Budget politics: The Rajiv Gandhi effect

Last Updated: Mon, Jan 28, 2019 11:11 hrs
Rajiv Gandhi

Twenty years ago, a Union Budget was sacrificed at the altar of Congress politics.

Until almost the third week of February 1991, Yashwant Sinha, finance minister at that time, was busy finalising the Budget for 1991-92 to present it before Parliament on the last day of that month. Little did Mr Sinha or his finance secretary, Sriranga Purushottam Shukla, know then that Congress President Rajiv Gandhi, the main opposition leader then, was planning to pull down the Chandra Shekhar government.

Indeed, few in the finance ministry those days gave credence to the rumours of such a Congress move. How could the Congress withdraw support to the Chandra Shekhar government just before the Budget and that too in a year when the economy was in deep trouble? 

Setting at rest such doubts, Rajiv Gandhi did just that. The reason: The Congress was eager to pull down a government that it had propped up barely three months ago, so that it could go for elections in the hope of regaining power at the Centre.

That the economy was in a shambles and delaying a Budget would cause greater economic uncertainty did not deter Rajiv Gandhi or the Congress from pursuing power politics.

Thus, Rajiv Gandhi used an apparently silly reason (a few police men were seen outside his residence allegedly sent there to spy on him!) and withdrew the Congress support to the Chandra Shekhar government. A government that had lost its majority could not present a full Budget.

Mr Sinha abandoned his original plan and began work afresh to present an Interim Budget. Not surprisingly, India's economic crisis worsened as a result of the delay in the presentation of the Budget.

Today, twenty years later, nobody is talking about sacrificing a Union Budget, though the Bharatiya Janata Party (BJP) is keen on disrupting the forthcoming Budget session of Parliament. Whatever be the nature of disruption during the Budget session, it is unlikely that the Budget would be a casualty. 

Moreover, the BJP is in no position to pull down the government as the Congress and its alliance partners have a comfortable majority in the Lok Sabha, whose approval of the Budget is critical. The BJP recognises this. Thus, there may not be a discussion on the provisions of the Budget, but in all likelihood, the BJP would let the Budget go through and then resume its disruptive protests.

The point you should not miss is that political parties in India today are reluctant to take any step that directly affects the presentation and passing of the Budget.

This is perhaps the most significant lesson that Rajiv Gandhi's scuttling of the Budget in 1991 has taught Indian politicians. You can play any number of political games, but none of them should stop the ruling party from completing the Budget exercise.

Thus, in the last twenty years, Rajiv Gandhi's move to scuttle a Union Budget remains the only such instance. Indeed, there has been no other similar instance in post-Independent India.

In 1997, the Congress under Sitaram Kesri came close to achieving Rajiv Gandhi's dubious feat of 1991.

The United Front government under HD Deve Gowda had presented its Budget for 1997-98 in the normal course - on the last day of February. However, Mr Kesri, who was the Congress president at that time, decided to pull down the government, unless the United Front changed its leadership.

A compromise formula was worked out, with Mr Deve Gowda stepping down and Inder Gujral becoming the new prime minister. The Gujral government retained P Chidambaram as the finance minister in the new Council of Ministers. Fortunately, the Budget that Mr Chidambaram had presented as part of the Deve Gowda government was retained by the Gujral government and Parliament did not make any noise before clearing it.

In 1999, a bigger crisis took place. The Vajpayee government fell in 1999 after its finance minister had presented the Budget for 1999-2000.

In the normal course, the Budget too should have been allowed to lapse after passing a vote-on-account for enabling government expenditure for a few more months until a new government was in place after the elections. However, the political parties had become wise by then.

They all decided that the Budget presented by the government would be passed and then the Lok Sabha would be dissolved. In other words, they all agreed to get the Budget out of the way before resuming their game of politics. You may describe this either as the maturing of the Indian political parties or the Rajiv Gandhi effect.

Purists may also find flaws in the opportunism that political parties have begun showing by passing a Budget of a government in whom Parliament has already lost confidence. Perhaps, this is also a reflection of the gradually declining importance of the Union budgets.

With tax rates becoming more or less stable and the focus increasingly on how the government spends the money, particularly on social sector schemes, political parties find fewer substantive Budget-related issues over which they can quarrel with the government.

If Pranab Mukherjee's Budget for 2011-12 goes off smoothly, in spite of an adverse political climate, the real credit should not go to the managers of the Congress, but to the Indian politicians' reluctance to jettison a Union Budget and refusal to take the kind of blame that Rajiv Gandhi took in 1991.

Disclaimer: This story was originally published on 04:53 hours, Feb 9 2011. This is a part of our budget archives.