Time To Deglamourize Budget ?
In a comprehensive post on budget, Utsav commented, “Unfortunately, the Budget nowadays is reduced to a mere accounting exercise”.
Now I know as much about economics as the-man-with-unpronounceable-handle knows about pop culture (just kidding, even benedictine monks know more about pop culture than him), with that caveat in place I have the exact opposite complaint. I think as far as public discourse on reforms is concerned our focus is exclusively on budget exercise to the detriment of broader policy outlook.
This is not to say that Budget has no role in reforms, there might be scope for rationalizing tax rates, and of course overall macroeconomic intent of government will always be decided by budget, but by and large budget should remain accounting exercise.
As far I as I can tell the reason budget gets such disproportionate attention is three fold, one taxes and duties directly affect individuals and corporate, second in our cargo cult democracy budget is a festival (along with election or independence day), third because of 1st generation reforms.
While there is not much one can do about first two reasons, a little explanation about third reason.
Budgets were crucial to first generation reforms starting in 1991 because of the onerous taxes and tariff rates enacted under the policy of import substitution, it was this that was addressed by the budgets, however even more important was lifting of non tariff barriers and license quota permit raj as well currency reforms while the former was part of industrial policy under PVNR himself later was a monetary decision involving RBI and government.
While it is not unreasonable to assume that Manmohan Singh, then Finance minister, might have provided inputs to overall policy, it was not within purview of budget making or even under finance ministry.
But isn’t it just all nit-picking, I disagree. The reason it is necessary to delink discourse on reform from budget making process is that next gen reforms are fundamentally different from previous one. Sure it is possible to tinker with tax rates here and there, but I believe that adjustment needed is nowhere near 1991 levels.
Similarly it is possible to adjust monetary policy but again that will be fine tuning relatively speaking.
It is my opinion that next gen reforms primarily are a combination of policy, structural and political changes.
Whether it is foreign investment or disinvestment, labour laws or land reforms, infrastructure or welfare streamlining, government will have to face challenges on the all three fronts from entrenched forces.
It is a arduous process and the success is far from guaranteed. That said, a serious conversation on all broad contours of next gen reforms instead of a conversation in fits and starts is absolute minimum prerequisite for it.
Deglamourizing budget which at present sucks all the oxyen from policy discourse will be a start