The Hindu Business Line : Budget ritual revisited

The ANNUAL BUDGET EXERCISE of the Union Government is meant to be just an income statement and a plan. But this obvious act is being paraded before us as a favour that will soon be granted to us as an outcome budget!

Hype continues: Senior members of CII Karnataka watching the Union Budget on a big screen at a star hotel in Bangalore.

If you have a maid working for you at home, have you thought through how she runs her budget? Follow me for a while. Let's say you pay her a thousand rupees a month. Obviously, this is supplementary to her husband's wage as a bricklayer or whatever. Yet, soon after settling down to your employment, she comes to you with a request for a month's advance wages for some emergency expenses. She then suggests that you defer deducting it from her salary till, say, Diwali and she carries on this way, spending a bit more than what she earns every month, so she asks for a salary advance every so often.

Soon she has to borrow from you to keep the home fires burning because the loans have already been spent. The date for an advance on the current month's wage advances from the last week, steadily, until one month she finds herself so overdrawn that she has to appeal to your compassion to keep a cash flow going even on the first of the month. Well, come festival time you don't have the heart to give her nothing in cash and offset the entire loan, so she continues the same way until the day comes when she either leaves you for good or you, seeing her work, and being dependent on her, decide to write off a couple of months' salary. But some put their foot down and insist on getting the advance back, in which case the poor wage earner pledges something to take another loan big enough to pay you off - and then earns a wage only to pay her interest, to the `unofficial banker'. The Government has been running more or less along the same lines for some decades now.

Huge debts

This year, for instance, if you looked closely at the numbers you will find that we as a nation owe an interest payment of over Rs 1,20,000 crore — and the government's annual borrowing is about the same amount! This situation hasn't improved appreciably and no one's complaining. They are too busy with the details of this deduction and that allowance, and amazingly no one questions the fact that the gap between the revenue receipts and the expenditure is no longer expressed in terms of the revenue but the GDP! It is almost as if the government owned the entire country's income. All it has really at its disposal is the annual revenues and that shows only marginal, although welcome, increases, after a long break. Since the breakthrough budgets of the 1990s there has been no reason to expect anything earth shattering from every year's Budget because the course had clearly been set for the government to hand back the reins of business to businessmen and play mainly the facilitator and regulator or referee.

Meanwhile, substantive elements of the government's finances are dealt with outside the budget. Food subsidy, ever a sacred cow, was dealt with separately, so was the fertiliser price, and the price of fuel, kerosene, LPG and so on. Taken together, defence, interest payments, cost of the bloated bureaucracy and subsidies account for a huge chunk of the expenditure budget. With none of them under check, there is no way fiscal prudence is going to become the norm in the government.

Railways on its own track

The Railways, another mammoth deficit producer has its own budget anyway. Defence, which is among the three or four main reasons for our huge indebtedness, is naturally an untouchable. What it had going for it was the fact that some of the numbers were for the first time in its favour. A real growth of 8 per cent a year would translate as a per capita nominal rupee income growth (on average of course) of over 40 per cent in a three-year period; that must leave a lot of people feeling relatively better off in a fairly short period of time, something which has never happened in India before.

However, in the days when the government used to own the economy so to speak, people used to wait with bated breath on the evening of the 28th February every year, to check where the axe fell on their industry or product category, by way of additional levies, and where they would get some driblets of concessions to offset against the income.

Stockbrokers busy trading in Mumbai during the Budget presentation.

Cosmetic tinkering

The tax payer, the economist, the journalist and the political analyst have long ago conceded that much of this was a self-defeating exercise in futility with changes being rung annually by way of cosmetic tinkering, rather like moving pieces around in a stalemated game. Some items went up in price instantly, leading to some anticipatory stocking up, certainly by the moneyed wholesalers and sometimes even the consumer. It was also fashionable to take a perverse pleasure in drawing guffaws from the members during the finance minister's speech, by referring to the usual `sin taxes' on cigarettes (but not beedies, please note, which rightfully belong to the weaker sections) and booze, also called by the incongruous name of Indian Made Foreign Liquor, or IMFL. There were all sorts of fun and games played between the industry and the ministry showing who were the smart alecs, with the basis for the tax being chopped and changed - length of the cigarette, proof of the alcohol, the definition of what amounts to manufacture for excise purposes, and other minutiae — once again proving the delight of the legal profession.

What is surprising is the hoopla that continues to surround the Budget year after year, even among the better-informed. Here are the facts: The annual budget exercise of the Union Government is meant to be just an income statement and a plan, with a survey of the economy to precede it. It must of course become a place and time for performance evaluation of the government - but this obvious act is being paraded before us as a favour that will soon be granted to us as an outcome budget!

It is time we relegated the annual budget to the same status as the annual feature of seeing politicians throwing coloured water on one another on Holi or supping at sundown Iftar parties! Moments for traditional fellowship and ritualism no doubt, but little else of consequence.