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UPA Will Woo Aam Admi

The Gujarat elections have certainly had an effect on the UPA Government's standing. The UPA is hence now trying to woo the common people with a number of proposed schemes and bills

After the rout of the Congress party in Gujarat, the UPA and its allies in the Left have decided to close ranks. Despite public pronouncements to the contrary, it is now reasonably certain that the Manmohan Singh government will not seek to expeditiously operationalize the nuclear agreement with the US and antagonize the Left. More significantly, the government is certain to make special efforts to woo the electorate.

As already announced, the coverage of the National Rural Employment Guarantee Act will be extended from 330 districts to the entire country.

Then, unpaid agricultural loans are likely to be written off. The government is also expected to introduce and Parliament pass the Unorganized Sector Workers' Social Security Bill that aims at providing various benefits for 94 per cent of the country's workforce, from farm hands and construction workers to hawkers and domestic helpers.

A crucial element of the bill will be to provide unorganized workers a smart card that is unique, portable and could eventually replace other forms of identification such as electoral photo identity cards and 'below poverty line' cards. Just as the NREGA was described as the only one of its kind that legally mandates 100 days of employment in a year to a family living in rural areas, the bill to provide pension, insurance and other social security benefits to unorganized workers is being described as a unique programme that has never been attempted anywhere in the world. The three initiatives outlined should cost the exchequer roughly Rs 50,000 crore, of which the one-time write-off of agricultural loans could be in the region of Rs 20,000 crore. What the Union budget would probably not account for would be the expected increase in expenditure following the government's acceptance of the recommendations of the Pay Commission for central government employees.

Even if many of these populist programmes will not exactly be favoured by an influential group of 'neo-liberal' economic ideologues in the government - led by the Prime Minister himself and including Finance Minister P Chidambaram, Deputy Chairman of the Planning Commission Montek Singh Ahluwalia and the head of the PM's Economic Advisory Council C Rangarajan - this group will not be able to resist the pressures exerted on it by the 'left' faction in the Congress.

The socialist lobby in the ruling party will successfully convince Sonia Gandhi that the only way the Congress may be able to consolidate itself in the country's highly-fragmented polity would be to espouse policies that were epitomized by Indira Gandhi's garibi hatao slogan in the early-1970s. This lobby is of the view that the incumbent regime must ensure that its economic policies can be differentiated from those followed by the BJP-led NDA government.

In certain respects, Chidambaram is better placed at present to spend like crazy and provide a sharp leftward thrust to his next budget - which will almost definitely be the last budget of the UPA government. Inflows of foreign capital (both portfolio and direct) have far exceeded expectations and tax revenues are extremely buoyant with direct tax collections (both personal and corporate) having gone up by more than 40 per cent.

So brace yourself for many hand-outs for the aam admi. And don't be surprised if general elections take place towards the end of 2008.

Paranjoy Guha Thakurta is Editor, Realpolitik, a teacher and a journalist with 30 years' experience in various media - print, radio, television, the internet and documentary film.
This column appeared in the January 2008 Issue of Mutual Fund Insight.