Marathons, but no winners

Some 2,500 years ago, Pheidippides, an Athenian runner, is reputed to have run 42 km to Athens to announce Athenian victory over Persian invaders in the Battle of Marathon.  Though historically inaccurate, the legend endures.  A 42-km race has been an exciting part of all modern Olympic Games. The term marathon is now routinely used to describe any long-lasting event, including Finance Minister Nirmala Sitharaman’s February 1 Budget speech. After 2 hours and 40 minutes, Ms Sitharaman had not yet done with it, but had to abandon the rest of it due to exhaustion (that duration, by a remarkable coincidence, is very nearly the same as O P Jaisha’s Indian women’s marathon record of 2 hours and 35 minutes).  That failure, however, is not the only reason why it was not a winner.  

But this column is not about the Budget’s many infirmities by commission and omission and confusions. They have attracted significant comment.  To add to them would be flogging a dead horse. I wish to focus instead on the increasing harm being done to the integrity of the budgeting concept and process over the past decade or longer, reducing the Budget to just a formality.  

Article 112 of the Constitution of India mandates that “The President shall in respect of every financial year cause to be laid before both the Houses of Parliament a statement of the estimated receipts and expenditure of the Government of India for that year, in this Part referred to as the ‘annual financial statement’.  The estimates of expenditure embodied in the annual financial statement shall show separately (a) the sums required to meet expenditure described by this Constitution as expenditure charged upon the Consolidated Fund of India; and (b) the sums required to meet other expenditure proposed to be made from the Consolidated Fund of India.”  

Pratap Bhanu Mehta is correct when he observes that “the Budget reads like a five-year plan with lots of objectives and targets but no road map” (The Indian Express, February 3, 2020), but does not add that Union Budgets have simply not been the plain vanilla accounting statements of the Consolidated Fund of India for some decades. That constitutionally-mandated purpose now appears to have been relegated to mere footnotes. A whole succession of finance ministers have treated Budgets as vision things, not accounting exercises. The first two Modi 2.0 Budgets of July 2019 and February 2020 do not even make the pretence to be such exercises.

Budgets no longer present a true picture of government finances.  That is not solely because of the cloud hanging over the integrity of official data, but also because of the increasing recourse of governments of the day to measures such as postponement of committed expenditures or credit taken in advance of payments to be received or transferring borrowings to public sector agencies.  When schoolchildren indulge in similar practices, they are fudging; if businesses do so, they are supposed to be gold-plating the books, and in case of governments, such accounting legerdemain is couched as “off-Budget transactions.”  The net effect in all cases is the same— obfuscating the reality.

Over the years, Budget speeches have grown longer: I had termed Arun Jaitley’s two-hour long 2017 Budget oration the longest in my memory, but Ms Sitharaman’s two forays have been even longer.  Yet at the same time, they show what in layman’s terms is tantamount to laxity in application of mind.  Not only do gaps between Budget estimates, revised figures and actuals keep widening, but also measures proposed in the Budgets have no sanctity.  Exigencies are not anticipated; taxation rates and other revenue-generating means can be and are altered any time to meet them.  As for expenditure, the time-honoured practice is to make what in effect are token allocations, with an eye on the political (electoral) fallout, rather than requirements of a well-designed programme.  And every annual exercise has no memory of even the immediate past, like each circuit in the bowl is a new experience for the goldfish!

The annual Economic Survey is expected to be an integral component of the budgetary process.  Its analysis is meant to be a snapshot of the current economy and act as the basis of Budget proposals.  In reality, though, the Surveys, too, have grown longer and at the same time, become disjointed from budgets.  Arvind Subramanian’s well-crafted and illustrated oeuvrés were eminently readable, but their persuasive disquisitions on topics such as universal basic income, internal migration and missing women found no connection to the Budgets they preceded.  The current down-to-earth Survey similarly appears to be a stand-alone exercise with little impact on the Budget.  

The vital exercise of making and presenting Budgets has been gradually reduced to just going through motions over the last several years, a tiresome but unavoidable chore for the government in power of any and all political affiliations.  The ensuing debates are now devoid of substance, akin to shadow-boxing.  Governments have had no trouble getting Budgets passed through Parliament even when they had no brute majority.  

In this season of heightened awareness of a functional democracy, we need to realise that the travesty of Budgetary accountability is yet another step in the direction of citizens’ disempowerment.

The writer is an economist