance ministers, however, have the courage to take a principled stand. Mostly, they take refuge behind the excuse of "political compulsions". But this is usually just a euphemism for survival technique.

Mr Palaniappan Chidambaram is probably no exception to this rule. He knows what is being demanded of him. It will be very interesting to see how much he delivers.

Run-up to the Budget 2005-06

People also tend to overlook the fact, perhaps conveniently, that while revenue is about economics, expenditure is solely about politics. It is also about power, including, or particularly, the power of large business houses. Only a very na´ve finance minister tries to switch this golden rule around.

It doesn't pay for a finance minister to resist demands for massive expenditures that are considered potentially beneficial politically. He can argue only up to a point. But if he digs his heels in too hard, his goose is put into the pan, preparatory to cooking.

Typically, important "sources" in government float stories about him. This can, in extreme cases, include his impending departure. Innuendo reigns supreme.

The message is usually received loudly and clearly. The finance minister bows to the inevitable "political compulsions" without specifying whose compulsions these are.

Manmohan Singh in his first Budget of 1991 cut the subsidy on urea. That was in July. By September he had been forced to resign. So he rolled it back and stayed on. The lesson was not lost on politicians, whose ranks he was yet to join.

Yashwant Sinha, who is now anchoring a programme on Zee TV with industry leaders, came to be known as a roll-back minister. He also pleaded political compulsions. When he was finally removed in 2002 as finance minister, he could not understand why. After all, he had cooperated fully.

This long preamble is intended to provide a guide to readers about how to read the 2005-06 Budget. If you look for the economics in it, you will be haring off down a false trail.

Indeed, I never fail to be amused by the intensity with which economists try to apply their techniques of rationality to the Budget. It is also heart-rending to see them shake their heads in confusion.

Thus, the debate so far has focused mostly on revenue deficiencies and the tax reforms required for correcting them. It is a good way of keeping the children busy while the grown-ups get on with the serious business of winning political support.

To some extent the debate has also dwelt on expenditure, namely, the subsidies component of it. But as I have argued in the past, subsidies have to be looked at multi-dimensionally. If you take a simplistic economists' view of it, you could end up like China: totally uncaring. China can be like that, but I don't think we want to be.

The central problem for finance ministers is to decide where caring stops and politics begins. When Sonia Gandhi sends in a chit asking for thousands of crores to be spent on something, is it caring or is it politics? How much of it is caring, and how much politics?

Can Mr Chidambaram argue with her and be heard saying that caring means spending wisely? After all, what is wisdom for a finance minister may not be wisdom for a party president.

Can he say that wise spending may not result in political advantage, that the others who tried it before, like Rajivji in 1988 and 1989, Inderji in 1998, and Atalji in 2004, came to grief?

Can he say that he will not go along if the spending is intended to buy the support not of the people but of the middlemen, namely, those pervasive political creatures endearingly called chhote bhaiyyas in the Hindi belt? If he does, will he not be told that a very important reason why, say, Chandra Babu Naidu, lost was that he did not keep the chhote bhaiyyas happy?

The proof of the importance of the chhote bhaiyyas lies in what is happening in Bihar. Lalu and his chief minister wife do not deliver anything to the people. Lalu even had the cheek to ask some villagers why they needed electricity when they didn't have anything to run on it!

But the duo make sure that the chhote bhaiyyas get what they want: money, tons of it. And so they win.

However, if one swallow doesn't make a summer, look at West Bengal. The CPM has been in power for 28 years. For 20 of those, it did nothing but cater to the needs of its own chhote bhaiyyas. That's where most of the development money went. That is why there are hardly any properly audited accounts.

This doesn't always work, though, because there are always some chhote bhaiyyas who feel badly done by. They switch allegiance and work for the opposition, either by using Gandhian methods of non-cooperation or openly.

The Congress, as might be expected, is good at non-cooperation. The BJP is good at open rebellion. If you talk to the BJP chhote bhaiyyas, one of their major grievances in the election of 2004 was that a few "Dilliwalas" kept most of the cake for themselves.

There is also a new problem now. There are senior chhote bhaiyyas in the Union Cabinet. And when some of them are the heads of regional parties that are important to the ruling coalition, it takes a lot more money to buy their happiness.

After all, the poor chaps have to run their own political parties. It is no coincidence that the railway portfolio, since 1997, has always gone to such leaders from Bihar or Bengal.

Some of these senior chhote bhaiyyas belong to the leading member of the coalition. They hold important portfolios. They have to raise funds for the party. Their survival depends on how much they can raise.

So, whatever economics or common sense (same thing) may suggest, expenditures on defence are increased or duties "adjusted", and so on. When you play with big boys, you have to accept that rules are only meant for children.

And you know the transition has been made when a man you knew to be "all right" suddenly says, "I am politician." What he means is "don't hold me up to the usual standards". So to all those who are holding their breath for the promised "dream Budget", here is a simple suggestion.

Ask not what the Budget does for you; ask what it does for the chhote bhaiyyas.

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Budget 2005-06: Complete Coverage

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