Budget Blues And Booms
February 01— few fixed dates in the calendar have as much importance to businessfolk as this one. For the last few years, this is Budget Day (supplanting the earlier “last day of February”), awaited with both expectation and trepidation. It is the day on which the government presents the equivalent of the country’s annual accounts, along with economic and taxation policies, and an unveiling of new initiatives.
Millions in the country, as also thousands of investors and analysts abroad, keenly listen to the Finance Minister’s speech to unravel what the year may hold for them: for many personally, and to others for their company or business. As a result, the live telecast draws a large audience – not quite as much as a T20 cricket match, but more than a usual news programme.
The FM’s speech is traditionally interspersed with a generous number of quotes from different sources, demonstrating his/her erudition. Because of these embellishments, the speech provides greater insight into the persona of the FM than it does about the true state of the country’s finances! Economics is often referred to as the “dismal science”; to lighten the gloom – also, to celebrate good times when the economy is booming – all FMs turn to poetry, and whom and what they quote reveals much about them.
The poets and the original languages are as diverse as our society (may it stay so; no, “one country, one culture/language”) and also include foreign poets (resonating with “vasudhaiva kutumbakam”).
Amongst the sources are Tagore, Manzoor Hashmi, Chanakya and the Mahabharat (Nirmala Sitharaman); Vivekananda and Thiruvalluvar (P. Chidambaram); Shakespeare and Kautilya (Pranab Mukherjee); Victor Hugo and Allama Iqbal (Manmohan Singh). The last also threw in a brief bit of personal history, providing a rare glimpse into his personal life.
Those who may be affected listen with rapt attention, though it is often a lesson in patience. In this, our present FM is a tough teacher: in 2019, she broke all past records with a speech of two hours and 17 minutes, surpassing this in the very next year with one that lasted 162 minutes.
She proved her fortitude by doing this when visibly unwell and had to leave a couple of pages unread. Manmohan Singh’s historic “reform budget” speech in 1991 which began with the ringing declaration that “we shall prevail, we shall overcome”, was a record 18,650 words! Since every word matters, one has deep appreciation – and sympathy – for the writer, orator and millions of readers.
Despite (or because of?) their length, the Budget speeches and documents make sure that one is lost counting trees and misses the forest. There are innumerable details of small tweaks in duties, levies, taxes, and surcharges. Inevitably, barring experts, others have to wait for a detailed analysis which takes into account all the fine print and unstated points.
With much else – in government, industry, and elsewhere – transforming into crisp power-point presentations, why can’t the budget follow suit and present all the key features in 30 well-illustrated slides, supplemented with a commentary by the FM? Why not a far sharper focus on clearly defined outcomes that the budget targets, with clear responsibilities and the achievements of the past year?
Outcomes must include economic growth, but also job creation, equity (Gini coefficient may be a good measure), health, education and other social indices (housing, sanitation, power and water supply). It must include data – qualitative and quantitative – on changes in capital assets, including infrastructure, and human and natural capital (soil health/degradation; water table; forest cover; air quality; river, lake and sea pollution).
In a sense, the Budget must cover both the flows and the stock in the economy (akin to an Income & Expenditure Statement and a Balance Sheet), with assigned responsibilities for meeting goals. A good start is inflation: there is a defined target (within the range of two to six per cent) and responsibility (RBI). Having failed to keep inflation within the upper bound in the last nine months, the RBI is required to give the government the reasons.
In a similar manner, can the Budget be a time for the government to report to the people why it failed to meet the set targets? Not only will this be an example of transparent and accountable governance (TAG, in keeping with the fashion of acronyms, though the names now must be in Hindi), but will lead to outcome-based allocations. In this, it is vital that the outcomes cover key areas, some of which were noted above, rather than the present focus on narrowly defined macroeconomic measures like GDP, fiscal deficit, and inflation.
Important factors that affect people are ignored. Though the economy is said to be doing well in comparison with the rest of the world, one analysis shows growth slowed to about 2.5 per cent per year from 2019, as compared with about five per cent pre-pandemic, placing us amongst the slowest to bounce back within large economies.
Despite the growth, expected to be a healthy seven per cent this year, there are deep concerns that the Budget should address. The first is jobs and livelihoods. Measures like the labour force participation rate point to a crisis, particularly for women. One indicator is the demand for work under MGNREGA, which has increased from 16.4 million in 2015 to 30.7 million in 2021.
After the amazing performance in the decade from 2005 (271 million pulled out of multi-dimensional poverty), this is a clear regression. Those above this level too are badly hit: for example, domestic two-wheeler sales are back to the 2013 level, having declined by 36 per cent since 2018-19. Clearly, growth is being both driven by and benefitting primarily the rich (evidenced by the robust demand for luxury cars), exacerbating the rich-poor chasm.
Will the budget address this growing and worrisome inequity? More importantly, will it re-examine the model of development that promotes this? Will it outline policies and spell out targets on poverty reduction, equity, job creation, health, education, and environmental sustainability? Will February 1 mean budget blues or a boom of blossoming buds?
