In fact: How dynamics of PM-FM relations impact Budgetshttps://indianexpress.com/article/explained/in-fact-how-dynamics-of-pm-fm-relations-impact-budgets-4491735/

In fact: How dynamics of PM-FM relations impact Budgets

On Budget day, February 28, 2003, Singh said that despite grave uncertainties on the oil front, the government had by and large absorbed the rise in crude prices.

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Another story about the interaction between the Prime Minister and Finance Minister ahead of the Budget is from Manmohan Singh’s famous July 24, 1991 Budget.

Before Budget 2003-04, Finance Minister Jaswant Singh was holding discussions with Prime Minister Atal Bihari Vajpayee and senior officials. There was one proposal that was politically sensitive — but which the Finance Ministry felt the government must bite the bullet on: raising fertiliser prices. Some were worried about a political backlash, and feared the proposal’s fate in Parliament. But the Minister, according to officials associated with the exercise, reckoned that the party had the numbers to carry the day.

On Budget day, February 28, 2003, Singh said that despite grave uncertainties on the oil front, the government had by and large absorbed the rise in crude prices. But given the likely increase in naphtha and gas feedstock prices, at least the fertiliser subsidy had to be contained. He then announced that the issue price of fertilisers would be increased by Rs 12 for urea and Rs 10 for Di-Ammonium Phosphate (DAP) for each 50-kg bag — translating into a Rs 700 crore cut in the subsidy bill.

As soon as Singh made his announcement, there was a huge uproar cutting across party lines. The BJP’s own party chief joined the protests. The ruckus forced the government to review the proposal. A few days later, during the debate on the proposals, Singh told lawmakers that he had told the Prime Minister that he (Singh) was being described as rigid and iconoclastic for taking a justifiable position on raising fertiliser prices. Vajpayee, Singh told MPs, had responded by advising him to “ask his conscience”. That request to reconsider the proposal was enough for Singh to withdraw it — he said that if lawmakers were not in favour of an increase in fertiliser prices, then “so be it”. It is another matter that officials were later scolded for their bad advice!

Another story about the interaction between the Prime Minister and Finance Minister ahead of the Budget is from Manmohan Singh’s famous July 24, 1991 Budget. At the fag end of the Budget preparations, discussions were on in a small core group on the government contribution to the Rajiv Gandhi Foundation. After a modest amount was proposed initially, Prime Minister P V Narasimha Rao apparently nudged his Finance Minister to raise it to Rs 100 crore. Singh later got some flak for it — with many judging him by his opening sentence, in which he said he was overpowered by loneliness, missing the “handsome, smiling face” of Rajiv Gandhi listening intently to the Budget.

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Earlier that year, the Chandra Shekhar government, which was in office for only a few months, had started Budget preparations even while battling a huge balance of payments crisis, and amid talks with the International Monetary Fund for assistance. A framework was in place, and the expenditure budget, which is the first document to be readied, had been printed at the government press at the Finance Ministry. It had to be pulled back as the Congress, on whose support the government was surviving, pulled the plug alleging that the Haryana Police was spying on Rajiv Gandhi.

In the early years of the National Democratic Alliance government, Prime Minister Vajpayee suggested during Budget discussions that broad principles on taxation ought to be followed — prompting his Finance Minister, Yashwant Sinha, to later say that he (Sinha) was denying himself the ability to make arbitrary changes. Indeed, most Prime Ministers have been concerned about the inflationary impact of Budget proposals.

In 1997, when the United Front government was in office, some of the meetings between the Prime Minister’s Office and the Finance Minister and his team used to fairly brief. When Finance Minister P Chidambaram mentioned the radical proposal to go for three tax rates — 10%, 20% and 30% — Prime Minister H D Deve Gowda just said, “Let’s do it. Don’t (be) afraid!”

In 2007-08, when the UPA was in power, came a political proposal for a farm loan waiver scheme. It didn’t quite originate from North Block, but had to be implemented given the importance of the National Advisory Council (NAC) headed by Congress president Sonia Gandhi.

In 2015, with pressure on spending to revive the economy, the Ministry outlined to Prime Minister Narendra Modi the potential impact of breaching the deficit and spending more, and of holding back, leaving the choice to him. The PM opted to be conservative.