JULY 08, 2009

Budget euphoria in India should go

By Dr V S Gopalakrishnan, PH D, Former IAS

I have established my credentials as above before talking on the subject! This subject has been a passion with the "public" in India ever since I remember! Why? Is there a real need for it now?

Let me go back in time and deal with facts first. India had a tax rate of 99 percent at one time, four decades back or so, when Morarji Desai was the Finance Minister. That was the highest slab. So, if you had to eat an ice cream worth one rupee, you would have earned one hundred rupees so that you paid Rs.99 in tax and then got the ice cream too! Those taxing years were ridiculous. The concept of luxury goods included air conditioner, motor bike and a number of things that now we take for granted. The indirect tax (excise duties) on the luxury goods was phenomenal! No wonder they became luxury goods because of their non-affordability!

And over a period of time the taxation policy, mostly handled through the instrument of annual budget, became less rigid and more liberal and more realistic. With a corporate and peak personal tax slab of 30 percent as of now, we (industry, consumers, employees, professionals etc) are fairly comfortable with the situation. This has been so over the last few years and any changes are somewhat minor. SO, WHY THIS TAMASHA NOW, WHEN THE BUDGET DAY IS ON?

It is ludicrous to see the entire media, most particularly the TV media, preening itself in preparation for the Budget Day. The Budget Day in India is like an annual Festival day, say Diwali or Vaisakhi or X-Mas, keenly awaited year after year. Does that make any more sense? Do people in the USA and in Europe waste so much breath and time over this formality called Governmental Budget? Why is this happening in India?

Is it because the big industrialists and businessmen can find an audience frequently with the PM and FM, more with the latter, to project their demands and make themselves more friendly, recognized and known? Is it because they get more visibility on TV through discussions and interviews? And to me, it looks utterly ridiculous when the captains of industry and trade sit in five star hotel rooms huddled together like penguins, watching the big screen as the budget gets unfolded in the Parliament, taking notes like school students! Don't they have better things to do? Do the captains of industry behave like this in any other nation?

What is the great thing in the budget these days - I mean these years - meant for the Corporates? Really very little. The Corporate tax of 30 percent is way below that in some countries even in Europe. It is futile to hope for a reduction when the economy deserves a boost, and governmental spending on infrastructure is still a major necessity for development and growth. So what have we witnessed the other day, I mean the Budget Day? The changes are minor and insignificant. The FBT (Fringe Benefit Tax) liability on employers has been dropped but instead the employees will pay for the perks. There has been some tampering with MAT (Minimum Alternate Tax) and some tax holidays extended for exports etc. Do all these warrant the Corporate leaders spending days on end in pre-budgetary exercises and speculation and worthless post-budgetary discussions? This can happen only in India.

The real purpose of budgeting should now be to focus on the upliftment of the underprivileged and the poor. How many from this category are involved in pre-budget consultations, preparations and post-budget discussions? Perhaps zilch is the answer. The budget for the poor should reach him without leakage (corruption) and delay. Is this important thing ever discussed at all in the Parliament. How is the Government ensuring that the beneficiaries of the Welfare Schemes get their dues without getting cheated? Are there any discussions on this during the Parliamentary debates? Are there discussions on the action-taken in previous years as to how implementation was done and whether it was effective or not? Is any report tabled in Parliament about proper resource spending and utilization in the previous budget-year? Are there Performance Budgets going with financial numbers? Is the Actual Past Performance being collated and submitted to Parliament?

And mind you, economic growth in a country does not come from budgeting only. Of course, budgeting gives an impetus as a mechanism. However, growth depends on so many different policy measures. They cannot all be budgeted. Why then are we, as a nation, wasting so much time and energy in watching the budget-presentation and the discussions everywhere following that?  This national waste of time has to go. The initiative should come from those who see the budget as a Sacred Bull. The captains of industry and trade and those in Trading and Industrial Associations like FICCI, ASSOCHAM etc should take the lead in this. They may present their requirements to the FM before the budget and then quietly carry on their lobbying after the budgeting event. What is the need for so much TV and media tamasha for the annual budgetary exercise in which the common man is of very little consequence?