ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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NEW DELHI-Political Economy of 1987-88 Budget

Political Economy of 1987-88 Budget BM TWO lengthy quotations from Jawaharlal's speeches in the speech of Rajiv Gandhi presenting the budget for 1987-88 have been enough for the cheer leaders who like to flaunt their left-progressive pretentions to applaud the return of the young prime minister to what they call the 'Nehru path' in economic policy from which he may have strayed during the last two years because of inexperience and some bad influences. They seem to have been greatly encouraged in their hopes by the negative reaction of the stock markets. It is indeed remarkable that so high were the expectations of tax reliefs and fiscal incentives of business interests from the prime minister that even a status quo in income and corporate taxation, with a scries of other fiscal crumbs scattered all over the budget, led to a crash of share values on the stock markets. The confidence of business interests in the established power structure over which Rajiv Gandhi presides is obviously very heavily motivated and can easily sag when their demands are not met with alacrity just as self styled leftists clutch at straws to claim a lurch in their favour. What stands out, however, is the inability or unwillingness of the prime minister to make a turn away from the liberal fiscal and budgetary philosophy that has prevailed during the last two years and go for what may be called a conventionally hard budget in the face of an extremely stretched budgetary position. He has actually chosen to meet the demands on resources for security at the cost of development. Missing clearly is what may be said to be the Nehru touch in the face of the inexorable demands of defence and development such as was applied in the early sixties when it was considered necessary to step up defence expenditure and what may be called a severely harsh budget was drawn up under the direction of the then prime minister. The easy option, after some fudging of figures of revenue and expenditure, of leaving a large deficit uncovered and refraining from a major additional resource raising effort has been adopted on the present occasion. The seemingly firm and unqualified assurance of the prime minister that the deficit in the coming year's budget would not be allowed to swell, as has happened in the current year which is expected to end with a deficit of as much as Rs 8,285 crore as against the budget estimate of Rs 3,650 crore, is, of course, too facile to carry conviction or credibility. A much larger deficit than estimated for the coming year with all its adverse implications is actually indicated by the budgetary sums. The fact indeed is that the budget-makers, by design or default, appear to have over-estimated revenue receipts and under-estimated expenditure of the government.

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