Subir Roy: The Budget is a national waste

VALUE FOR MONEY

Budget fever begins well before the year is out, though the Budget comes only in end-February. The logic for the early start is that the decisions that shape the basic character of the Budget get taken then.

So, if you want to be heard, start your advocacy while it still has a chance of influencing. But this early start does not prevent the advocacy""by business, self-perceived opinion leaders, and every conceivable pressure group""from going on right till Budget eve.

Virtually every section of the media trying to guess what the Budget will hold also marks the run-up to the Budget. This also continues right up to Budget eve though it is a pointless exercise as the die is cast and you will know all about it in a few days.

The secrecy surrounding the preparation of the Budget, its presentation as a virtual fait accompli, much shouting thereafter by the aggrieved, and marginal changes grudgingly made as minor acts of defeat by the treasury are part of the British legacy.

The only significant change in the last 50-odd years is the Budget being presented at 11 a.m. instead of 5 p.m., as was originally done so as to time it with India's British masters being in office and not in bed.

Thus, the most important economic policy statement and action plan of the government is formulated, delivered, and seen through in a successively secretive, adversarial, and non-consultative manner, making a mockery of the current premium on transparent and consultative governance.

This need not be so if India adopts the American model. The finance bill in India is eventually passed along partisan lines without the opposition taking any ownership of it.

In the US, the contours of the appropriations, after they are first unveiled and put on the table, evolve through a lengthy consultative process involving extensive give and take and horse trading, so that everyone takes ownership of the finally product.

This makes for an extensive public debate and scrutiny of both taxation and spending proposals and the concessions made by the treasury are not hamstrung by prestige. There is little doubt as to which outcome is better and which system is more efficient.

The only apparent gainer in the Indian system is the Union finance minister of the day, who, particularly since the Budget presentation began to be televised, gets a chance to directly address the nation and score an eyeball count that is the fantasy of advertisers.

Finance ministers believe that their long Budget speech, peppered with quotations from their pet sources, painstakingly read out amidst numerous interruptions, give a great boost to their national profile.

(All that remains is for a truly revenue-minded finance minister to allow commercial breaks during the interruptions by semi-literate members.)

If India adopts the American system or a variation of it, a lot of pointless effort will be saved. The media will not expend huge man-hours trying to scoop aspects of the Budget and inevitably look silly when most of it routinely goes wide of the mark.

The interest groups will not submit memoranda of demands, which are inevitably thrown into the waster paper basket. Instead, they will get time to lobby MPs so as to help shape proposals before they are finalised.

The biggest gainer will be the government. It will neither make half-baked proposals, nor have to stand by them so that its leader does not earn the sobriquet "roll back minister".

Take some of the most contentious recent tax proposals. The securities transaction tax on share trades, initiated in the July Budget, led to howls of protest and was later drastically altered before adoption.

The same is likely to happen with the fringe benefits tax. The fine print (the devil is always in the detail when it comes to taxation) was poorly drafted by lower-level functionaries and allowed to pass through.

Changes, eventually made, will be widely seen as a victory for critics. How much better if the first proposals are seen for what they are, widely debated and examined publicly by experts, amended and then adopted.

In India, if a money bill is lost, the government has to resign. In the US, the government usually makes sure of sufficient bipartisan support before a measure is put to vote.

In India, the discussion over a Budget is heavily skewed in favour of tax proposals. In the US, raising resources and their spending receive equal scrutiny. In India, the finance minister makes grand declarations about his spending intentions in priority sectors in the first part of his Budget speech but final expenditure figures (not revised estimates) often tell a different story.

In the US, legislators extract clear spending decisions as a quid pro quo for allowing the government to garner the necessary resources. In the process a good deal of what is called "pork barrel" (populist and unsound) projects dear to legislators go through but legislators have a greater say in the nitty gritty of spending.

To make a formal change to an alternative system, laws may need to be changed. But it is possible to achieve a lot in terms of substance while sticking to form. V P Singh introduced a long-term fiscal policy which had a lot of numbers.

It is quite possible to revive it with a clear current picture which in effect contains the revised estimates.

The tax and spending proposals for the coming year can be simply put on the table of the House without being read in a grand manner before TV cameras and straightaway taken to the standing committees for detailed examination and amendment.

The final outcome, with bipartisan support, can be put through in a workman-like manner without the treasury looking like being forced to make concessions. A lot depends on attitude and perceptions.

The grapevine has it that Jaswant Singh wanted to give up the present practice but Vajpayee was uncertain. (He was much more confident of taking dramatic initiatives in foreign policy.) Manmohan Singh's forte is finance. He should deliver us from the present wastage.

P Chidambaram should not demur as no finance minister has so far gone on to become a successful Prime Minister""neither Morarji Desai nor V P Singh. In North Block, you have to mostly wear a crown of thorns. It is better to do it away from the cameras.

sub@business-standard.com