Is the Union Budget really relevant anymore? Is it merely a TV event that overpowers the mind space and consciousness of the nation like before? On both counts the halo over the Indian budget is slowly but surely wearing off. The last vestiges of this veneer came off last year when Finance Minister P Chidambaram presented one of the most tepid middle-of-the-road budgets, with nothing for anybody.
Even so, the common man wallowing in a trough of ‘mehangai’ can only expect some respite if there is a tinkering in the personal taxation rates. Otherwise, it doesn't matter. The budget document has thus become more of a ‘State of the Union’ address that dictates the financial roadmap for the coming year, mapping out key expenditure figures. Does the budget then matter to the capital markets? Well, yes, if there is a reduction in corporate tax or higher levies are charged for transactions in the stock markets. Then the reaction will be adverse. Remember the securities transaction tax and how it spooked the markets a couple of years ago. This time round, the budget perhaps assumes a little more significance than the last few presentations thanks to it being an ‘election year’ budget. So, it will be high on populism and will dole out sops in large measures for the underprivileged. The thrust will clearly be on the social and farm sectors.
But then there is another question that begs an answer: is the budget so high on hype and hoopla now because it is being stoked furiously by a hungry media? Is it devoid of substance and basic policy imperatives? The media, always feeding on scraps of news, seem to go overboard on something like the annual budgetary exercise. Non-events like last year’s budget still saw a media overkill.
Over the last decade or so, we have more often than not see policy announcements of great import being made outside the purview of the budget, which is how it should be. The NDA actually managed to take the big ballyhoo out of it by making big ticket announcements related to freeing capital controls at the annual Pravasi Bharatiya Diwas some years ago. In fact, reforms and policy execution should be a year-round exercise. In this context, the RBI has stuck to the knitting by closely monitoring the external and internal environment dynamics on a pragmatic quarterly basis through policy ripostes. Its job of checking inflation, exchange control, cooling the overheating realty market and interest rate management has largely been responsible for any major imbalances creeping into the system. Against this backdrop, the Budget should remain a document that computes the government's income and expenditure streams, say like a balance sheet. And the present government, buoyed by burgeoning tax collections, may attempt to pass on relief packages to the underprivileged this time round.
The basic problem in Indian budget-making is that schemes, schemes and more schemes are proposed. But these schemes don’t come with an expiry date. Nowhere does the hoi polloi get a fix on where the money is going. Delivery systems and a mechanism need to be in-built into all these large corpus schemes. Most importantly an audit mechanism is critical for the well-being of the people.
The recent indictment by the Comptroller and Auditor General (CAG) of the National Rural Employment Guarantee Scheme, the problems with disbursal of the Sarva Shiksha Abhiyan and the delay in the roll-out of the National Highway Development Programme are just three cases in point. If sadak, bijli, pani and education are the four-pronged lifelines of the ‘inclusive growth’ mantra of the UPA, then what are the milestones that one has reached? After all, the Right to Information Act arms the common man with the right to know where the taxpayers money is going.
The Prime Minister has time and again harped on the slippages and leakages in the system. He has also criticised the corruption and fraud in implementations. Let reform continue ceaselessly, and let us not go overboard on February 29 as if a climactic event is upon us. We need to remember that the government's highest executive decision-making arm, the Union Cabinet meets every Thursday to take vital economic and other decisions. Let this be the practice. Let us focus on implementation of high-faulting schemes. Let us put a stringent audit system in place. The red bag that the FM carries up the Parliament steps doesn’t have hand grenades in it. It is just a document that mirrors the nation's financial health.
Which brings us to the delicate subject of how to figure out a way to track the actual rupee that flows out of the Budget speech and probably doesn’t reach its target audience. One requires an audit body to decipher where the disbursed rupee is headed. The journey of the Budget is yet another imponderable in the Indian context. It has to be passed by both Houses, take the form and shape of legislation before it sees the light of day and comes to actual disbursal. This process alone takes six months or so at times. And before one can say ‘bijli, sadak paani’, one finds that wish-lists are out all over again; media speculation is back at a fever pitch, and the same old all-pervasive frenzy seizes almost everyone.
Although it must be said that the man on the street seems to have matured over the last few years. His take is simple. Will he get a bigger bang for the buck is all that he is concerned with. He is increasingly wary of the Budget and often holds a detached view. That is till someone springs a surprise on him in the Budget itself. Holding the price line is uppermost in the minds of our policy tsars. But the harsh reality of spiking oil and food prices at a fearful pace is disconcerting for the common man. The wholesale price index and the consumer price index tell you only part of the story. These are numbers that emanate out of government every Friday. The bullets that consumers have to dodge while buying their meat and vegetables tell you the whole truth — that the rupee is shrinking, and how.
Prices remain at the core of our being. And the Budget doesn’t address that. It only accentuates it in different ways. It could be by levying service tax on a new set of services. Or by raising the rate from 8 to 12 per cent and then slapping a 1 per cent surcharge. It could be by a securities transaction tax after removing long term capital gains tax on equities. Or by the withdrawal of
RBI tax free bonds or by tax on cash withdrawal of over Rs 25,000 per day from current accounts. Or by the dreaded fringe benefit tax to bring a number of perks under the tax net. Or by yet another cess in the form of a 2 per cent education cess levied on all taxes, subsequently increased to 3 per cent. Or by the removal of tax exemption on interest income of up to Rs 10,000.
All this and more only puts the common man under the cosh. Expect a catalogue of relief packages for the education, social and agriculture sectors. Should one expect more creeping taxes? Unlikely in an ‘election year’. To pump prime the consumer goods sector reeling due to a high interest rate regime, there may be a duty cut. To rationalise duties, a similar excise cut on crude oil. But otherwise the budget will attempt to reach out to the aam aadmi in vast tracts of Hindustan’s rural hinterland, who in any case is oblivious to the budget. Budget 2008 will remain a media carnival replete with filibustering.
Sandeep Bamzai is an author and business analyst