Logo

Logo

Budget bucket list

Union Budget 2018 is being put together under obsessive security. After being fed halwa by the Finance Minister, junior officers…

Budget bucket list

Union budget presentation

Union Budget 2018 is being put together under obsessive security. After being fed halwa by the Finance Minister, junior officers of the Finance Ministry are set to be sequestered in the cavernous interiors of North Block… lest the smallest detail of the Budget is known to the public before the document is presented in Parliament. Pressure groups are hurriedly making rounds of top officials pleading for one change or the other. Pink papers are busy speculating on the outline of the Budget. Chief Ministers, as much at sea about the contents of the Budget as the next man, are petitioning the Finance Minister to safeguard the interests of their respective states.

Does the run-up to the Budget have to be like this? The near fanatical secrecy associated with the Budget is a colonial relic which was necessary because at that time the ultimate control over colonial finances was exercised by London. Budget secrecy, as a concept, has already been discarded by former colonies like Canada. Probably, moving with the times, our Government should publish a SWOT (strengths, weaknesses, opportunities and threats) analysis of the economy prior to the Budget and engage in a dialogue with the public about the thrust areas of the Budget.

The Economic Survey is meant for this very purpose but again respecting tradition, it is published only a day before the Budget leaving no time for public discussion. Even otherwise the Government hardly heeds the advice contained in the Economic Survey. For example, the principal advice of the Survey of 2014-15 was that the Government should not go in for Big Bang reforms but adopt “persistent, creative and encompassing incrementalism” as the guiding principles for prospective action. The Economic Survey of 2015-16, reiterated this advice and went on to add that:

Advertisement

“1.2 This year’s Survey comes against the background of an unusually volatile external environment with significant risks of weaker global activity and non-trivial risks of extreme events. Fortifying the Indian economy against possible spillovers is consequently one obvious necessity. Another necessity is a recalibration of expectations.”

However, the leitmotif of the Government appears to be quantum change and heightened expectations. This is manifest in such game-changing steps as demonetisation and the promise to double farm incomes over the next five years. The inherent divergence in the basic approach between the Union Budget and the Economic Survey is intriguing because the same set of people crafts both the Union Budget and the Economic Survey.

The Economic Survey 2015-16 listed the following priorities for the Government:
a) Exit policy for business;
b) Revamp of health and education sectors;
c) Sprucing up of the delivery of essential services;
d) Modernisation of agriculture;
e) Pruning of incentives, subsidies and increasing consumption;
f) Taking effective measures for climate control;

Except for passing the Bankruptcy law, not much has been done to address these priorities ~ either in the Union Budget 2016 or the current budget or even otherwise. Such disdain for the Economic Survey, which is drafted by the Government’s own economists, is inexplicable.

Another feature of the Budget, which can be done away with, is the misleading statistics and tall promises. For example, Budget 2017 presented in the wake of demonetisation claimed growth of 7.3 per cent in the demonetisation period, which was against the general perception and which has now been scaled down to 7 per cent. Budget 2017 quoted figures of foreign investment only up to October 2016, without mentioning the outflow of capital in November and December. So far as promises are concerned, from budget to budget the country always seems to be on the cusp of an economic revolution… which unfortunately always eludes us.

Over the years, the Budget has ceased to be merely a laundry list of the Government’s income and expenditure. Many significant policy initiatives that have nothing to do with finance are announced in the Budget. In 2017, it had a number of diverse non-monetary legislative provisions like abolishing some tribunals and amalgamating others, which should not have found place in a money bill. This exercise may have been undertaken to carry through legislation which would otherwise have been difficult given the composition of the Rajya Sabha at that time. Perhaps with the change in circumstances, the Finance Bill 2018 would limit itself to purely financial topics.

If one dispassionately analyses the Finance Bill 2017, which runs into 85 pages and has 150 clauses, one would find that most of the legislative provisions merely tweak existing provisions achieving nothing substantial but managing to complicate matters. Some amending provisions affected very few tax-payers; some others were inserted to overrule judicial decisions against the Government. If we take note of the fact that 90 per cent of the income-tax collection comes only from 8,000 (of the total 5 crore and odd) taxpayers, such provisions only add to the length of the Finance Bill contributing little to revenue collection. The cause of revenue collection would definitely be better served if the cases of these top 8,000 taxpayers are handled in a better manner.

Then we have innumerable schemes in the budget. Each Budget adds some welfare schemes, continues some earlier schemes, renames some inconveniently named schemes and abandons a few schemes. This is not a minor item in the Budget; the current Budget is funding about 100 major schemes in a sum of Rs 6.75 lakh crore ~ more than a third of the entire budget expenditure.

Despite the Economic Survey warning against introduction of new schemes, each budget adds to the existing schemes. Hopefully, Budget 2018 would not add or change existing schemes but would instead focus on an audit of the existing ones. The foremost priority of Budget 2018 should be to jettison the “top down” approach of earlier budgets and opt for a “bottom-up” approach.

This would mean that instead of formulating all schemes and plans in North Block, plans with identifiable outputs and a working blueprint would be prepared for each village or block with inputs from the affected people. Such plans would be aggregated to district level, state level and then national level with each level taking responsibility for implementation of the proposed plan. In a departure from current practice, instead of expenditure the outcome at each level would be closely monitored.

Afterwards, State budgets should dovetail with the Union Budget so that expenditure could be more focussed. Presently, money for Centrally Sponsored Schemes is provided by the Centre, but implementation is left to the State bureaucracy (over whom the Centre has little direct control) leading to leakages and poor implementation. Dovetailing of Central and State budgets would obviate this problem and give Centrally Sponsored Schemes a chance of success.

Decentralised planning would also cut down expenditure because spending would only be on identified needs and only to the extent that money could be used productively. Since we would have small-size plans at the village and block levels, the outcome would be easy to monitor and failures would get pinpointed.

The budget process needs a relook; otherwise we would end up repeating the mistakes we made year after year. As the great urban planner Jane Jacobs observed in another context: “The pseudo-science of planning seems almost neurotic in its determination to imitate empiric failure and ignore empiric success.”

(The Death and Life of Great American Cities)

The writer is a retired Chief Commissioner of Income-Tax.

Advertisement