Devangshu Datta: Balancing act

BEATING THE STREET

For the sake of our collective sanities, let us assume that Dr Manmohan Singh will manage to allocate key portfolios without too much in the way of heartburning and infighting amongst the Congress' allies. The next week or two will see him involved in that delicate task.

He does have numbers in his favour. Between the Congress and the Left, the UPA is almost assured of a majority and the Left doesn't want any portfolios.

There is not much chance of the NDA cobbling together a majority in case the UPA does break up on the issue of division of the spoils.

Mulayam and Mayawati are standing in line to replace any members of the UPA who might decide to walk. So, while we can expect plenty of hard bargaining and brinkmanship, the Congress starts this exercise of allocation from a position of strength.

Once portfolio allocation is over, the fun will really start. In case you've forgotten, government finances are now running on borrowed time.

The new government will be under pressure to present a "proper" Budget for 2004-05 as soon as it possibly can. That, of course, is Dr Singh's area of core competence and even if the Finance Portfolio is allocated to somebody else, he's likely to draft the first Budget.

Budgets are always political documents. Usually they consist of large quantities of waffle along with the Finance Bill. But this year's document will provoke plenty of analysis between the lines since it will be a definitive political statement for the new alliance.

Common Minimum Programmes are all very well in terms of rhetoric but the Budget puts money where the government's mouth is. So it will be preceded by frantic lobbying from the Left as well as other members of the alliance as well as various industry groups and other vested interests.

Dr Singh will have to tread carefully through several minefields in an effort to somehow produce a Budget that keeps his allies happy while also maintaining fiscal prudence and trying to offer the promise of growth alongside higher employment.

How deftly he tackles all the variables will be a litmus test of his government's stability. Between 1991-93, he faced even bigger odds in some senses.

The economic was in crisis with the government dangerously close to default in its external obligations and growth almost stagnant during the early stages of the new Economic Programme.

Right now, the economy is fairly healthy. In the strictly economic sense, Dr Singh's task is much less onerous than it was between 1991-1994. However the politicial pressures on him are likely to be higher precisely because finances are healthier than they were in 1991.

Given that energy price increases are likely to be imposed long before the Budget is presented, it will be politically difficult for the new government to impose much in the way of new taxes.

At the same time, Dr Singh will be under pressure to hand out all sops to all and sundry. Plus, he won't have the luxury of balancing accounts by way of PSU sell-offs. Nor can he hope for massive inflows on the portfolio acount. So, where does he go?