A modest budget

Houdini was famous for tying himself up in knots and amazing his spectators by getting free in a trice. P Chidambaram performed a Houdini-type liberating trick when he presented his eighth budget last Thursday.

The circumstances were not auspicious. GDP growth in real terms had slumped to 5 per cent and inflation continued to be above the real growth rate for the 12th quarter running. The man now in Rashtrapati Bhavan had bequeathed a Budget in which the deficit estimate was not credible. An election is imminent at the most within 15 months and hence this was going to be the last proper Budget. So how was Chidambaram going to balance austerity and populism, inflation and growth, fiscal balance and welfare expenditure?

The answer we got was a masterpiece of fiscal gamesmanship. (No wonder Yashwant Sinha who has been finance minister himself spoke of baazigari). Faced with multiple demands, the guiding slogan that the FM adopted seemed to be the Hippocratic Oath: Above all else, do no harm. He had already begun reducing expenditure within the financial year when halfway through in September Pranab Mukherjee vacated the hot seat and Chidambaram was put in it. This "fiscal consolidation" meant an 18 per cent cut in planned expenditure during the last six months of the fiscal year. This allowed him room despite the slower growth in revenue to meet the deficit estimate he had inherited of 5.1 per cent at no worse than 5.2 per cent.

That difficult task done, the Budget for the next year was carefully calibrated by allowing a minimum of populist gestures but branding each new step cleverly. Thus we had mention of gender and disability and children and associated human development themes. The trinity the FM evokedówoman, the youth and the poorótowards the end of the first half of his Budget speech gave a golden gloss on the small rations he had the scope to allow. Thus the big fear of the markets that he will be tempted to give away large sops to secure the election even at the cost of wrecking the deficit was belied. The overall numbers came out such that for the coming year, the deficit was pegged at 4.8 per cent.

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