Last week, Prime Minister Narendra Modi held a high profile meeting with industry leaders, including the chairman emeritus of Tata Sons, Ratan Tata, Reliance Industries Ltd chairman Mukesh Ambani, and the founder of Adani Group, Gautam Adani, among others, the virtual who’s who of India Inc, as part of preparations for the presentation of the Union budget on 1 February. Later, he followed this up with a similar round of deliberations with a bunch of economists. Tacitly, the government is conceding that it is seeking and is open to good advice. No doubt this does not reflect well on the advisers within the government who have struggled to cope with the challenges. Yet, it is key to building consensus on the desired solutions.
Undoubtedly, these two engagements by the Prime Minister, duly orchestrated by his office, has dwarfed the deliberations finance minister Nirmala Sitharaman has been conducting over the last month or so, triggering some chatter, some of which found its way to social media. Needless to say because it is the worst kept secret, the Union budget speech is ready only after the prime minister has given the nod. This process takes several rounds of interactions with the finance minister. If anything, through these meetings the prime minister is overtly signalling a formal co-owning of the upcoming budget, which is not necessarily a bad thing as it means that Modi is willing to expend some of the social capital he earned in the 17th general election when he spearheaded a spectacular win.
The big takeaway instead is that it has put the Indian economy, rather the worrying state of affairs, in central focus, something that has been long overdue. The sharp deceleration in growth may have got the headlines, but what was most worrying is the worsening structural fault lines, flagging investment and agrarian distress, which emerged since 2008 have largely been ignored by successive governments. The slowdown is a classic instance of chickens coming home to roost.
Addressing these challenges are easier said than done. There are no magic bullets to fix the problems and the solutions will need at the least a medium-term to bear fruit. Unfortunately, the growing demand is one for a short-term fix. At the moment, in the cacophony of political voices even a half-full cup is coming across as half-empty.
At the least, the Union budget will have to alter the narrative even while it formally acknowledges the structural flaws in the economy. At the moment, the Union government is losing the perception battle. It is not that this regime has not been trying. In fact, two mini-budget kind of pronouncements have followed the formal July budget. However, somehow they are coming up short in terms of deliverables. As a result, the official responses are increasingly defensive even as the Opposition war cry is becoming shriller. It is then imperative that the budget does not come up short either in tone or tenor; the one thing it can’t do is to be overwhelmed by the circumstances.
As Haseeb Drabu, former finance minister of Jammu and Kashmir, has argued, an outstanding budget needs to shake up the key stakeholders and stir up the economy. In a piece written for Mint, many moons ago, Drabu put it most succinctly, “A routine budget gets driven by the economy, a great budget drives the economy. A routine budget is only about taking from the stakeholders but a great budget is about giving—giving a message to stakeholders and a direction to the economy," he said before adding, “This may entail technically overstepping the strict fiscal mandate that a budget has and making it holistic by taking enabling initiatives in the sphere of economic policy in line with an ideological position. That is the recipe for cooking a great budget."
Amazingly, this holds true even today.
Anil Padmanabhan is managing editor of Mint and writes every week on the intersection of politics and economics.