Needed: Budget for the common person

The men who manage men manage the men who manage only things but the men who manage money are the men who manage all.

That powerful observation from ‘The Lessons of History’ by the noted historians Ariel and Will Durant explains why finance ministers are particularly important (for better or for worse) and why the annual budget, which is due today at noon, is a much watched event. But the exercise is much more than a mere annual financial statement, the labyrinth of numbers and charts can conceal more than they reveal to the common citizen. The true import behind today’s exercise lies in the political context and intent, given the string of electoral battles coming up this year and leading on to national elections in 2019, if not earlier. So this will be an election budget and it comes in difficult economic times.

Consider the messes that refuse to go away. Non-Performing Assets of banks are at an alarming level and continue to rise. Ask around and you’ll hear the not-uncommon refrain that the Bankruptcy Code is unlikely to solve this ugly sore in a hurry. Corporate balance sheets remain stressed and there is little appetite for funds. Investments are at a new low. And there is this powerful politico-economic number offered by the former Chief Economic Advisor to the government Kaushik Basu, who has pointed out that GDP growth in the second quarter was below the 30 year average. The figure is selectively picked but nevertheless, it makes a point.

What emerges is an economy marked by a slowdown in agriculture, deceleration in manufacturing and construction, deceleration in investment and growth that for the Q2 emerged as largely consumption-led.

At the same time, oil prices are up and inflation is rising, movements that would mock the observations of the last Economic Survey (Vol. II), which as late as Aug. 2017 offered us the idea of “a structural disinflationary shift driven by more permanent developments in both the international oil market…” Clearly, the picture is vastly different from what was being sold by the establishment only six months ago.

It’s not that there are no positives. There is merit in the argument that GST collections will stabilise and grow – that’s a long-term reform that can quickly go on to make an impact that is good, deep and lasting.  But the rushed implementation of the GST also came with its short-term costs and disruption.

Stocks are booming but this is not a barometer of economic performance. Rather, the stock exchange is more a mood meter influenced by investments from domestic and foreign portfolio managers for the short term, and it will not take long for the mood to swing, as experience suggests.  In fact, there is already concern at the elevated asset prices.

In sum, the economic weather is not good and conditions look not so benign.  Also gone is the government’s supreme confidence that led to bloomers like demonetisation – which is a good thing – but it also means that the government will do nothing that can be categorised as bold, unusual or off-beat.

That leaves us the possibility of walking the beaten track, trying to present a balance while also trying to please various constituents, notably the salaried class and the farmers. While trying to achieve this, the government will push for higher growth and in this endeavour, it will likely open the doors for more FDI.

While FDI is welcome, the long term solution to sustainable growth is to enhance savings, particularly government savings, by spending less on itself and administration costs and providing more for capital investments.

We may ask what’s in this for the common citizen of India, who has no protection from any side, be it health, education or even drinking water, all of which is made worse by inflation?

In a democracy, the government is said to be of the people, for the people and by the people. If this is to be a reality, it must reflect in the budget outcome. It is a pity when the budget spends on the common man, it is misconstrued as “populist” by the so-called analysts.

In fact, it is unfortunate that budgets get categorised as bold, dream or populist. Every budget must be a people’s budget and this means having at its root the welfare of the weakest, the poorest and the marginalised.

Central Budgets play the role of a catalyst for a People’s Budget down the line, which is the budget offered at the level of States and local self governments. The Centre should set the benchmark for this but often this does not happen, and we get locked into an interconnected vicious cycle of deficits and debt that rob the common person of his and her dues.

The FM more often than not has been using and promoting the word “fiscal federalism”, which means sharing revenues equitably between the Centre and the States. This is best done when political ideology is kept aside and a fair and balanced view of development for the nation as a whole is kept in focus. Unfortunately, history suggests that every government fails this simple test, and the failure if anything is more so with the present one.

(The writer is a senior journalist and faculty member at SPJIMR)