Every year a UNION BUDGET is formed which aids in controlling the economic fluctuations. It also ensures proper handling of inflation and deflation thus bringing about Economic Stability. This article assesses the influence of the Budget on the upcoming state elections.
The Union Budget is the annual report of India. It contains the government of India’s revenue and expenditure for the end of a particular fiscal year, which runs from April 1 to March 31. The Union Budget is the most extensive account of the government’s finances, in which revenues from all sources and expenses of all activities undertaken are aggregated. This year our Finance Minister Nirmala Sitharaman presented a budget that calls for bigger spending to fuel growth. This year will be her fourth Budget after 2019,2020 and 2021.
The Union Budget this year will be presented while EC’s( Election Commission’s ) Model Code of Conduct (M.C.C) is in force across five states, including India’s most populous one, UP.
The Union Budget might influence these state elections.
There are certain cases where Budget have impacted Elections like,
• In 2017, Election Commission (E.C) had forbidden the Government of India from announcing state-specific schemes or broaching achievements relating to the five poll-bound states in the Budget speech.
• The 2012 Budget, now infamous for Pranab Mukherjee’s retrospective taxation fiasco, was postponed to March 16 for state polls to conclude.
So, This year, E.C hasn’t issued specific directions like 2017, though M.C.C’s usual structures against announcing “any financial grants or promises” that have the effect of influencing voters should still apply.
Other Impacts of Budget on State Election
Elections have other effects on budgets. For example, U.P’s and Punjab’s discoms are among the most debt-ridden. They urgently require reforms worked out for the electricity sector to come into effect. But these reforms are usually unpopular because they attack subsidies, especially those given to farmers. So, it is almost certain today’s Budget will steer clear of signaling anything on electricity reform.
Sometimes ‘election budgets’ do the other thing – when MCC( Model Code of Conduct) is not in force, they give generous doles. The best recent example is Congress’s 2008 Budget – general elections were in 2009 – that announced the farm loan waiver. That standard operating procedure(S.O.P) was thought to have helped Congress come back to power. But when Congress increased allocation for food security in the 2013 Budget meanwhile, general elections were in 2014 and followed up with a food security law, voters remained unimpressed and the party was thrashed.
The lesson here is that S.O.Ps alone can’t win elections, and sometimes you can win elections even without competing on giving the best Standard Operating Procedure. In the election year 2019, Congress came up with the basic income transfer scheme, ‘Nyay.’ But BJP’s Budget proposed a limited income transfer scheme to farmers. Thanks to the other factors, BJP won a thumping majority.
However, BJP also won in 2019 despite elections being held in the middle of slowing GDP growth. This should not be seen by parties, including BJP, as indicating that the economy is irrelevant. It is extremely relevant most times because it is one of the factors that determine how voters feel about themselves. UP polls, being held amidst job losses and rising inflation, will be a test of the economy-election hypothesis.
Today’s Budget Analysis
The key point is that in today’s budget the government has refrained from doling out any kind of loan(s) ahead of the state elections that begin later in February 2022 as has been the case in the past. The budget focuses on the next few years and not the elections, which is justifiable.
There are elections in five states Uttar Pradesh, Uttarakhand, Punjab, Manipur, and Goa are going to be held from February 10. The Union Budget is likely to address some of the core political issues, particularly relating to big states such as Uttar Pradesh and Punjab.
The reason is simple: these five states together elect 690 MLAs and 145 MPs (102 to the Lok Sabha and 43 to the Rajya Sabha). Additionally, one of the biggest reforms undertaken by the Narendra Modi government found the strongest pushback from Uttar Pradesh and Punjab. The year-long farmers’ protest that saw the involvement of a large number of youth forced the government to retreat on its farm reforms path in November 2021.
Nirmala Sitharaman’s Budget today focuses on farmers, youth and women, besides spelling out a financial plan to strengthen health infrastructure in poorer states such as Uttar Pradesh.
The focus on health flows directly from the Covid-19 situation that Uttar Pradesh and the rest of the country have witnessed over the two years of pandemics.
The Union Budget is presented days before the start of assembly elections in five states, including the most populous, Uttar Pradesh, which could spur Sitharaman to promise higher rural spending and subsidies on food and fertilizer, economists and officials said “The fiscal position appears much healthier than expected ahead of the (budget) announcement,” Shilan Shah, an economist at Capital Economics, Singapore, said news agency Reuters.
The political challenges that the BJP is facing were reflected in Sitharaman’s Budget. The BJP needs to make sure that the economy, and more importantly those at the bottom of the pyramid see an improvement in their fortunes over the next year.
While there are expectations that the Budget will offer some relief on issues such as urban unemployment and the crisis in the informal sector, there is another aspect it will have to keep in mind, namely the erosion of nominal benefits being offered currently because of inflation. For example, the real value of PM-KISAN transfers, which were started in the interim Budget of 2019-20, has fallen by 15.5% in the quarter ending December 2021.
Hence, the Major announcements of finance minister Nirmala Sitharaman as part of her Budget 2022 speech, include a spectrum auction which will be held in 2022 for rolling out of 5G mobile services within 2022-23 by private firms. In a major move, the minister announced a 30% tax on proceeds of digital assets. This budget focuses more on developmental aspects rather than elections but it might impact the voter’s view.
Edited By: Aakriti Verma
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