Model Answer
0 min readIntroduction
The Union Budget, traditionally viewed as a financial statement of income and expenditure, is fundamentally a political document. It reflects the government’s policy priorities, ideological stance, and electoral promises. As Schumpeter noted, politics is essentially about resource allocation, and the budget is the primary tool for this allocation. In a democratic setup, the budget serves not only economic purposes but also as a crucial instrument for maintaining political stability, securing popular support, and furthering the ruling party’s agenda. The recent emphasis on populist schemes and infrastructure spending exemplifies this political dimension.
Budget as a Political Instrument: Mechanisms
The budget operates as a political instrument through several key mechanisms:
1. Resource Allocation & Policy Signaling
- Targeted Spending: Governments strategically allocate funds to specific sectors or regions to appease key voter groups. For example, increased agricultural subsidies often aim to garner support from the farming community. The PM-KISAN scheme (2019) is a prime example.
- Tax Policies: Tax incentives and exemptions are used to reward politically favored groups or industries. Lowering taxes for the middle class before elections is a common tactic.
- Infrastructure Projects: Initiating large-scale infrastructure projects in politically sensitive areas can demonstrate government commitment to development and secure local support. The Bharatmala Pariyojana and Sagarmala projects are examples.
2. Legitimacy Building & Public Perception
- Fiscal Responsibility vs. Populism: The budget can be used to project an image of fiscal responsibility or, conversely, to signal a commitment to populist policies. A budget focused on deficit reduction might appeal to investors, while one prioritizing social welfare programs might resonate with the masses.
- Budget Speeches & Narrative Control: The Finance Minister’s budget speech is a powerful platform to shape public perception and justify government policies. The narrative presented influences how the budget is understood and received.
- Transparency & Accountability (or lack thereof): The level of transparency in the budgetary process can impact public trust. Opaque budgeting practices can raise concerns about corruption and favoritism.
3. Patronage & Political Consolidation
- Discretionary Funds: Members of Parliament Local Area Development Scheme (MPLADS) provides funds to MPs for local development, allowing them to directly influence projects and build a local support base.
- Public Sector Employment: Budgetary allocations for public sector employment can be used to create jobs and reward political supporters.
- Contracting & Procurement: Government contracts and procurement processes can be influenced by political considerations, favoring certain companies or individuals.
Examples of Budget as a Political Tool
Example 1: The 1991 Economic Liberalization Budget: Dr. Manmohan Singh’s 1991 budget, while primarily an economic reform measure, was also a politically calculated move to address the severe economic crisis and regain public confidence in the government.
Example 2: The 2008 Farm Loan Waiver Scheme: The UPA government’s farm loan waiver scheme, announced in the 2008-09 budget, was a politically motivated move to appease farmers ahead of the general elections. It resulted in a significant fiscal burden but secured substantial political gains.
| Political Objective | Budgetary Tool | Example |
|---|---|---|
| Secure Farmer Support | Agricultural Subsidies, Loan Waivers | PM-KISAN, 2008 Farm Loan Waiver |
| Attract Middle-Class Voters | Tax Cuts, Increased Allowances | Tax rebates in Union Budget 2023 |
| Demonstrate Development | Infrastructure Spending | Bharatmala Pariyojana |
Conclusion
In conclusion, the budget is far more than a technical exercise in financial management; it is a powerful political instrument used by governments to achieve a range of objectives, from securing electoral support to shaping public opinion and consolidating power. Understanding this political dimension is crucial for analyzing budgetary policies and their impact on society. A balance between economic prudence and political considerations is essential for ensuring that the budget serves the broader public interest and promotes sustainable development.
Answer Length
This is a comprehensive model answer for learning purposes and may exceed the word limit. In the exam, always adhere to the prescribed word count.