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It’s politics over economics

Budget 2007 is the Manmohan Singh government’s answer to murmurs of discontent in the Congress and the Left.

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DNA analysis

NEW DELHI: Budget 2007 is the Manmohan Singh government’s answer to murmurs of discontent in the Congress and the Left. Pilloried by public criticism of its policies from both, the Prime Minister and Finance Minister P Chidambaram seem to have decided to let politics, not economics, colour their financial proposals.

The starkest evidence of their capitulation is the last-minute insertion in the budget speech of an announcement banning forward trading in wheat and rice. Backed by Sharad Pawar, the PM and Chidambaram had resisted pressure from the Left and Sonia Gandhi, who saw forward trading in food commodities as a major reason for rising prices. But ultimately, they too, like the rest of the Congress, were spooked by the election results in Punjab and Uttarakhand.

The decision to impose a ban was taken at a hurriedly summoned meeting of the Forward Markets Commission on Tuesday afternoon and circulated on Wednesday as an addendum to Chidambaram’s printed budget speech.

It was inevitable that this year’s budget would be dictated by the political concerns of its biggest component, the Congress. 2007 is a bad election year for the party. It has lost Punjab and Uttarakhand, it got a drubbing in the Maharashtra civic elections, its prospects are dim in the upcoming municipal polls in Delhi and the assembly polls in UP and it faces an almost certain defeat in Gujarat, where elections are due towards the end of the year.

These are fears that haunt Gandhi and her party and therefore, shadow the government. Of course, the PM is no stranger to such pressures. As finance minister in Narasimha Rao’s government, he accepted the dictum to put reforms on hold when the Congress lost a string of assembly elections. He’s signalled his willingness to do it again with this year’s political budget.

It took at least one dozen meetings over the past three months for the PM to help Chidambaram craft a budget that responds to the politics of the day. And drawing on his experiences with Rao, he reworked the draft budget speech to sharpen political elements and give it the required focus.

With just two years left for the next general elections, Gandhi has gone into poll mode. The PM has indicated that he is set to follow his leader. His skills will be put to severe test in the coming months as he attempts to balance the demands of a globalised market economy with the political needs of his party.

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