Behind the speech

There is one thing that all Budget  speeches have in common. The finance minister delivering the speech may be interim or permanent; the poet quoted may be Tamil, Bengali, or North Indian; the emphasis may be on farmers, or on the middle class, or on government employees — but all Budget speeches conceal more than they reveal. It is not the purpose of a Budget speech to reveal and explain the details of the Union Budget, but in fact to conceal them. This is not because of a search for cheap applause lines — multiple such applause lines might exist in a speech, but unlike an American president’s State of the Union address, they are not the point of the Budget speech. The point of a Budget speech is in fact to guide the interpretation of the Budget, and specifically to guide the eye away from those clauses of the Finance Bill or entries in the Demands for Grants that actually matter. 

In the interpretation of Budget proposals, what matters is understanding the trade-off that is made. As even a first-year economics student knows, budgeting is by definition an exercise in trading off one need against another, subject to a constraint. For governments, the macro trade-off is between fiscal rectitude, expenditure, investment, and taxation. Within this, there are multiple smaller trade-offs to make — who bears the brunt of taxation, who will benefit from extra spending, which social and economic priorities will receive funding. Yet it is rare to discover a Budget speech that makes this trade-off explicit. Parliamentarians expect to hear a long list of things that are being funded, and not those that are being defunded or taxed. The sole exception was, perhaps, taxes on cigarettes, which multiple finance ministers in the past have been happy to specifically name. It is remarkably easy, on listening to a Budget speech, to be lost in admiration of the genius of the finance minister in question — any finance minister — who has somehow managed to provide something to everyone without apparently straining the finances of the government unduly. 
 

It is only when the Budget papers are carefully scrutinised that the true picture emerges. The observer will discover then, for example, that defence expenditure might have been squeezed — even if a finance minister has pointed out in his speech that the allocation is “the highest ever”. For example, the latest speech has told you the defence budget has crossed Rs 3 trillion for the first time. But the actual allocation will show that the outlay has barely kept pace with inflation — as has been the case over and over again across governments. 

When ministers have significantly increased the allocation to a department or a scheme, they are happy to tell the world how much higher the allocation is than the previous Budget estimates in percentage terms. If the increase is not significant, they will instead mention the difference in rupee terms. But when they have squeezed it, they will likely instead state in their speech just the allocation without mentioning the previous year's outlay. If, during the course of a financial year, the allocation for a scheme has been increased — as happens with NREGS frequently — then the minister will mention how much higher the new allocation for the coming year is than the previous Budget estimates, and not how much higher it is than the Revised Estimates. If instead that ministry, department or scheme found that the finance ministry had not disbursed money over the year, then the speech will highlight how much higher the new outlay is than the Revised Estimates. 

Sometimes, the most crucial aspect of the Budget — and the one that determines how the Budget is remembered or written about — is only discovered hours or days after the speech, because it is hidden somewhere in the Finance Bill. Such 

was the case, for example, with the famous Vodafone retrospective tax amendment — which startled observers noticed only several hours after then finance minister Pranab Mukherjee had stopped speaking. The truth is that a Budget speech is often terrific entertainment — but it is rarely useful.