View: Budget has lived its life, and deserves rebirth
After 70 years of evolution, our democracy has become something unique, worthy of rational reform.
Nirmala Sitharaman’s Budget was an improvement on Arun Jaitley’s in a few respects. Jaitley routinely gave lots of grants of Rs 50/100 crore to many NGOs, which were presumably on the right side of the ruling party. These were missing in Sitharaman’s Budget. Jaitley’s favourite organisations would probably continue to be patronised. But there was no expansion of their number.
The second respect in which it differed from Jaitley’s Budgets was that although Sitharaman gave the longest speech in my memory, there was not a single figure in it. The Budget documents were, of course, full of figures — they can hardly do otherwise — but none of them figured in her speech. I got the impression that while her revenue and expenditure departments made up the Budget, she took not the smallest interest in it. She must have been the first finance minister to do so, just as she was the first one to exchange the portfolio for a bright red cloth bag.
The Budget emerged centuries ago as an instrument for Parliament to control the volume and direction of the monarch’s expenditure. It was meant to make the monarch — in our context, the government — responsible for what he or she did with the money he or she raised from his people. Sitharaman is apparently quite unaware of this obligation. It may be because our MPs take the duty of making the government accountable very lightly: debates on the Budget are some of the least attended in our Parliament.
The third respect in which it differed from all previous Budgets — and not just Jaitley’s — was that macroeconomics was simply missing from her speech. As I said, the primary function of a Budget is to control government expenditure and limit it to what the representatives of the people approve. But as governments grew in size, both their Budget balance and their tax and expenditure policies had serious effects on the national economy. Parliaments are supposed to watch and control these effects. This function was entirely forgotten by Sitharaman. She did not err. Simply, it is her experience that Parliament does not care.
So, what does Parliament care about? It cares about what she talked about. It was all about controls, subsidies, fashions, prejudices and crazes that parliamentarians — in her case, mostly those of her party — get excited about. Election to legislatures, inter alia, gives their members power and resources to pursue their foibles. Some of them have some rationale. But pensions for shopkeepers, payment platform for micro, small and medium enterprises (MSMEs), cattle-feed marketing… these are just a few examples of unnecessary foibles.
Politicians can indulge in them because they have access to free money from taxes paid by the people and debts incurred by governments in their name. Democracy has considerable reputation across the world. But in India, it has evolved into a sometimes lucrative but often ludicrous game. This is not an argument against democracy. I would rather live under the Indian democracy than the political arrangements in most of the world’s nations. But after 70 years of evolution, our democracy has become something unique, somewhat peculiar, worthy of rational reform.
Ever since the early 1990s, we talk glibly of reforms. We mean economic reforms. But we also deserve some political reforms by now. That is a big agenda. Let us start with something more achievable.
It would be worthwhile to appoint a parliamentary commission on what is appropriate for the State to spend people’s money on, and what it should leave to for-profit and non-profit organisations. We got confused on this with good reason: we started as a socialist democracy. But under the present political regime, this socialism has blossomed into something quite Indian. We only have to read our Budget speeches to see how bizarre it has become. It is time to confine GoI finances and activities to what is in the interests of the nation, and nothing else.
One way of doing so would be to have two houses of Parliament. One should be elected by proportional representation, with elimination of parties and candidates who get the least votes up to the point where the largest party would have a majority. The other should be elected by income-tax (I-T) payers, with votes in proportion to the tax they pay. The first house would pass the expenditure Budget: people’s representatives would decide what to spend on. The second house would approve the revenue Budget: taxpayers would decide the level of taxes and borrowings.
The two houses would have to agree on the Budget. The compromise they reach would optimise the finance at the command of the government and the uses it is put to. This is not the only possibility. One can think of other options that might be better. My argument here is just that the Budget has lived its life, and deserves rebirth.
The writer is former chief economist, ministry of finance, GoI