Fiscal playground

Budget games appear to have begun in full earnest. Over the years, they had dwindled in interest levels, what with the finance ministry's rather rigid insistence on boring ideas like fiscal responsibility. This year, though, the fiscal playing field is once again awash with claims for all kinds of tax concessions, on the one hand, and demands for more government support for welfare programmes, on the other. Actually, the games began a few months ago, when the finance ministry and the Planning Commission got into their well-publicised spat about postponing the deadlines set in the Fiscal Responsibility and Budget Management (FRBM) Act by a couple of years, in the interests of channelling more resources to the social sectors. That disagreement seems to have been held in abeyance for the moment; but it has given the green signal to all concerned that fiscal discipline is only one determined shove away from collapse.

Various industrial lobbies are now asking for their pet concessions with renewed vigour and hope. Pre-Budget memoranda from various industry associations, which had become an exercise of going through the motions, now ask boldly for more. The SEZ policy certainly proved to be an inspiration; if they can get it, why can't everybody else? Thus, exporters want tax concessions for units located outside SEZs comparable to those located inside them. Telecom equipment manufacturers want the elimination of import duties on the materials and components they require. And, the biotech sector can look forward to some fiscal inducements that will be built into the forthcoming biotech policy statement.

That is not all. The Left parties have asked for a substantial hike in the quantum of gross budgetary support to commitments made in the common minimum programme. They want it raised to 7 per cent of GDP in the coming Budget, a trebling of current levels and far more than the Planning Commission's relatively modest suggestion that it be doubled. Not that the Planning Commission has helped the cause. It was reported last week that the final version of the Approach Paper to the 11th Plan suggests an active role for the public sector in helping generate employment. More people with higher salaries as recommended by the Sixth Pay Commission can only increase the fiscal burden.

It is time for someone to stand up and firmly re-assert the rules of the game. And that can only be the finance minister. He should communicate to all these interest groups, and others who might be getting ready to join the fun and games, that decisions on taxes and spending will be constrained by their impact on the FRBM milestones and commitments. Those targets and milestones are not up for bargaining or negotiation. If, therefore, someone wants to pay less taxes than the current rules indicate, someone else is going to have to pay some more. Likewise, if more money is sought for some social welfare programme, then some other programme will have to make do with less. All those asking for lower taxes and more budgetary support must be required to come up with concrete ways in which the gaps that their demands create can be made up. Forced prioritisation of this kind always helps to focus the mind. With a little tweaking of the rules, the Budget games can be made more constructive and positive-sum.