Budget passes BJP’s political test ahead of 2024 elections
The Budget 2023-2024 remains that ‘rare exercise’ where good politics and reasonably competent economics have fused, even if this coexistence remains somewhat fragile
The political test of the final full budget of the Bharatiya Janata Party (BJP)-led government before the 2024 elections was based on a simple metric — would it be enough to sustain the party’s multi-class alliance or would budget measures fracture that wide alliance?
On this yardstick, union finance minister Nirmala Sitharaman has passed the political test. And she has done it while broadly focusing on macroeconomic stability and fiscal discipline, preparing the country for a green transition, offering direct tax cuts, investing in the technologies of the future, continuing on the path of public investment-driven infrastructure, incentivising local manufacturing, prodding states and the private sector to step up, and retaining a welfare cushion given the acute levels of distress that the combination of the pandemic, inflationary pressures and continued unemployment have left behind.’
This makes Budget 2023-2024 that ‘rare exercise’ where good politics and reasonably competent economics have fused, even if this coexistence remains somewhat fragile. It is not that this budget did not think of the 2024 elections as some seem to suggest — there is no way that a party as politically attuned as the BJP will ignore the electoral calculus — but the sophistication of the budget lies in its ability to be political without being explicitly so.
What’s the BJP’s multi-class political base? Under Narendra Modi, the party has been able to win over segments of urban wealthy Indians (think of the corporate CEO); the vast swathe of salaried middle-class Indians in cities and smaller towns (think of a mid-level government servant or tech professional or a medical company representative or school teacher); younger entrepreneurs (think startup founder or a small business owner) or lower middle-class workers (think of the Uber driver from a neighbouring state or a college graduate who has taken up the job of a personal assistant); rural big landowners (think of the old agriculturist who is embedded with local power networks and owns a college); smaller farmers and landless labourers (think of the construction worker or auto driver who shuffles between a village home during sowing and harvesting season and returns to work in the city in the off-season).
If five of 10 people in each of these large and admittedly heterogeneous categories back Narendra Modi, it works for the party — and there is enough anecdotal evidence to suggest that this was the case in both 2014 and 2019.
To be sure, this is a simplified, perhaps even somewhat simplistic, matrix of the class structure driving the BJP’s popularity. But these categories also broadly overlap with the party’s vast social coalition of Hindu upper castes, other backward classes (OBCs), Dalit subcastes, and, to a lesser extent, tribals in northern, western, central and increasingly eastern India.
What Sitharaman’s budget has done is give enough, either in terms of symbolism or substance, to enough of these constituencies to not rock the boat.
When she highlighted the welfare achievements — free ration for 28 months to 800 million people during the pandemic; the construction of 120 million toilets; the distribution of gas cylinders to 96 million homes; cash transfer of ₹2.2 lakh crore to 114 million farmers; increase in the PM’s rural house construction scheme by 66% to ₹79,000 crore — it was a reminder to the subaltern that this is a government that has made their life easier.
When she spoke of ramping up investments in handicrafts for artisans, mentioning how it would benefit OBCs, Dalits, tribals and women, it was a signal that the government hadn’t forgotten their livelihood issues. When she spoke of the aspirational districts programme or the aspirational block programme, it was a message to neglected geographies that they don’t remain neglected anymore. When she allocated ₹15,000 crore for the Prime Minister’s Particularly Vulnerable Tribal Groups Development Mission or announced that over 38,00 teachers and staff will be hired for 748 tribal schools, the political subtext was hard to miss. After all, a majority of the states, both in Northeast and central India, going to polls this year have a substantial tribal population. When she spoke of investments in mechanical desludging, it was a signal to Dalits that the government was finally committed to ending the inhuman practice of manual scavenging.
When she spoke of an agriculture accelerator fund or increased the agricultural credit target or highlighted the focus on decentralised storage facilities or announced the expansion of digital public infrastructure in the agri domain or took pride in millets, there was a signal to farmers of different classes that the sector mattered.
When she expanded the credit guarantee to MSMEs or returning 95% of the forfeited amount to these enterprises related to bid or performance security keeping the pandemic in mind, it probably wasn’t enough — but there was a sign to the sector that the government was willing to listen to their financial concerns. When she lowered the tax rates for new cooperatives or provided relief to sugar cooperatives to the tune of ₹10,000 crore, there was a powerful signal to these bodies, with vast memberships, that exercised political influence.
When she spoke of reducing compliances, Sitharaman sent a signal to business constituencies and smaller enterprises that the task of cutting red tape would continue. When she increased the Capex or Capital expenditure to ₹10 lakh crore, it was with the intent to galvanise construction and allied sectors — and all those involved in it — and tell them that business was coming their way. When she spoke about extending concessions to startups or investing in the green economy or setting up labs for future technologies, it was a signal to younger Indians searching for opportunities that the government will continue to back entrepreneurship in new sectors.
And when the union finance minister announced her decisions on direct taxes, it was a signal to each of the party’s constituencies. For the rich, she brought down tax rates from 42% to 39% — the numbers of those who benefit will be small but they exercise disproportionate influence over the narrative. Those earning up to ₹7 lakh need not pay direct taxes at all — and there will be millions in the ₹5 lakh to ₹7 lakh bracket who will, from the next fiscal year, benefit from the provision. There were also other changes to incentivise taxpayers in other brackets to shift to the new tax regime, with reductions and deductions.
When Sitharaman reminded the audience that in a grim global economic climate, India was seen as the bright spot and that it was heading the G20 this year, she tapped into a sense of Indian exceptionalism that has become hardwired in nationalist psyche across all demographic and social groups.
Whether the government’s numbers meet its expectations, whether its plans do get executed, whether it is underestimating the scale of distress, and how external variables will change the budget’s overarching philosophy are all relevant questions and merit discussion, but the fact that the government was able to present a budget in a difficult year without antagonising powerful constituencies — even if it did not have enough that would make each one happy, and some were left more satisfied than others — is a mark of political success. The fact that there remain 15 months before the next elections also gives the government confidence that it can take corrective measures if it needs to do more to address specific grievances if they become politically volatile — remember, it was only after the setback in state elections at the end of 2018 that the government announced the PM-KISAN scheme and weaved it into the interim budget two months before polls.
But while remaining true to the PM’s insistence on fiscal discipline, keeping the big objectives in mind, and doing a little bit for everyone, Sitharaman has given enough political talking points to her party to ride through this season and prepare for the big battle ahead.