With waivers, sops Karnataka CM fails to budget for middle-class

Ever since the JDS-Congress coalition came to power in Karnataka, the  loan waiver promise of the Janata Dal has been the focus of a lot of attention. The principal calculation of the Chief Minister in retaining the Finance portfolio and not conceding it to his alliance partner, was to ensure the gaining of the maximum political mileage from the loan waiver decision. His insistence on a  full fledged budget was clearly to create the needed fiscal space for fulfilling his key election promise. Thus, Kumaraswamy's much publicised budget had as it’s centre piece the proposal for loan waivers. 

Any budget presented by a government immediately after an election will invariably aim at implementing the election manifesto of the ruling party. The situation in Karnataka this time around was complex. One is not sure who as to who won or lost the election. A post election coalition of the JD(S) and Congress was a inevitable marriage of necessity.  In the budget, the  Chief Minister announced the waiver of crop loans to the tune of Rs 2 lakhs, requiring a budget allotment of Rs 34,000 crores. Arrears on loans for defaulters was also waived, requiring a further fiscal provision of Rs 6500 crores.

On the face of it, the Chief Minister would claim that he has taken a positive step forward in fulfilling the promise made to the electorate on loan waiver for farmers. Yet beyond the political rhetoric, there are two immediate questions that would need to be addressed. One, soon after coming to power, the Chief Minister had mentioned that the loans waivers would have some important riders. This was essentially to ensure that loan amounts used for non-agricultural purposes would be sifted out and such loans would not be included as part of the waiver. Yet, the budget statement does not seem to provide any such indication and appears to suggest a blanket waiver to the tune of Rs 2 lakhs per family. 

Secondly, any loan waiver scheme needs to have a salutary impact in terms of not merely solving a past problem but anticipating a future challenge. The budget speech provides little indication of any tangible effort to address rural/agricultural distress to prevent the challenges of future loans waivers being warranted.  The focus clearly is on loan waiver without even a short term planning on tackling the problems faced by the agricultural sector. 

Being a proposal of a coalition government, it would also be useful to take into account the emerging  rumblings within the Congress on the budget proposals. While the Chief Minister has not visibly disturbed the ‘Bhagya schemes’ of the previous Congress government, there are concerns expressed on the spotlight of attention and benefit being on the ‘Old Mysore’ region and the corresponding neglect of Coastal and Northern Karnataka. For the JDS,  a focus on Old Mysore would involve catering to their electoral catchment area. It is surprising that the Congress party, a part of the coalition government did not insist on a fair treatment to Coastal and Northern Karnataka, which are part of its electoral base. The budget, has thus, provided a handy tool to the BJP, to drive home the point that important segment of the state have been ignored.

Further, there is very little positive in this budget for the middle class and the more affluent sections of society. The tax increase in petrol and diesel and the hike in electricity charges will directly hit these segments while the indirect impact in terms of rise of prices of essential commodities will adversely hit all sections of society. It is for this reason, that sections among the Congress favour a roll back of the taxes on fuel and  the hike in electricity charges. Given a Lok Sabha election next year (in which the Congress has greater stakes than the JDS), the coalition needs to ensure that its measures do not have an adverse political fallout.  

Attention also needs to be drawn to two other dimensions which seem to have escaped the governments attention in the budget. Firstly, streamlining the administration to ensure maximum revenue mobilization does not seem to have go he attention it deserves. Year after year the revised estimates and actual revenues collected is indicative of the yawning gap between projected revenues and the actuals. Secondly, there seems to be no serious effort to prune government expenditure. Soon after coming to power, the Chief Minister had promised that his cabinet colleagues would  be encouraged not to spend excessively on renovating their offices/official residences or in ordering brand new vehicles. Soon after the cabinet expansion one was astonished to hear a Minister comment that how would people recognise him if he did not flaunt a high end car! There is very little in this budget that makes out a case for reducing wasteful expenditure on the part of the government machinery and its people.

Finally, a budget is a progressive instrument that should focus on growth and development. One could argue that there budget provides limited indications of the same. While loan waiver is the centre piece of the budget and would be welcomed in some segments of society, the positive impetus to agricultural growth in particular and providing the momentum for economic development is largely missing. One also would need to wait and watch how the government actually implements the different provisions outlined in the budget. While the schemes and waivers may be critical the road map for their implementation is as important. The real political benefit would be reaped not by merely  announcing a plethora of schemes but by their implementation and being felt by common people on the ground.   

The political fallout of these proposals is clearly linked to the segment of society one is looking at.  While the JDS seemed to have reached out to its vote bank, the same cannot be said of the Congress which has a much wider social base of support. Possibly, the party has missed an opportunity, in spite of being the larger partner in the coalition, to protect and further its political interests.

The writer is Pro Vice Chancellor, Jain University