May 16, 2020
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Federal In February?

The winning formula—power to the states—must not remain a Budget slogan

Federal In February?
LESS than 10 minutes into his Budget speech, Finance Minister P. Chidambaram evoked the first snigger among the millions of people who were glued to their T V sets watching the live telecast. He announced that Prime Minister Deve Gowda would inaugurate the Kasturba Gandhi Shiksha Yojna, "a programme to establish special schools for girl children in districts with a particularly low female literacy rate." The cynicism was not directed at the programme itself. The disbelief related more to the possibility of the United Front Government lasting long enough to commemorate the 50th anniversary of India's Independence. The feeling among many was that with the Congress having put the 13-party coalition on notice, the Government could crumble well before that.

However, by the time Chidambaram finished his 90-minute presentation to Parliament—and through the electronic media to the nation—he had managed to achieve the impossible. He had succeeded in generating a surge of enthusiasm which washed away (at least for the time being) all doubts over the Government's longevity. Not only that, the United Front became for the first time since it assumed power the darling of the industrialists as well as the middle class.

The mood was reflected in Parliament too. The Congress, till then in a war-like mood, was forced to concede it was a good Budget, and though the Left parties did have some reservations about the partial opening up of the insurance sector and the 'sops' to the rich, they could not but welcome the significant increase in the allocation for the social sectors, and the efforts to widen the tax net. Even the BJP seemed to be groping for points to be critical, with a glum Atal Behari Vajpayee insisting the Budget would trigger inflationary pressures without really telling us why.

But, evidently, not everyone in the Sangh's extended parivar shared Vajpayee's feelings. In the western metropolis of Mumbai, Maharashtra's Shiv Sena Chief Minister Manohar Joshi was forthright in his praise for the Budget. In particular, the scheme which would give the states as much as 77.5 per cent of the revenue generated through the voluntary disclosure scheme. Joshi was also appreciative of the new devolution formula that proposes a single, divisible pool of taxes to be shared between the Centre and the states as per the Tenth Finance Commission's recommendation.

While Vajpayee's reaction cannot but be taken in the context of partisan party requirements, it is Joshi's response which helps us understand one of the most salient features of Chidambaram's Budget proposals. The Maharashtra Chief Minister was undoubtedly reacting to the spirit of cooperative federalism contained in the Budget. It was left to Tamil Nadu Chief Minister M. Karunanidhi to sum up the spirit succinctly. "It is a major step towards federalisation," he said in Chennai. And lest there be any doubts that his accolade arises out of the fact that the DMK is part of the United Front coalition, the point is clinched when we consider an almost similar reaction by the Congress' Orissa Deputy Chief Minister Basant Kumar Biswal in the eastern city of Bhubaneshwar.

As Karunanidhi pointed out, various Chief Ministers had been demanding such steps for years. It was but natural that it was fin-ally provided by a government which has come about only because of the support of strong regional entities like the DMK, the TMC, the Telugu Desam and the Asom Gana Parishad. The federal spirit can be strengthened only by extending devolution of power to the states to other areas in administration and finance.

But having said that, one cannot but add a cautionary note. The fine balance of the need to carry on with economic reforms and the demands of real politik astutely achieved by Chidambaram notwithstanding, there could yet be developments which could make things go horribly wrong for the United Front Government. The spectre of the unmanaged oil pool deficit still looms large. Part of the reason for the sense of relief provided by Chidambaram's current budgetary proposals is that he has not done anything to tackle this deficit right now. But it cannot be ignored forever. He will have to raise petroleum product prices sooner or later. And the moment he does that, he would have set loose considerable inflationary pressures. And once that happens, the paeans of praise he is receiving could well turn into bitter vitriol. It cannot be denied that Chidambaram has achieved what seemed impossible through this Budget. But it will be proved a truly path-breaking Budget only if its credo of 'cooperative federalism' is now translated into a sustained working principle.

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