A K Bhattacharya: Just routine stuff now

RAISINA HILL

Budgets are no longer what they used to be

Left economist Prabhat Pattanaik was invited to attend Finance Minister Palaniappan Chidambaram's pre-Budget consultations with economists this year. Eyebrows cannot be raised when the finance minister's invitation goes to a person of the stature of Pattanaik, an accomplished economist. Nevertheless, the invitation was also seen as one more friendly gesture by the Manmohan Singh government to the Left. But the JNU teacher chose not to attend the meeting.

It is not known why Pattanaik took that decision. At least one more economist invited to this meeting also expressed his regrets. And this one was a strong proponent of the free markets.

The sense one gets from all this is that budgets have ceased to create the same excitement that they used to do even some years ago. So, one should not be surprised if more economists choose to stay away from such meetings in the coming years. The reason is not ideological. It is something to do with the evolving nature of the budgets over the past few years. Fifteen years ago, the P V Narasimha Rao government unveiled a road map for taxation reforms and expenditure management priorities. Governments at the Centre have changed since then. But there is no change in that roadmap or in the broad direction of fiscal policy as outlined in successive budgets presented by different finance ministers of different governments in this decade-and-a-half.

Pattanaik may have excused himself from the meeting simply because he knows that whatever the government and whosoever the finance minister, it will be futile to try and persuade them to follow his path of reforming the fiscal and expenditure policies. Other economists also may not find it too useful because they know that even if the government is broadly on the path of fiscal reforms and better expenditure management, the debate is all about their pace and sequencing. The scope for debate is fairly limited. Every finance minister, irrespective of his political alignment, is convinced that tax rates should remain moderate and the taxation system should be rationalised and made more efficient.

The short point is budgets these days are far less exciting and provide far less scope for expecting the unexpected or hoping for some fundamental change and a new direction. You cannot expect Chidambaram on February 28 this year to give you the same excitement that you got when Manmohan Singh slashed the customs duty by half in the early 1990s or when Chidambaram himself brought down direct tax rates in the range of 30 per cent in one stroke in 1997. There would be small surprises like modifications in the fringe benefit tax or some tinkering with the rate of the securities transaction tax or the depreciation allowance. But none on a scale that one saw in the 1990s.

Also gone are the days when finance ministers used to seal their mouths weeks before the Budget. They would stop attending public meetings or making any pronouncement at least for two months preceding the Budget, lest they dropped a hint at the kind of fiscal policy change that might be in the offing. Now finance ministers talk relatively freely about the nature of the fiscal policy change that might be announced. And the reason is that by making such statements, the finance minister does not reveal any Budget secrets. The broad contours of the fiscal policy changes are well-known in any case.

In 1993, Manmohan Singh declined to attend the World Economic Forum's annual meeting held in Davos, Switzerland as it came close to the Budget. Singh was then the finance minister and he was in Geneva to attend a UN human rights conference, but did not make himself available at Davos. Chidambaram, as the finance minister in the United Front government, broke that tradition. And this year, too, he would attend the WEF annual meeting to be held later this week.

Yashwant Sinha as the finance minister of the Vajpayee government also contributed to the way budgets have become less glamorous and less mystifying. He advanced the time of the presentation of the Budget from evening to noon. Citing that the presentation of the Budget at 5 pm was a British legacy and needed to be discarded, he began presenting it a little after noon. With that, experts and analysts had more time during the day to understand the Budget implications and make the right conclusions. This also put an end to late evening desperation to find out what the Budget actually meant.

Sinha also began making a host of policy announcements in the Budget speech. But many of these measures announced in the Budget had to be rolled back and this ensured that successive finance ministers like Jaswant Singh and Chidambaram eschewed this practice. That robbed the budgets of whatever excitement that was left.

So, if you find there is not much pre-Budget excitement in the air even though the government's annual financial statement is just five weeks away, blame it on the way successive governments have stuck to the broad fiscal policy map outlined in the early 1990s, leaving few secrets that a finance minister needs to hide before he actually presents his Budget to Parliament.