The exercise to prepare the annual budget in India is a long-drawn one that has to deftly juggle political pressures, conflicting demands, the economy’s priorities and utmost secrecy. For decades, the last working day of February has come to be associated with the annual budget. The budget can raise or shave money off people’s incomes. When spring flowers bloom outside, millions of Indians tuning in to the widely anticipated budget speech, huddling around television sets in homes, offices, shopping areas and even tea stalls have become a common sight every year on budget day in February. That could change, if a finance ministry plan to advance the budget’s presentation by a month to January is implemented.
On the face of it, there are sound arguments in favour of bringing ahead the budget presentation process. For one, it will give individuals and companies more time to firm up savings and tax payout plans. Though the budget is presented in February, currently several tax proposals kick in only from June after Parliament passes the annual finance bill in May. For instance, service tax was increased to 15% from 14% from June 1 this year, though the finance minister announced the change in the budget presented on February 28. Income tax changes come into force only after the finance bill is passed, but these are retroactively implemented from April 1.Besides, many times proposals announced in February are rolled back, partially or fully during the finance bill’s passage in May, because these may have been politically unpopular triggering off howls of protest. Advancing the budget would conclude the process by March allowing for the changes to roll out from the beginning of the financial year.
There are other advantages, too. Under the current system, Parliament passes the budget through a two-stage process. A vote on account is passed in March to meet necessary expenses on employees’ salaries and other costs for two to three months. The finance bill, which contains tax changes, and the demands and appropriation bill, which spells out full year expenditure details, are passed in May. This consumes a considerable amount of time on the passage of the budget, leaving fewer hours available for other legislative and reforms businesses. A January budget will open up more time for Parliament’s focussed attention on non-budget related lawmaking and debates and discussions. That said, it is absolutely essential for the government to hammer out a complete political consensus on ringing in these changes. It will involve a change in the Parliament’s annual schedule, and will require moving around plans for the winter and monsoon sessions as well. Advancing the budget to January is an idea worth examining, but not without taking every political stakeholder on board.