Who is burdened with the Budget 2014-15?

By Devi Prasad IES*

 

Who is burdened with the Budget 2014-15? None, except the Finance Minister of India, Mr. Arun Jaitley himself!… because, Mr Jaitley has to read 16458 words, documented as “Budget Speech”; he has to read to explain the disbursement of Rs. 60.99 lakh crore (gross) from the Consolidated Fund of India, which gives him just Rs 17.94 lakh crore (Net) to spend, and of which about 80% is non-negotiable, non-discretionary and limits his fiscal space.

He faces the challenge of providing economic security to about 124 crore Indians; he faces the challenge of convincing the aggressive and adversarial political audience about the durability of economic security he is envisioning in next 3 years, in the medium term.

arun jaitley

The present FM combines in himself the positions and the opportunity to influence the investment and spending priorities of the Corporate sector as much as providing public funds to balance the economic security with military security, which too is non-negotiable.

During the Budget day, while reading the budget speech, the FM was seemingly burdened with back-breaking pain; he  had to request for a 5 minute break. The impressive orator in him had to read his speech while seated.  Yes, to match happiness triggered with political rhetoric and also to meet the legitimate economic expectations of billions of Indians for better life-styles and choices, Mr Jaitely read out 16485 words as his Entry Speech. Just five months ago, his predecessor read 6958 words as his Exit speech.  Though both of them used separate set of budget documents, they contain more or less same numbers, with marginal variations. For instance, compare the numbers used by both of them as below.

 

 (Rs. In crore) Jul-14   Feb-14
GDP 2013-14 11355073 11320463
GDP 2014-16 12876653 12839952
GDP Growth rate 13.40% 13.40%
Total Disbursements from Consolidated Fund 6099167   6070463
Subsidies % GDP 2% 1.90%
Gross Tax Receipts 1364774 1379449
States’ share in taxes 382215 387732
Net Tax Revenue (Centre) 977288 986417
Non Tax Revenue 212505 180714
Total Expenditure 1794892   1763214
Plan Expenditure 575000 555322
Rev Deficit 378348 382923
Fiscal Deficit 531177 528631

 

So, what these extra 9500 words of the new FM reveal?

These extra words reveal a lot for those who take pains to read and understand the implementation strategy. But these words communicate little to those who benefit from implementing the budget, who also have less trust on the quality of governance they lived with so far.

Naturally an impressive and a powerful orator, can’t read a speech; in fact he should not read a speech to connect with the 124 crore target audience to convince them about their economic security.  They are ruthless! They want to give less and less as taxes or enhanced productivity but expect more and more from the FMs. Ditto with the FMs!  They want to take more and more from public to give more, and by giving it effectively.

That said, the FM will have live with burden of managing the budget responsibly, while also containing the expenditure.   For an impressive orator who connects with audience as a habit and instantly shapes their opinion,   reading a Speech ought to be a painful burden on his eye balls, when he can’t connect with the audience.

In any case, he will have second chance to communicate the intent, content, and implementation strategy of the budget more effectively. The second chance comes just before the Budget is voted in the next days in Lok Sabha and Rajya Sabha.  If only, his officers gave clues about the styles of some of the Chancellors of Australia and the UK and how they ‘spoke’ about their budget rather than reading their speeches.

Apparently, he understood the Fiscal Responsibility and Budget Management (FRBM) Act in its letter and spirit.  As a good lawyer Mr Arun Jaitley had invoked the legislative objective of the Act to present his statement of economic security (the Budget).  For example:

  •   To justify fiscal consolidation he has  invoked inter-generational equity.
  •   To accelerate GDP growth, when public savings are low, he spoke of investment through PPP and FDI.
  •  He revealed his preference to coordinate with RBI’s  monetary policy to manage inflation and thus  also revealed his intention to lower interest  burden (a) on the entrepreneurs who  invest and (b), on the borrowings of  state governments and the Central governments.
  •  To raise investment through PPP and FDI mostly  in subject in the Union list he also emphasized the need to  learn from the mistakes in implementing  PPPs of  iconic projects in progress.

Going forward, the FM, the orator, while answering the debate  hopefully will use his second chance to:

- speak out how the savers will benefit;

- tell how the risk takers will have opportunity to reap rewards, and pay more taxes,  while creating jobs;

- speak out how the pro-prosperity bias in the budget is going to attack the poverty and not the poor;

 

Let’s also hope that he tells the poor how they will be better off next year as compared to the current year!

While answering the debate,  hopefully the FM, in his own style and  vocabulary  also tells  the States how they are going to  get more on their own through  enhanced  acceleration  and multiplier effect of Centre’s policy /investment decisions , if only these are made to work.  In the process, he also reveals the assumptions relating to the time-lag in investment impact, so that the States and City governments align their medium term budgeting priorities.

Let’s hope that he tells how Centre is partnering with each and every state to reduce implementation risks.

Let’s hope that he tells one and all, that the PSU banks now will soon be owned by individual Indians as share holders, who can sell their shares, walk out when unhappy and not chained to live with underperforming banks.

Further, he also need to communicate how he is concerned with the unborn (next generation voters), as much as the children (non-voters of the present generation).

The new FM, in his own style need to speak out how he is taking  less  in taxes, but giving more opportunities, and lowering the risks to family budgets and the government budget(s) now and future, at the Centre and the States.

He has to tell the expenditure management problems and how he expects to change after the Expenditure Management Commission gives its interim report by November 2014, and in time before next budget is drafted.

He has to  tell how,  he is leveraging Floor Scale Index (FSI) concessions to  promote housing supply for the poor as much as those who pay through EMIs, when about 18 lakh Indians living in 640 districts are counted as homeless in 2011 Census.

He has to speak out how he is going to enthuse the NRIs, to invest in Ganga cleaning project on a durable basis and how he is insulating the budget from the burden of financing the Ganga cleaning project.

The FM has to tell to 124 Crore Indians, as to why and how he is spending about Rs. 14,450 per capita, while the tax collections are about Rs. 11,000 per capita.

He has to tell about the quality of balance sheets of those lending about Rs 4,300 per capita, and also about the strength of government balance sheet to bear the stress of paying back to the lenders.

He has to take the citizens into confidence as to why he is spending only Rs. 14,450 per capita though Parliament approval is sought for disbursing about Rs. 49,000 per capita as proposed in the Annual Financial Statement (AFS).

Perhaps the present FM, in fitness of the things should opt to change the format of his “Budget Speech” and the Medium term fiscal policy statement.  He can allow the details to be voted to be annexed to his speech. After all it is the AFS that is voted in the parliament and not his speech. In contrast,   outside the Parliament it is his speech that debated; it is his speech to which public expectations are anchored to and not the AFS.

Hence, as part of prudent economic policy communication strategy suited for the next generation of Indians, the government need to give access to the budget details to the Analysts and the Media to communicate better. Just enforce an embargo until the speech is completed.

Hopefully, the FM who understands the FRBM law in its letter and spirit needs to minimize the ‘secrecy’ in the preparation of AFS and the Demand for Grants. Provisions in Section 6 of the FRBM Act* mandates so.

Infact, once the Goods and Service Tax (GST) comes into force, the secrecy in tax proposals too can’t remain a secret, as most of the tax proposals may have to be shared with the state governments before being presented to Loksabha.

PS:

A good news brief on budget was brought out by the BBC within hours of budget speech by the FM. It is interesting, as available at:

 http://www.bbc.com/news/business-28228670?utm_source=Sailthru&utm_medium=email&utm_term=%2AMorning%20Brief&utm_campaign=2014_MorningBrief%207.10.14

 *http://finmin.nic.in/law/frbmAct2003.pdf?W=SHTITLE%20%20PH%20IS%20%27Unit%20Trust%20of%20India%20%27&M=2&K=1329&U=1

 * Mr. Devi Prasad IES is, 1982 batch Indian Economics Service (IES) officer and former Advisor to Government of India.   Presently the Research Fellow at the Civil Service Officers Training Center at Mussourie (LBSNAA), Uttarakhand.  He served as the Chief Executive Officer / Director of three organizations during his tenure in GOI and also functioned as Advisor to the Executive Director, IMF

 The views of the Author are personal and do no represent the opinion of CPPR

You may also like...

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>