Preparing the annual budget has always been like a tightrope walk for the finance minister of a vast country like India.
The financial task is not merely an exercise in making a spending plan for each ministry, but is also often used to earn political brownie points by offering sops to a particular section of Indian society. As the experience of the past has shown, economy and politics are never the best of mates, so to force them to see the other’s point of view does test the mettle of even the most astute finance minister.
This is also the reason why the weeks before the presentation of the budget are a period of furious activity – when heads of various ministries, trade bodies, industry associations, fiscal and sector experts all make a beeline to the finance minister’s office with suggestions, recommendations or demands on how best he could “help” a particular industry.
It is hoped that the minister and his “fin min” colleagues will keep those “wish lists” in mind while drawing up the government’s fiscal blueprint.
With the budget scheduled for July 10 this year, India’s new Steel and Mines Minister, Narendra Singh Tomar, finds himself in the proverbial Catch-22.
As he prepares his ministry’s proposals for the benefit of the finance minister, he needs to strike a balance between the demands of the steel industry and those of the iron ore miners. Why? Because the steel mills do not want the government to remove the 30 percent export duty on iron ore, but the miners want the tax gone.
Tomar needs to tread carefully. Not only does what he recommends need to make economic and financial sense, it must not tick off either of the two lobbies. One issue relates to mining, the other, to steel. In the previous governments, such a conflict never arose since both were separate ministries handled by different ministers. Today, in the new Bharatiya Janata Party (BJP) Government, while the ministries continue to remain separate, there’s one minister in charge of both, so therein lies the rub…
The author, Sohrab Darabshaw, contributes an Indian perspective on industrial metals markets to MetalMiner.