One last time, with feeling, Pranab-babu
Before going on to what the budget should be, it is worth asking why we have the annual hoopla. I’m not referring to the importance of the budget. Omkar Goswami writes.india Updated: Feb 26, 2011 23:24 IST
Around 11 am, Pranab Mukherjee will present the third consecutive Union budget in his present avatar, and the sixth in his long career. He knows the business of being a finance minister. From the looks of it, Pranab-babu knows all that is needed of governing a shaky coalition — dousing many fires, interpreting subtle semiotics of the High Command, mollifying an angry opposition, whipping and cajoling recalcitrant allies, chairing scores of Group of Ministers meetings. You name it, Pranab-babu is there. The budget is just one task, and the least of his worries.
Before going on to what the budget should be, it is worth asking why we have the annual hoopla. I’m not referring to the importance of the budget. It is a key task of the government to present the fiscal scorecard of the year that will soon have passed, expenditures that it seeks to make, taxes that it expects to garner and policies that it wishes to implement in the year to come. I am referring to the making of a great media event, to which I plead mea culpa by writing such columns and happily baring my mug on the idiot box.
It is not as if budgets were devoid of any public and media interest in the rest of the world. I remember the 1970s and early 1980s in Britain, when people would huddle near the television to hear Denis Healy and Geoffrey Howe sipping gin and tonic and delivering their long-winded speeches; with moans, groans and expletives for every tax hike on fags and the pint, and every cut in National Health budget.
Soon enough, the drama of the British budget came to an end. Today, it is routine business, not a media circus. The budget is presented sometime between March and April, this year’s being on March 23. The typical budget speech takes between 50 minutes and an hour; there is no TV overload unless the chancellor of the exchequer introduces key reforms or taxes; and barring the next day’s Financial Times and some pontificating stuff in The Economist, the event is devoid of hard publicity and hype. It is business to be done, and thus, done.
So too in the United States. I can’t remember when the annual budget of the federal government was a issue of a week-long televised orgy. Typically, the president submits his annual budget request to the Congress on the first Monday of February. The House and Senate Appropriations Committees then draft the regular appropriations bills that determine spending for various federal programmes. The bills — often combined into an omnibus bill — must pass both the House and Senate and then be signed by the president to give federal agencies the authority to spend. Again, totally workmanlike, and usually devoid of top-of-the-pops publicity.
One day, we too shall grow up. To treat the budget as an important annual act of financial and fiscal governance, and not an occasion for excessive drama. I hope it comes sooner than we think, for it will be a sign of our growing up. In the meanwhile, where does Pranab-babu stand? In a damn good place, despite all the red-faced embarrassments that the government has faced in recent times.
Thanks to an expected gross domestic product (GDP) growth of 8.6% real plus 7.5% inflation, or over 16% in nominal terms, and healthy tax collections, the government’s fiscal deficit for 2010-11 will be more like 5% of GDP, versus the budget estimate of 5.5%. He has had a great run on tax revenue: customs is up by over 60%; excise by almost 30%; and overall tax revenue by almost 25%. And we are looking at a GDP growth of between 8.5% to 9% next year. Despite the recent hiccup in manufacturing growth, the buoyancy is self-evident.
Which is why Pranab-babu must be bold. I would like to see him reel in most of the concessions that he had so generously offered during the global crisis.
I would like him to make credible sounds about restraining spending, especially on useless projects where monies are promised but never spent.
I would want him to begin the process of implementing a common goods and services tax (GST), start a time-bound roll-out, and ignore the BJP-ruled states, if these choose to be obdurate.
I would like him to re-start a languished reforms programme: give a clear date for increasing foreign direct investment (FDI) in insurance; start the process of FDI in retail; begin four to five pilot projects on cash transfers to the poor which makes more economic sense than anything that we do right now; and implement some key provisions of the proposed direct tax code, and so set the stage for a more comprehensive rollout in 2012-13.
It is Pranab-babu’s last chance to prove his mettle as a reformer. For one, the last two years of any government is the time for fiscal populism, based on a fond hope that sops win elections. This government won’t be different, and Pranab-babu will have to pipe the tune. This, therefore, is his real opportunity to clean up the clutter, and present a budget that is both fiscally honest and reformist in intent. For another, he won’t get a batting pitch so favourable to score an effortless century: one of the best growth rates in the world; entrepreneurial drive second to none; and a general sense that India deserves its place in the sun. It is time to press the reform button, and regain the high ground lost to apathy and corruption.
The big question is ‘Will he?’ Is Pranab Mukherjee a reformer? Or is he a ploughman? Adroit, aware of how the bread is buttered, but a ploughman nevertheless? That’s for you to tell at 1 pm tomorrow.
Omkar Goswami is is an economist and chairman, CERG Advisory The views expressed by the author are personal