The old order changes

Former Madhya Pradesh Chief Minister Digvijay Singh used to be fond of a definition he had himself coined for powerful persons in the Indian political system.

"There are only three powerful persons in the administration -- the DM, the CM and the PM," he would say when asked who, according to him, wielded real power in India. For the uninitiated, DM stands for the district magistrate, CM for the chief minister and PM for the prime minister.

Today, Finance Minister P Chidambaram must be recognising the aptness of this definition in more ways than one. As Chidambaram prepares to present the 2004-05 Budget on July 8, he is realising how powerful the prime minister can be.

Going by the number of meetings the finance minister has had with Prime Minister Manmohan Singh on various Budget-related issues and proposals, it is increasingly becoming clear that this PM will have a substantial say in the overall thrust of the coming Budget.

For Chidambaram, this must be a new experience. The last two Budgets he presented as the finance minister of the United Front government, the prime minister did not have much to offer by way of advice or inputs to the Budget preparation exercise.

H D Deve Gowda's understanding of Budgets or economic issues was rudimentary. Barring a few suggestions from Gowda or the officials at the Prime Minister's Office, which had to be shown due consideration, Chidambaram had a free hand. His experience with dealing with a prime minister did not change when Gowda was replaced by Inder Kumar Gujral.

He relied on himself and his excellent team of officials, led by Montek Singh Ahluwalia, who was then the finance secretary, Shankar N Acharya, the chief economic advisor, and N K Singh, who was the secretary in charge of the revenue department.

Consider Chidambaram's team in the finance ministry today. Apart from Chief Economic Advisor Ashok Lahiri and D Swarup, who is heading the expenditure department, there are not many senior officials with whom Chidambaram is holding serious Budget-related discussions.

In any case, both Finance Secretary D C Gupta and Revenue Secretary Vineeta Rai, are due for retirement within a few months of the presentation of the Budget.

And instead of Deve Gowda as prime minister, Chidambaram now has to deal with Manmohan Singh who is a former finance minister with five Budgets to his credit.

Not surprisingly, therefore, the tone and nature of the PM's Budget meetings with the finance minister and his officials have changed from what they used to be in the past.

Proposals are not discussed in general. On various occasions, Singh has insisted on a detailed note justifying the proposal, with numbers and background data.

For finance ministry officials, a Budget meeting with the PM now means more preparation and more background work. This is quite a difference from the past, when PMs would listen to a presentation, nod in endorsement and offer some general suggestions.

So, will it be a Chidambaram Budget or a Manmohan Singh Budget that Chidambaram will present on July 8? Those who have seen the finance minister from close quarters in the past couple of weeks point out that whatever may be the influence of the PM on the Budget, Chidambaram will make sure that it bears his imprint.
They also insist that it would be naive to expect any big-bang announcements from Chidambaram in his first Budget.

The finance minister is not likely to show any undue haste in coming out with some major proposals in his first Budget. He has just moved in to North Block and it will take some time before he makes up his mind on what he wants to do.

Moreover, whatever measures he introduces will have an impact for only half the year. So, he is more likely to unveil the big-bang measures only in his next Budget in 2005.

Chidambaram's first Budget in the United Front government in 1996 (incidentally that, too, was presented in July) did not impress either the markets or the corporates. Don't forget that the minimum alternate tax was introduced by him in his first Budget.

Barring that, there were no other big measures or new schemes announced by him. It was his second Budget in 1997 that was a big hit with a massive cut in both direct and indirect tax rates.

Chidambaram's first Budget now will also have to carry the burden of the United Progressive Alliance government's common minimum programme. That would mean reprioritisation of expenditure allocation for various schemes and projects.

There might be some grand schemes or a broad road map for the introduction of the value added tax regime. But the real action may be missing. For that, you might as well wait till February 28, 2005.

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