Why B-day is not D-day

Budget has very little impact on the vast majority.

The stock market is warily optimistic, tax-payers hope for some relief, companies look forward to some special treatment, the reformer breed hopes that the "dream team" will deliver once again, and their critics, including many of the new government's friends, look for departures from past trends.

Manmohan Singh may argue that the government has not had the time to prepare a full raft of changes, and Mr Chidambaram may say that his first full-scale budgetary exercise will be in February 2005, but the level of expectation has reached the pitch where pre-Budget TV discussions command the same audience size as popular soaps.

Budget time provides rich pickings for the media, as the market grows for news leaks, informed (and uninformed) guesses, punditry and much else.

Perhaps the whole thing is overdone. Analysis of the past decade's Budgets shows that what finance ministers have announced have resulted in no sustained pattern to subsequent stock trading; the initial responses are often revised, and before long other events take over to drive the market.

The same can be said of economic performance, including industrial performance "" rarely have budgetary pronouncements made a real difference to the year that follows. There are far too many variables at work, for a single change in tax rules to make a defining difference in anything other than the rare cases that are the exceptions.

And, of course, the Budget has very little impact on the vast majority whose lives are not touched by pronouncements from North Block "" they are not investors, they work outside the formal economy which is tracked by the taxman, and they are not consumers of anything that the government feels it can tax.

It would be futile to look for any election post-mortem that mentioned the Union Budget as an issue "" though the same cannot be said of state Budgets, which determine power tariffs, water rates, bus fares and such.

Also, finance ministers now have little room for manoeuvre. The big bets were taken years ago, the direction of tax policy set at the same time, and such changes as can be made now are strictly on the margin (Should budgetary support for the annual Plan go up by 12 per cent or 13 per cent? Should the defence Budget be raised from 2.8 per cent of GDP to 2.9 per cent? And so on).

Whatever successive FMs' preferences, the economy will still grow at an average 5.8 per cent, as it has done for the past quarter of a century! Today, the real money players watch not Budget day but for signs that the Reserve Bank governor will announce changes in interest rates. Fiscal policy gets the ratings, monetary policy gets the money moving.