Is Modi securing political allies? Sitharaman responds to Budget criticism

NiftyTrader • July 29, 2024

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India’s Budget for this fiscal year remained fiscally prudent while maintaining its record capex allocation, while it made significant changes to tax structures ranging from income taxes (under the new regime) to indexation benefits, and tweaking capital gains tax and STT on F&O, which had previously rattled the stock markets.

The Budget also allocated thousands of crores to Andhra Pradesh and Bihar, the two states ruled by Chandrababu Naidu and Nitish Kumar, who are key allies for the Bharatiya Janata Party-led NDA alliance, as Prime Minister Narendra Modi returned to power for a third consecutive term, albeit with a weaker mandate because the BJP failed to secure a majority on its own.

Soon after the Budget was announced, in which Finance Minister Nirmala Sitharaman proposed giving Rs 15,000 crore to Andhra Pradesh for the development of its capital city Amaravati and allocating over Rs 60,000 crore to various projects in Bihar, the Opposition political parties rushed to criticize the Budget, calling it ‘discriminatory’.

The Modi administration did not concede to major demands like as special status for Bihar, but it made announcements to appease its friends. Congress leader Rahul Gandhi chastised the government for attempting to appease its NDA allies through the Budget. He referred to Modi’s first budget of his third term as the “Kursi Bachao” Budget. Gandhi accused the administration of making hollow promises to friends while ignoring other states.

However, Sitharaman defended it in parliament, and in an interview with ToI, she stated that the Budget is more about continuity and commitment than political gamesmanship.

“This budget is completely consistent with the interim budget; nothing has been deleted, and everything has been continued, with the addition of fresh items. When you say it’s political, you’re referring to initiatives we’ve taken on for Bihar and Andhra Pradesh. But we did it for a cause,” Sitharaman told ToI.

According to the finance minister, the budget contains initiatives to build barrages to alleviate floods, which address long-standing challenges rather than pursuing political rewards.

When questioned if the interim budget might have been more politically favorable, Sitharaman said she couldn’t say since she views it as a reflection of the government’s efforts. According to her, the interim budget was a realistic document that ensured government operations ran smoothly and addressed expenditures until the new administration came over.

“In a public position, who is accountable to taxpayers, you have to be clear that collecting tax from someone and paying it to someone else, no matter how deserving that person is, should be sustainable,” Sitharaman said, adding that there must be a balance between political pragmatism and fiscal responsibility.