T C A Srinivasa-Raghavan: The emperor's clothes

Like most things in India, the Budget too has become a parody

One of the worst fates to befall a columnist in a business paper is to have to write on the day before the Budget. Peer pressure propels you to make meaningless forecasts. Common sense tells you to write about Donald Trump. But, as always, folly prevails.

If your forecasts turn out right, you get no credit because dozens of others have made the same forecasts — give or take an error margin of 50 per cent. Budget division officials are doubled up with mirth for weeks afterwards. 

If you get it wrong, which is most often the case, you get so annoyed that you become a blind critic of the finance minister. How dare he, you say. 

But in all this, such has been the political marketing of Budgets by governments and media that we have forgotten the one basic truth, namely, that Budgets are an instrument for gouging the citizen. Say what the government will, they are not harbingers of prosperity. How can they be when they snatch away almost half your income? 

All Budgets have a much-publicised expenditure side, which I call the Ballad of Part I. Its telling is an art form because the finance ministers are basically selling pies in the skies. Still, that’s the fun part where everyone goes along with the slapstick.

The sinister part is very well hidden, deep in the recesses of the Finance Bill which purports to raise revenue. In reality, it is a way of providing a sumptuous living to income tax officials, chartered accountants and tax lawyers. 

It is, if you will, the modern Indian equivalent of the Afghan Buzkashi which, in case you don’t know, even the Taliban banned. But unlike in Buzkashi where they play with a goat’s carcass, here it is the bloodied taxpayer they kick around. 

The projected revenue comes through sometimes but only if all three players happen to reach an agreement, which is rare. If everyone agrees where’s the beef? 

All this fades into insignificance in the face of a very, very hard fact: 65 per cent of the government’s expenditure is pre-committed to useless things — such as the salaries and pensions of its employees; subsidies to the rich; and, of course, interest on debt incurred to finance these two expenditures.

Add defence expenditure to these three guzzlers of your taxes. These can’t be reduced. So there goes some more money. 

More bad news: There is another bottomless pit. The railways are also a part of the general Budget. By now, close to 72 per cent is gone and the problem of fixed costs has become even worse. 

No economics, only politics

Illustration by Ajay Mohanty

The finance minister, therefore, has very little room for manoeuvre. This makes it even harder to judge the economic content of the Budget. Everyone is free to form his own or her conclusions. 

So in the end we are left only with its political content which, as must be obvious when there is no money, is just a lot of marketing, often of very bad ideas. In older times, these were called fairy tales. 

That is why the central Budget today is a completely pointless exercise designed to support the political class and its willing servants who are conveniently employed by the government. That old noble objective that it could be used for resource allocation has been dead for close to half a century. 

The result is that like everything else in India over the last 50 years, budgeting too has become just a parody. As with other things the politicians have screwed it with their populism. 

Consider, for example, the latest hot idea, the Universal Basic Income, which is just a scaled up version of Mahatma Gandhi National Rural Employment Generation Act (MGNREGA). India needs this like a hole in the head but it will get it, if not this year then the next. The Jan Dhan accounts will at last get irrigated.

If you recall, this is exactly what had happened with MGNREGA. All sensible people said it was a bad idea but it got implemented anyway.

Thus, what used to be a very serious exercise has, since about 1988 – the Budgets of 1991 and 1992 notwithstanding – now been reduced to a way of winning elections and, in the process, lining pockets. In that limited sense it is still an instrument of resource allocation. 

So when you try to see what the finance minister will say tomorrow, don’t waste your time looking for any economic sense in it. There will be very little.